Learning from customers in outsourcing

The ongoing fragmentation of work has resulted in a narrowing of tasks into smaller and smaller pieces that can be sent outside the organization and, in many instances, around the world. Not surprisingly, this trend is shifting the boundaries of organizations. Though experience and productivity improvement may be seen as key benefits of this trend, little is known about how this shift toward outsourcing influences learning. When producing a unit of output, the content of the knowledge gained can vary dramatically from one unit to the next. One dimension along which a unit of output can vary-a dimension with particular relevance in outsourcing-is the end customer to whom it is delivered. The performance benefits of such customer experience remain largely unexamined. We explore the customer dimension of volume-based learning in the context of outsourced radiological services, where individual doctors at an outsourcing firm complete radiological reads for hospital customers. We examine more than 2.7 million cases for 1,431 customers read by 97 radiologists and find evidence supporting the benefit of accumulating customer-specific experience at the level of individual radiologists. Additionally, we find that customer depth for the entire outsourcing firm (i.e., total volume for a given customer across all radiologists at the firm) also yields learning and that the degree of customer depth moderates customer specificity at the individual level. We discuss the implications of our results for the study of learning and experience as well as for the providers and consumers of outsourced services.