We all now live in an age where we see well-established industries disrupted by streams of new technology that challenge the very foundations on which they operate. Whether a company has an adaptation, survival, or growth goal, the magic key to meeting each of these challenges is the same – innovation.
‘Traditional innovation’ within large organisations is generally slow and ineffective. Management of this traditional corporate bureaucratic innovation is usually driven by short-term goals and internal politics, resulting in inertia, stifled creativity, and an instilled fear of failure. The simple solution is to transform innovation by outsourcing to external agencies or separate subsidiaries.
The innovation failure rate is between 80-90%. Innovation fails when teams lack long-term strategy and don’t adapt to changing circumstances. While many companies innovate in-house, sometimes it makes more sense to outsource innovation. Firms can be incredibly successful when they use external parties to generate ideas and strategies. Research shows the best innovators use a combination of in-house innovation and external collaboration.
Large organisations can also take advantage of a wide range of benefits by outsourcing innovation or by carrying out innovation programmes:
Access to top talent
Specialist teams can provide segment knowledge and relevant skill sets. Innovolo offers unique access to developers, engineers, marketers, and staff with significant venture capital and company-building experience. This real-world experience and start-up knowledge can be missing within a corporation.
Keep the focus on what you know best
Outsourced innovation can also tackle some of the problems associated with the corporate mindset. The transformation of the conventional focus on quarterly results rather than long-term planning by organisations is apparent. A specialist outsourced innovation group can also turn the unreasonable expectations corporations often have regarding innovation on their heads.
Fast and agile
Outsourcing innovation is fast, as it often doesn't have the same constraining corporate processes and policies. An innovation hub such as Innovolo focuses on building and experimenting, retargeting budget, and scaling the team, without seeking time-consuming board or committee approval. This agile hierarchy also boosts creativity and the fear of failure inhibiting large companies is limited.
A cost-effective solution
Outsourcing innovation is usually more profitable for the organisation from a practical standpoint. Innovating in-house is expensive with capacity and time consumed at an ever-increasing pace. Hiring and retaining top talent is an incredibly hard and arduous task and will force costs up further.
Rather than focusing on one particular problem, these smaller budgets drive creativity and lean development.
Outsourcing innovation is likely to become a mainstream business discipline soon, given the many wide-ranging advantages that it offers. Large organisations, unable to innovate, will either outsource or form separate subsidiaries.
We will see specific budgets earmarked for innovation initiatives rather than being treated just as a line item, changing how innovation is measured. Presently, there is no accepted metric to measure the ROI, other than the resulting product or service; each innovation project has its unique return definition. Many deliverables and by-products from an innovation project are intangible, with often unquantifiable knowledge, giving rise to the risk that even when innovation initiatives are contracted to an external agency or laboratory, large corporations will demand the quick results that they are accustomed to in other areas of their work – choking the very creativity they are trying to tap into.
Who's going first?
The tech industry is expected to be the first to embrace outsourced innovation fully, with the construction industry not far behind. The older and more established industry sectors, such as banking and insurance, will take longer to adapt as they are often occupied by a myriad of business interests. However, when the benefits of outsourcing innovation become clear to these businesses, they will embrace it wholeheartedly.
Outsourcing innovation management is completely unthinkable in some carpet floors of companies. Nobody wants to give up control of such an important core area. However, this is completely unnecessary when outsourcing innovation management. Because which trends are classified as relevant, which ideas are pursued further and which inventions are to be launched on the market will continue to be decided by the top management level. Rather, outsourcing innovation management ensures that these far-reaching decisions are based on objective facts and the expertise of internal and external experts. Ultimately, outsourcing innovation management ensures that better decisions are made.
Innovation is coming
Externally contracted innovation will likely become as commonplace and as intuitive in specific industries as outsourcing communication, manufacturing, or accountancy over the next few years. The benefits to the bottom line, coupled with economic pressure and disruptive technology, make outsourcing innovation a compelling new tool for businesses in a post-Brexit and post-COVID world.