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Innovation: Is It A Myth, Or Simply Elusive?

March 16, 2010

One of the benefits that comes from IACCM’s conference partnership with the Shared Services & Outsourcing Network (SSON) is the exposure each of us gains to different viewpoints. Our commuinities are largely complementary and inter-dependent. That means we have opportunities to gain new perspectives and indulge in different conversations.

An example of that is the lively discussion created by Phil Fersht, who is presenting at both the Americas and Europe, Middle East & Africa events. In a blog entitled “Busting The Innovation Myth”, Phil challenges the idea that outsource providers ever introduce innovation. He argues that they can undertake actions that enable their client to innovate (for example, process improvements, cost reductions), but is asking for examples of actual, provider-inspired business innovation.

In mounting this challenge, Phil has defined ‘innovation’ relatively narrowly, by arguing that it must be market-facing. Therefore he rules out those things that may be simply new processes. Personally, I disagree with this. In a services-based world, where outcomes really matter, the quality of the process is a real market differentiator. I could regale many experiences of call centers, or billing errors, or missed shipping dates to illustrate the point.

But there is no denying that many clients would like their supplier to innovate and are disappointed by their failure to do so. Many providers would argue that is due to failures in teaming and collaboration by the customer. But there is of course another aspect, which is that any provider with innovative ideas is unlikely to want to apply them solely to one customer, because they are its source of competitive difference. So it is inevitable that most ‘innovations’ are rapidly replicated.

We often debate the extent to which the contract contributes to innovati0n – or the lack thereof. Certainly I am not aware of contracts that actually incorporated plans or commitments around ‘innovation’. I am aware of many where the governance and performance management procedures undermined collaboration such that the chances of the parties innovating were dramatically reduced.

But what do you think? Can suppliers introduce real innovation to their customers? Are their examples where strong supplier / customer relationships have resulted in market-facing innovations? I would love to hear about your examples.

One Comment
  1. Amit Kapoor permalink

    I wrote a paper a couple of years back on how service providers could contribute to business innovation for clients. While I do not have concrete examples to cite, there are some avenues in processes such as drug discovery that could easily be co-executed with suppliers, allowing them to directly contribute to market facing innovation. Suppliers also have to be involved in the right functions of the client organisation to be able to generate innovative solutions. It would be foolhardy to expect a full service IT supplier to generate innovative solutions for an automotive client, unless it was involved in the engineering applications side of things, and came out with a unique design / solution to a common problem faced by car users. I have always wondered why consultants are not regarded as outsourcing suppliers. Is this not a case of “decision making” being outsourced. If they come out with great ideas that eventually lead to market facing innovation, it is never publicly known.

    About contracts, I think the current practice of customers dictating most terms & conditions and therefore pushing too much risk on suppliers is not the best framework to foster a collaborative innovation centric relationship. More contracts will need to accommodate the possibility of dealing with failures in an equitable manner, if suppliers are expected to participate in a risk prone innovation process.

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