What Parts of the Innovation Process Can you Outsource?
Consultants can help with pretty much any part of the innovation process. However, innovation exists to help you build new capabilities and create new revenue streams; therefore, I don’t recommend outsourcing everything. If an external company can build your solution, then anyone can. In order to innovate effectively and create a competitive advantage, you have to build a differentiator into the process. That is, add a component unique to your organization. With that in mind, which parts of the innovation process can actually be outsourced? To answer that question, let’s walk through the innovation process step by step.
1. Defining the strategy
Setting up a strategy for developing new ideas is the company’s responsibility. Consultants can help—they can do homework, such as analyzing industry and trends. For example, you have consultants that know everything about Gartner's Hype Cycle, and that can help you translate these trends into forecasts that are meaningful for your organization. However, your organization’s management must decide on the direction to take with the company. That you cannot outsource.
2. Creating ideas
Idea creation is a process that can easily be outsourced. You can invite students, clients, and other guests into your brainstorming sessions. Just make sure that there is agreement on who owns the generated ideas, in order to avoid intellectual property disputes. Involving outsiders is an excellent way to get fresh and different perspectives on a given issue.
I recently had the pleasure to participate in an online world cafe, a test organized by Stormpunt to see if it was possible for a large group of strangers to create new ideas online in Miro. It worked very well!
If you are interested in obtaining fresh perspectives, there are organizations that can help you set up such a brainstorm, a hackathon, etc. Getting help with the preparation is important because if you don't ask the right question at the start, you will get lots of ideas for the wrong problem.
3. Writing the business case (validating ideas)
I strongly suggest that you get your team involved in writing the business case. The business case is about validating your idea from a market, organization, and project perspective. Those last two things, in particular, can only be evaluated by the team that will be acting on the idea.
Outside resources can, however, help you by providing support in writing the business case. There are several templates that you can find online.
At Organizing4Innovation, we offer online tailored guidance with our T4 accelerator program to help teams create their business case. We developed this offering after we saw many innovators struggle with writing the business case for their project. For example, take Cherry Langston, a nurse practitioner. She knew all about the problem she wanted to solve, but very little about the business side of things. We helped her put together a solid business case.
It is also possible to outsource parts of this step, such as industry and competitor analyses. For management consultants, such analyses are a piece of cake. However, make sure that such analyses are really needed before you outsource this work.
4. Developing the solution
Firms often think they have to build their solution themselves, in order to preserve their intellectual property rights. However, that is rarely the case. This step is usually the easiest to outsource, especially when it comes to software or hardware development. Just make sure that the intellectual property rights remain yours.
For example, if you are a lawyer and you want to develop a portal, you can outsource the development of the portal to a tech company, because the value is not in the technology. The value of the new service is in the content the platform provides and the follow up that you deliver as a lawyer. Perhaps you can even use an off-the-shelf solution! The less risk you take when developing a new service, the better!
Beware, though. If someone else can build the solution, then anyone can.
So, your best option here is co-development; for example, you deliver content while a software development shapes it into a usable app. More on this topic can be found in the blog that explains what parts you can and cannot outsource when developing a new solution.
5. Delivering to the first client (pilot)
Delivering the solution to the first client is definitely something you have to do yourself. Unless you’ve formed a partnership, where the implementation is the responsibility of the partner. But even then, you will want to be involved.
The first version is never perfect. By getting involved in the first pilot, you will see first hand how your first clients respond to the new offering and know what to work on to make it better.
You can ask for user feedback and outsource getting this information. However, a conversation with your user is invaluable and no survey can compete with that.
6. Scaling the solution
Scaling can be accomplished with partners—for example, through licensing or franchising agreements.
Even if you decide that scaling will take place in-house, you may consider training another team for the task. The innovators I have worked with were typically excellent at coming up with solutions and breaking down barriers. They were less skilled - and interested - in improving the solution to make it perfect. This may be a good moment to bring in new people.
7. Managing the process
Innovation management can be outsourced, which is an excellent and especially cost-effective option if your organization has limited experience with innovation. Like any process at a firm, innovation needs to be managed. You’ll need help collecting and validating ideas, as well as tracking projects as they progress. At organizing4Innovation we offer innovation management as a service. We help you with all of the above and more, including preparing the documentation you need for your portfolio management - see below.
8. Managing the portfolio
Portfolio management needs to be done in-house. Your organization will have to make the decisions regarding keeping or killing projects, and where money gets invested to that your combined projects will remain aligned with your unique strategic goals.
Most steps of the innovation process can be outsourced, but the strategy/portfolio decisions have to be made by your organization. Implementation is particularly difficult to outsource while still producing a VRIN—that is, valuable, rare, inimitable, and non-substitutable—solution. With this framework, innovation will gain you the intended competitive advantage by ensuring your ideas aren’t so generic that anyone can copy them.
Management, on the other hand, can absolutely be outsourced to your advantage.
Most parts of the innovation process can be outsourced. However, the strategic and portfolio decisions have to be made by the management of your organization. They define the direction and decide what projects to invest in.