Be careful about outsourcing innovation process

Over the last few years, I experienced companies outsourcing their “innovation process” to innovation labs and studios. This steps looks likea  pretty smart one from the management and business perspective. Outsourcing the innovation process is quite secure: you have a signed contract and external company have to deliver something innovative. It sounds like 100% certainty therefore is so tempting…

Internal innovation and startup efforts, on the other hand, can end in a blind lane. The failure rate can reach up to 90% considering all ideas and research projects. Seeing the direct costs and resources spent on them, the outsourcing of innovation can be seen as the smartest business decision to make. But it is always not. Why? There is a lot of hidden, unseen impact when outsourcing innovation process. Your products are the heart of your company and therefore should be owned by your employees and rooted in your DNA, including the early product discovery phase. Unfortunately, the biggest unseen impact of outsourcing innovation process is on your culture and further supports the negative spiral of lacking internal innovations.

Why companies outsource their innovation process?

Usually, management desires to have something like this:

• extraordinary products or services helping to achieve positive business results (profit, market share, preferred brand), locally or globally, does not matter;
• strong and clear vision owned by great leaders;
• open-minded and questioning people wanting to achieve something great;
• engaged and motivated internal teams owning their product;
• proud and creative employees sharing the word of mouth how great is their company and products.

Do most of the companies have it? What differs flexible and innovative SMBs, startups, or admired and innovative Apple, Google, Tesla or Space X from the ordinary companies? It is the people and culture described above. Such proud, creative, engaged, motivated people generates the innovation. If you outsource the innovation process, you maybe do not have such culture and therefore you outsource it. But if you outsource the innovation process, it does not create the desired culture. On the contrary, it further contributes to ordinary, not innovative culture. Even the last creative people still staying at the company would probably leave now, which closes the negative spiral.

How to mitigate the connected risks?

Don’t make me wrong. I am not screaming: “do not outsource innovation process!” Actually, it is very good not to reinvent the wheel but rather learn from the experienced experts. When I help companies with their innovation effort and internal startups, I also do kind of outsourcing, before I teach them how to do it by themselves.

Rather, I would like to outline the connected risks and share how to mitigate them. Here are few hints and ideas to care about when outsourcing innovation process to innovation labs and studios:

• Do not overtake the final product but rather only verified idea/MVP (minimal viable product), finalize the verification and realize it internally to get the ownership.
• Involve as many internal people as possible (especially Product people, Lead Engineers and developers, UX people) to early discovery phases with the lab. They will learn the discovery and assumption verification methods and people from the labs will question their mindset and assumptions. This will be then replicated to the internal teams and change current DNA.
• Organize early hackathons to involve more internal employees into product discovery. This is a very good way to share the discovery findings, customer behaviour, current status or feature set and can further help to improve current products.
• Do not only involve employees into the innovation process of some specific product or service being ordered, but also ask the external company to teach your people these methods used to generate the innovative outcome.
• Involve those learnt methods to early discovery or ideation phase of your current products.

Innovation is not the outcome, it is the journey

The innovation process is not about the outcome. It is about the way we find and build the outcome. Questioning people with open mindset knowing how to quickly verify their assumptions (via simple experiments with users) is the way to great innovative culture you may desire.

By following mentioned ideas in the list you create the environment with opportunity to learn, involve employees in early product phase, allow them to build something they believe in and bring them closer to the customers. These are the aspects that attract the employees further supporting the innovative culture, not the negative spiral. Does it make sense?