Why would you create outlines?
lol, That is a great question. I assumed if I created an outline, I would be able to work with each letter individually. Is there an easier way?
Example: Word is "ice", how do I change the "dot" on the i to another color?
You can change the color on individual letters. But, if you need to change PART of a letter, you would need to outline it. After outlining, use the Direct Selection tool to select part of the letter. The pick a color with the Swatches panel or Color panel.
To change an individual glyph (e.g., the complete letter "i"), select it with the Type tool, and pick a color with the Swatches panel or Color panel.