Core Competency Outsourcing Rule
Own your defining advantage and outsource acceptable specialist results
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 94%
First identify the capability that actually makes the company unusually effective. Build internal depth around that advantage, then evaluate other functions by the result the business truly requires rather than an abstract ideal. IQ Bar's stated strength was operations, COGS reduction, scale economies, and aggressive price points—not paid media. Nitz argued that an agency delivering roughly 85% of a hypothetical exceptional internal hire can still be the better system if the economics work and the agency scales more easily. The decision must include the scarcity, compensation, equity expectations, and career needs of a top employee, not just a quality comparison. This is not permission to accept poor work: define a sufficient performance threshold, measure it, and retain internal accountability for the outcome.
Origin
When Nathan Chan challenged the agency model, Will Nitz said the answer depends on the company's core competency. He contrasted IQ Bar's operations advantage with firms whose defining capability is paid-media buying.
Core principles
- 01A company rarely becomes world-class at many unrelated capabilities
- 02Internal ownership should follow strategic advantage
- 03Good-enough scalable execution can outperform a perfect but scarce hire
- 04Every outsourced function needs an explicit performance threshold
How to run it
- 1
Name the defining capability
State the one capability that most directly creates the company's advantage.
Pro tip Use observed performance, not the function the founder enjoys most.
Watch out Calling every function core makes the rule useless.
- 2
Classify supporting functions
List the work required to operate but not required to differentiate the company.
Pro tip Reclassify functions when strategy changes.
Watch out A support function can still carry critical risk.
- 3
Set the sufficiency threshold
Define the result a partner must achieve for the whole business model to work.
Pro tip Quantify the threshold wherever the function allows it.
Watch out Do not compare against an imaginary perfect employee.
- 4
Compare complete costs
Compare partner performance and scalability with recruiting time, salary, equity, management, and retention risk for an internal hire.
Pro tip Include the probability of actually finding the exceptional candidate.
Watch out Sticker-price comparisons omit major internal costs.
- 5
Retain accountable ownership
Give an internal operator the metrics, authority, and context needed to manage the external function.
Pro tip Review whether the required result is still being met as volume grows.
Watch out Delegating execution does not delegate responsibility.
In the wild
Nitz said IQ Bar's core competency was operational efficiency rather than paid advertising. He was willing to use an agency even if a rare exceptional internal buyer might perform better, provided the agency result kept the model working and scaled more easily.
→ The company could preserve internal focus while accessing specialist execution.
Common mistakes
Optimizing every function to 100%
Chasing a theoretical best-in-class employee can consume money, equity, and management attention without improving the total system enough to matter.
Leaving success undefined
Without a minimum acceptable result, outsourcing becomes a preference rather than a managed decision.
Is it for you?
Best for
It is best for lean companies facing repeated build-versus-buy or hire-versus-agency decisions.
Not ideal for
It is not ideal when the outsourced function handles an unacceptable legal, data, continuity, or quality risk.
From the transcript
“I think you have to decide what is your core competency.”
“If it still works, that's more scalable.”
From the episode
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Will Nitz