So what does innovation really look like to client organisations? Innovation is not to be confused with continuous service improvement - it’s radical change rather than incremental change and is likely to create business-wide benefits.
This was the view of senior IT outsourcing buyers who I discussed this subject with recently at an innovation workshop, as part of my role for the National Outsourcing Association. The attendees represented a good cross section of industries and the event was very valuable in casting some light on that stubbornly difficult to define aspect of outsourcing relationships: innovation.
One of the strongest messages to come out of the session was that a transparent and collaborative relationship is needed between client and service provider in order to create the environment in which innovation can flourish. Service providers need to have a deep understanding of a client’s business in order to innovate. Similarly, clients need to know their provider’s business better than may be the norm.
Before you can begin to discuss innovation, providers and clients need to have addressed such questions as, is this a strategic or transactional relationship? Is this contract sufficiently profitable to allow resources to be dedicated to innovation? Are we (clients and providers) prepared to accept the potential risk and cost implications of delivering innovation? Clearly, open and honest discussions are required.
Outsourcing buyers at the workshop also discussed tactics to make innovation a reality, these included setting up regular innovation forums where multiple service provider partners were invited to propose innovative solutions for their business. This format was found to be effective because a broad range of expertise could work to innovate – and natural competitive instincts in such a setting no doubt have a positive effect too.
So what not to do? Even mature outsourcing buyers can create barriers to innovation and common causes include assuming innovation will happen without their input, not allowing service providers to get close to their business and communicating a “we just want it cheap” message.
The bad news is that delivering innovation does require a sustained investment of resources, the good news is that the outsourcing buyers at the workshop could demonstrate, from personal experience, that the benefits could be dramatically greater than the costs.