Why You Should Consider Outsourcing Your Innovation
Written by Steven King
In today’s rapidly changing business landscape, the ability to continuously innovate is imperative for companies seeking to gain a competitive edge. However, innovation requires unique skills and methodologies that can be difficult for organizations to cultivate and maintain internally. More and more, we see leading companies like IBM, Apple, and Bosch strategically collaborating with specialized external partners to complement their internal capabilities for innovation. The Harvard Business Review recently reported that 94 percent of tech leaders view innovation partnerships as a necessary strategy.
Finding the right innovation partner is critical. In this post, we’ll explore key considerations for identifying and evaluating potential innovation partners that are positioned to deliver fresh thinking, accelerate your innovation velocity, and drive real business impact without overburdening your team.
We will share actionable insights and lessons learned from our lived experience as innovation leaders at UNC Blue Sky Innovations. Whether you are exploring outsourced innovation for the first time or aiming to increase returns from existing partnerships, read on for our advice.
Why you should consider outsourcing your innovation:
Innovation is a skill in and of itself. Look for expertise in innovation and design thinking: Partnering with an external innovation firm provides valuable access to professionals with specialized expertise and experience in the latest innovation methodologies and design thinking principles. They are skilled in techniques like human-centered design, rapid prototyping, and creative problem-solving. This level of in-depth innovation expertise is challenging and costly for companies to maintain internally on an ongoing basis. Outsourcing to specialists enables you to benefit from their proficiency. These specialists are practiced in approaching challenges in entirely new ways based on a deep understanding of end-user needs and emotions. Their unique toolkit can uncover innovative solutions that your internal teams may need help to reach.
Partners allow you to innovate without bogging down internal resources: Outsourcing your innovation efforts alleviates the burden on your internal teams, allowing them to maximize their time and energy on core business activities that drive revenue and operations. Your staff resources and budgets can be allocated more efficiently when an outside partner handles innovation. This frees up your finance department from having to secure and manage capital for innovation projects and their inherent risks.
Outside perspectives can provide fresh ideas: An external innovation partner provides an objective outsider’s point of view, helping you see opportunities, challenge assumptions, and imagine solutions that internal teams who are deep in the weeds may have overlooked. Their independence and cross-industry experience facilitate out-of-the-box thinking. A novel perspective is often the key to unlocking innovation.
Outside experts may be more current with the latest technology: How often have you heard that the “next big thing” is going to “change everything”? Whether you buy into the hype or not, we are living through a time of high volatility and high change, largely because we are developing new technologies at a faster pace than ever before. Internal teams may be so focused on accomplishing the current objective that they have less time to experiment with and learn about new technologies like AI, VR, and robotic automation.
For external innovation consultants who make it their business to stay on top of the latest technological breakthroughs and emerging trends, it is a full-time focus. Partnering with them allows you to gain exposure to bleeding-edge technologies before your internal team might, keeping you abreast of developments and their applications.
Common Pitfalls and Problems with Innovation Partnerships
Communication and coordination challenges: A lack of frequent face-to-face interaction when working with external partners can lead to missed opportunities for casual conversations, brainstorming, and relationship building between teams. This can result in misunderstandings, unclear expectations, and project misalignments. Close coordination and proactive communication is essential.
Misaligned objectives: Differing priorities or incentives between your organization and an external partner can lead to misalignments in goals for innovation projects. Without agreed-upon objectives, conflicts can arise, resulting in solutions that don’t fully meet your needs. Alignment of goals must be ensured from the outset and reviewed periodically.
Intellectual property and confidentiality risks: Proper legal safeguards must be instituted to protect intellectual property and sensitive proprietary information when collaborating with external partners. Failing to implement NDAs and establishing IP ownership at the start can result in a loss of competitive advantage.
Over-reliance can lead to loss of internal capabilities: While outsourcing innovation provides a great upside, relying too heavily on external partners over a prolonged period can erode your internal innovation skills. This can slowly reduce your self-sufficiency and increase your dependence on outside help. A balanced approach is optimal. The best partnerships are those that allow you to leverage outside resources to help build new capabilities internally.
Key Considerations for Evaluating Innovation Partners:
Relevant expertise and experience in your industry and technology: Having domain expertise in your specific business environment and technical area is highly advantageous in an innovation partner. Seek out specialized skills tailored to your sector and current tech stack to maximize the value-add. Consider niche partners versus generalists.
Proven track record of success: Thoroughly vet potential partners based on client references, demonstrated delivery of previous projects on time and budget, and a portfolio highlighting distinct areas of innovation strength. Case studies proving an ability to deliver measurable results for clients indicate the likelihood of repeated success.
Alignment with your goals and values: Take time to assess how well your organization’s priorities, values, and corporate culture align with that of the prospective partner. Greater harmony in these areas allows for smoother collaboration and higher satisfaction.
Strong communication practices: Frequent, open, and clear communication establishes alignment between external partners and internal teams. Ensure that potential partners have effective communication habits and are responsive to information requests. Schedule regular status checks.
Adaptability to changing needs: Seek external innovators who are flexible and agile, demonstrating an ability to adjust strategies nimbly as business circumstances evolve and new information emerges. Rigidity can be detrimental.
Transparency — processes, reporting, handling issues: Ongoing transparency from external partners builds trust by keeping your team informed of progress milestones, budget status, risks, and issues as they arise. Insist on transparency to stay abreast of the innovation project.
Intellectual property rights and confidentiality: Institute solid IP ownership rights and protections upfront through non-disclosure agreements and other contracts. This safeguards your competitive advantage when collaborating externally. Don’t leave this ambiguous.
Complementary strengths to fill your gaps: Opt for partners who fill your team’s gaps in skills, expertise, bandwidth, or experience to achieve a complementary relationship. Assess your internal innovation shortcomings and seek external experts who can address them.
Specialized focus on tools/markets specific to your needs: When highly specialized expertise is required for your project, strategically choose partners with proven experience and niche focuses suited to your particular business, market, and end-users. Leverage specialized capabilities you lack.
