Innovation outsourcing is a new and exciting way for companies to increase their competitiveness. It is a variation of what some call strategic outsourcing. By turning to other organizations, such as an innovation agency, to help them develop and implement new ideas, firms can improve their bottom line while also freeing up resources to focus on other areas of their business.
Results From Outsourcing Innovation Management
Here are a few examples of how outsourcing innovation can benefit both parties involved:
Increased Efficiency.
By working with an outside organization that specializes in innovation management, companies can save time and money that would otherwise be spent on trying to develop the diverse expertise needed to create new ideas in-house. This arrangement also allows firms to tap into a larger pool of creative talent, which can lead to more successful and impactful results.
Improved Quality.
When organizations outsource innovation, they can choose to work with the best and brightest minds in the field. This ensures that the ideas being developed are of the highest quality and have a greater chance of success.
Faster Implementation.
The benefit of outsourcing innovation is it helps organizations bring new products and services to market faster. By working with external teams, firms can bypass the internal research and development process, which can speed up the time required to market new offerings.
Reduced Innovation Risk.
When companies outsource innovation, they can the minimize risk associated with developing and launching new products and services. By working with an outside organization, firms can test ideas before investing significant resources into them. This can help to reduce the likelihood of failure and wasted effort.
Increased Flexibility.
Outsourcing innovation can give companies the flexibility to scale up or down their efforts as needed. This type of arrangement allows firms to respond quickly to changes in the market or their business environment. It provides organizations with the ability to try out new ideas without making a long-term commitment.
Examples of Innovation Outsourcing Models
There are many approaches to outsourcing innovation. The most common relationship models are:
Project-Based Innovation.
Under this arrangement, companies work with an outside organization on a project-by-project basis. This type of arrangement can be helpful for firms that only need help with specific projects, specialized skills, or want to test out a new relationship before making a long-term commitment to external collaboration.
Joint Venture for Innovation.
A joint venture is a partnership between two or more companies that are formed to undertake a specific task or project. This type of arrangement can be beneficial for companies that want to share the risks and rewards associated with innovation.
Innovation Strategic Alliance.
A strategic alliance is a partnership between two or more companies that are formed to achieve a common innovation goal. This type of arrangement can be beneficial for companies that want to pool their resources and expertise in idea generation to create a competitive advantage.
Innovation Licensing Agreement.
A licensing agreement is a contract between two parties that grants one party the right to use the other party’s intellectual property. This type of arrangement can be beneficial for companies that want to access another company’s technology or expertise.
Innovation by Acquisition.
An acquisition is the purchase of one company by another. This type of arrangement can be beneficial for companies that want to quickly add new innovation capabilities or enter a new market.
Examples of Successful Innovation Outsourcing
Some of the most successful cases of innovation outsourcing include Apple’s work with Foxconn, Nike’s work with Reebok, and IBM’s work with Lenovo.
In each case, the companies worked with an outside organization to develop and launch new products and services.
Apple and Foxconn.
In Apple’s work with Foxconn, the company outsourced the manufacturing of its products to the Taiwanese firm. This allowed Apple to focus on design and development, while Foxconn handled creating the innovation that would be needed to produce the products. The arrangement proved successful, as Apple could bring new products to market quickly and efficiently.
IBM and Lenovo
Innovation outsourcing is nothing new for IBM. The company has been working with Lenovo for over a decade to develop and launch new products and services.
May 2005, IBM sold its PC business to Lenovo as an example of innovation by acquisition. The move allowed IBM to focus on its core businesses while giving Lenovo the staff, innovation management, and expertise to innovate and bring new products to market.
The arrangement has proved successful, as, over the next 10 years, Lenovo became the number #1 PC manufacturer.
Examples of Failed Outsourcing Innovation
Unfortunately, not all cases of innovation outsourcing, or the broader strategic outsourcing category, are successful. In fact, some have resulted in failure. Some of these failures have been spectacular flaming innovation fails.
BlackBerry and TAT (The Astonishing Tribe)
One such example is BlackBerry’s work with TAT which ultimately resulted in BlackBerry acquiring TAT.
The original innovation aim was for TAT to take over the UI/UX development while BlackBerry would focus on the hardware design. There was a lot of hope that TAT would bring their technical expertise, development process, and the magic they applied to polish the Android interface to BlackBerry.
