Little Book of Innovation - Chapter 5

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SHOULD WE OUTSOURCE?

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A  CHALLENGING QUESTION FOR CEOs & BUSINESS LEADERS:

Businesses tend to scale back on innovation during unsettled economic conditions, the conundrum however is that this is perhaps when it is most needed; to deliver differentiation from competitors & drive profitable growth. Whilst a short-term flexing of outgoings versus NPD momentum is sustainable, achievability decreases as time goes on. Especially when coupled with a reduced workforce or one that may have limited skill & capabilities alongside a reining in on expenditure.

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Warwick Business School published a study of 253 business leaders across some of the largest firms in Europe. The study found 64% of respondents  believed their ability to sustain innovation contributed to the financial success of the business. A further 70% reporting they had achieved their innovation through outsourcing to specialist organisations. Historically this been the way large international organisations & governments behave, we are now seeing a definite shift towards smaller businesses following a similar model.

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WHAT QUESTIONS SHOULD BE ASKED IF YOU ARE CONSIDERING OUTSOURCING TO ENABLE YOUR INNOVATION EXPECTATIONS?

[/vc_column_text][vc_empty_space height="20px"][vc_column_text]TRUST: finding the right external partner, one you can trust with sensitive information. Verify credentials & any testimonials. INTELLECTUAL PROPERTY: ensure that you understand the IP rights & have a clear agreement in place from the beginning. Think pre-nup for IP! CLEAR OBJECTIVES: What exactly are your expectations: strategy creation, expertise to accelerate projects? CULTURAL FIT: it can be a disruptive & worrying experience for internal teams to have external providers coming in. How will your team respond, will they see as an opportunity to learn? Do they have the emotional intelligence to navigate any political fallout? COST: the ‘bang for your innovation buck.’ Outsourcing should not be viewed as a way to save cost; innovation is not a quantifiable discipline to the same degree, for example: a call centre has variables which are all known, this allows the application of robust costing.[/vc_column_text][vc_empty_space height="20px"][/vc_column][vc_column width="1/2" css=".vc_custom_1653575613146{padding-top: 0px !important;padding-right: 20px !important;padding-bottom: 20px !important;padding-left: 20px !important;background-color: #168679 !important;}"][vc_column_text]

BENEFITS OF OUTSOURCING

[/vc_column_text][vc_empty_space height="20px"][vc_column_text]SPEED TO MARKET: all businesses will face times of peaks innovation activity that internal resources will struggle to deliver on, managing this is crucial. Better to delay than to rush & fail; but if you can find a partner who you trust to flex with your business needs then why wouldn’t you? SKILLS AND CAPABILITY: certain projects require skills & capabilities that you may not have access to within your internal resources. Outsourcing can remove information blockages in projects alongside up-skilling your internal resource. COST: manage costs effectively by using a provider as opposed to a permanent resource; someone to dip in & out as required. Any partner worth working with will invest upfront to understand your culture & business needs; this only needs to happen once. UNFETTERED THINKING: do not underestimate the power of external challenge, particularly in cultures heavily dominated by one discipline such as operations. Finding solutions that are internally considered ‘off-limits’ can be raised without risk & a broad range of experience in different industries can be applied, bringing fresh perspective. EXPERTISE: we believe effective commercial innovation is a specialist business skill, so why wouldn’t you use specialists to develop your business projects? What makes an orchestra great is the conductor bringing together specialist musicians at the right time to deliver & command performance.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=".vc_custom_1661429473009{padding-top: 50px !important;}"]

It is not a clear-cut answer but where speed to market is a key profit driver for innovation, considered outsourcing can make a significant& positive impact.

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Case Study: what is the key benefit of having an iPhone? The apps of course, which Apple have effectively outsourced. All the innovation comes from a community of developers yet they still control the content of the App store & the reputational benefit it brings to its brand & core product. Is this the potential model that could dramatically change the retail landscape in the future?

We envisage a continued migration towards external providers as an effective cost management alternative within the industry;  future strategy to drive differentiation from our competitors & increase profitable margin should be dominate on any boardroom agenda.

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Could this be a way to develop your cake & eat it too?

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