Monday, July 07, 2008

You should outsource innovation if...

I didn't think I'd ever write this post, but I am rapidly coming to the conclusion that some firms are right - they can't innovate. This inability to innovate is not based on a lack of ideas, or a lack of intellectual curiosity, or inadequate skill sets. No, in many cases where firms want to innovate and can't, the barrier is time and focus.

Too many firms have the right people, good ideas and senior management commitment, but simply cannot find the time to innovate. Obviously this suggests a misalignment of the focus and engagement of the teams and the goals of management, but there it is. I've worked in several firms where there is clear commitment from the top - demonstrated in people resources and in dollar resources - but innovation gets shoved aside because people can't be pulled away from their day to day tasks.

So it's time to consider a completely different model - if you can outsource your payroll, outsource manufacturing and other key elements of your business, why not outsource innovation? In this regard I think the firm outsourcing innovation would suggest key areas of focus for a third party outsourcer to consider, and would provide some measure of resource availability for brainstorming and other activities. However, once the ideas are generated, the outsourced firm would run interference on the ideas, evaluate based on agreed criteria, research competitors and present the firm with what it considers the best ideas. An outsourcer could also spend more time looking at trends in an industry and synthesizing what's happening in the industry and key opportunities for innovation in terms of products, services or business models. I guess the question becomes - what's core competency and critical for success of your business, and what can be outsourced or managed by teams that are experts in innovation?

If your team is sold on innovation as an important key criteria for growth and differentiation, how much of the process should you run and manage in house, and how much should you outsource to innovation teams that have the depth, breadth and availability to innovate and are not locked down by your culture and bureaucracy?

The more I work with innovation, the more it becomes clear that some firms can innovate because it is simply part of their DNA, some firms can learn to be innovative, and some firms, while they want to be innovative, will have difficulty finding the time and the focus for innovation, even though they recognize it is important. Maybe the innovation industry should consider a new offering - not just a hosted software application, but a fully managed outsourced process and solution for innovation.
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posted by Jeffrey Phillips at 1:50 PM

40 Comments:

Blogger Paul Williams, PMP said...

Hmmm...perhaps like an independent "Innovation Management Office" or something to that effect?

Interesting concept that just might work for those with the desire, but not necessarily the ability to execute.

Please continue the following the thought (public or not) because my idea radar thinks you have something valuable somewhere in there.

4:53 PM  
Anonymous Anonymous said...

If you look at futurists and that they consult with companies to plan future strategic business direction - you can make the formal transition to inovator for hire. With my futurist hat on I suggest that we will begin to see major consulting firms offering this type of service to manage the particulars of innovation.

7:22 AM  
Anonymous John Cooke said...

It is a tricky problem. Do you outsource innovation and then struggle to deal with integrating it back into your business, because actually the consultants don't really know how your business runs..or, do you try to do the whole thing in-house and risk diversion of resources away from innovation when the next crisis/cost-cutting appears? For the "outsourcing" solution to stand a chance, you need to have people inside the organisation with the vision to know where the business factors (culture, financial models, values etc.)and future market conditions converge so your external innovation people can begin the have a view of where to aim. I've often seen external consultants coming into an organisation and being so wide of the mark that it's painful, and not realising what drives the business mindset. Agreed that sometimes that will definitely need to change but that can be a lot like turning around a supertanker.

9:12 AM  
Blogger Dennis D. McDonald said...

This comment has been removed by the author.

1:08 PM  
Blogger Dennis D. McDonald said...

Great food for thought. I've commented on this in my own blog: "Should You Outsource Your Organization's Innovation Processes?"

1:09 PM  
Anonymous Ash Seha said...

As someone who works for an open innovation intermediary, my natural inclination is to agree with you. However, it's been our experience that companies which are crappy "closed" innovators aren't great "open" innovators either. As you wrote in your post, "the barrier is time and focus"; the lack of those two precious commodities dooms innovation to failure, regardless of the source. Even if the entire innovation lifecycle could be outsourced, a company's management still has to take ownership of the process at various junctures (just as with any agency relationship), at which point the lack of focus and time rear their ugly heads again...

8:24 AM  
Anonymous aditya said...

Instead of outsourcing innovation, why not just outsource. As long as companies outsource only non-core operations, I don’t see why there should be a problem. It helps them concentrate on what really matters. Also the outsourced job is done with better efficiency by the BPO or KPO involved reducing the price.

3:55 AM  
Blogger Humphrey said...

This comment has been removed by a blog administrator.

4:33 AM  
Anonymous Anonymous said...

Actually it is a bit more complicated than that. Firms that don't have strong internal R&D capabilities have low "absorptive capacity": the ability to recognize and internalize external technology (Cohen & Levinthal 1990). i.e. if you don't have internal R&D it is very difficult to bring in technology from the outside, much less recognize it in the first place.

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