In 2010, BlackBerry gained TAT as an example of innovation by acquisition. TAT was 180 strong team that focused on the user interface/user experience. The goal was for TAT to help BlackBerry recapture market share from Apple and Android.
Unfortunately, the arrangement did not prove to be successful. TAT and Blackberry were unable to develop the operating system fast enough to keep up with the competition. As a result, BlackBerry lost market share and Blackberry/TAT was forced to lay off staff.
Why Do Some Succeed and Some Fail?
Key to Successfully Outsourcing Innovation
There are several key characteristics of successful innovation outsourcing. First, the companies involved should clearly understand what they want to achieve. Second, the companies should have a strong relationship and be able to work together effectively. Third, the companies should be able to trust each other. And finally, both parties should invest the time and resources.
Avoiding Outsourcing Innovation Failures
Innovation outsourcing can fail when companies do not take the time to properly assess their needs and find the right partner. Outsourcing for innovation should be a strategic decision, not a reactive one. Firms also need to be clear about what they want from their outsourcing partners and ensure that those partners can deliver on what’s been promised. Finally, regular communication and feedback are essential to making sure that both parties are satisfied with the arrangement.
When done correctly, innovation outsourcing can be a powerful tool to help companies speed up their growth. However, it’s important to understand the risks and challenges involved so that you can set your organization up for success.
Cost of Innovation Failures
When a company cannot innovate, it can cost them in several ways. First, they may lose market share to their competitors. Second, they may miss out on new opportunities. And third, they may have to lay off staff. In the extreme case, it could cause the failure of an existing business.
Many leaders, especially those not directly involved in innovation, overlook the cost of failing innovation costs. But the cost of innovation failures can be high. So it’s important for companies to understand the risks involved and take steps to avoid them.
Innovation is essential for companies if they want to stay competitive and grow. By understanding the risks and challenges involved in innovation outsourcing, companies can set themselves up for success.
Is Outsourcing Innovation Right For You?
Outsourcing innovation is not right for everyone. It’s important to understand the risks and challenges involved before deciding to outsource. When done correctly, however, innovation outsourcing can be a powerful tool to help companies speed up their growth.
How do I decide who to partner with?
Innovation Culture
In my experience when partnering/outsourcing innovation (co-innovation), the alignment and similarity of the corporate culture have been the cornerstone of my decision on who to partner with. Culture eats strategy for lunch any day of the week.
When looking to outsource innovation, my first step is always to look for a company with a culture that closely resembles ours. This creates alignment from the start and gives us a much better chance of success. It also allows us to move faster because we are already on the same page.
Proven Track Record
The second step is to look for a company that has a proven track record of innovation. This includes looking at their past projects and understanding how they approached them. It’s also important to understand their process for taking an idea from concept to reality. You should also look at those projects that failed and what did they learn from them.
Business Model
The third step is to understand their business model and how it fits with ours. This includes understanding how they make money and what their margins are. It’s also important to understand their go-to-market strategy.
Innovation Capabilities
The fourth step is to understand their capabilities. This includes understanding what they are good at and what they are not good at. It’s also important to understand their processes and tools.
Team Experience and Expertise
The fifth step is to understand their team. This includes understanding the skills and experience of their team. It’s also important to understand their culture and how they work together as a team.
Reduce Risk While Increasing Success
Organizations that are serious about using innovation outsourcing to speed up growth need to take a structured and thoughtful approach. One approach is to consider using an innovation agency. This will help reduce risk while increasing the chances of success.
The role of an innovation agency in outsourcing innovation can be twofold. First, they can help by being an external trusted adviser to assess the risks and challenges involved in outsourcing innovation. And second, they can help to manage the relationship between the two companies. They can also help to ensure that both parties are satisfied with the arrangement.
Conclusion
Outsourcing innovation can be a powerful tool to help companies speed up their growth. By understanding the risks and challenges involved, companies can set themselves up for success. Innovation outsourcing can help companies reduce risk while increasing success when done correctly.
If you’re serious about using innovation outsourcing to speed up your growth, consider using an innovation agency like Techtrend. We can help reduce risk while increasing success. Contact Techtrend at hello@techtrend.com. We would be happy to discuss your specific needs and see how we can help.
Innovation outsourcing is like outsourcing your tax preparation. If done correctly, it can save you time, money, the fear of doing it wrong, and position you for success.
