Innovation and the Outsourcing of Jobs

The main purpose of this article is to lay the stress on our clients' requests for outsourcing work and how they evolve. This is not the only goal however. In a recent article entitled, "is innovative outsourcing a pipe dream" (that title in itself in fact is causing an issue, because one wonders whether the journalist is referring to innovative outsourcing, i.e. outsourcing work done differently, versus innovation within outsourcing, which is in fact the true subject), Stephanie Overby describes how difficult it is to execute on an innovation strategy within outsourcing. In essence, the future outsourced client wants his or her savings delivered (standard outsourcing savings being 20% on average, in this kind of contracts), and the vendor is therefore making a lot of promises with regard to innovation, which according to Stephanie Overby will seldom if ever be implemented. As soon as the contract is signed, the outsourcing work provider is caught in the daily woes of delivery and has literally no bandwidth left for innovation implementation. In many cases, Overby is right - and that was the case for the December client mentioned in my article (client name will remain hidden).

However, innovation in the outsourcing of jobs is in my mind not a pipe-dream and here are the reasons why I think we can add a few nuances to Overby's conclusions. There is a case in my eyes for a halo effect (re. the halo effect blog and the book), i.e we are adding several causes which are not actually linked to one another. Besides, there is also a confusion between the relevance of a strategic objective and the quality of its execution:

Firstly, it all depends on how this innovation promise is actually formulated. The onus is on the client's representatives so that they work with the vendor in order to develop the precise framework which will define the conditions of the execution and the key success factors of a joint innovation programme. This is why I entitled this approach ' programme '. I didn't use this word because it sounded good; this is on the contrary a very careful choice of words. The word programme means "super project", very often complex and cross-organisational, which often serves as an umbrella for an array of sub projects. In this particular case, the contract is an outsourcing work contract, but this is not making any difference with regard to the requirement for a programme to be set up. In other words, innovation doesn't happen by chance, it requires focus and planning,

Secondly, the implementation of the programme requires a very strict governance, which is often considered as a chore, and therefore not very interesting. Everyone will tell you they want innovation, but the head of innovation has to be able to stand up and speak up for his/her programme and defend the need for a real governance. This is not an easy task, and often very unpopular. This very strict governance is what is going to make a programme succeed. This is true of all programmes, not just innovation, and the programme has to be managed properly and at the right level (i.e. neither sales or operations). In the particular case of outsourcing work, this is even more mandatory if you want to avoid slippage,

Thirdly, the financial aspect of the programme is very important and yet often minimised by management. However, without financing, innovation can NOT be delivered. Stephanie Overby seems to imply that clients want innovation for free, embedded in outsourcing contracts. I don't think this is true, and this is not what I witnessed in the field. On the contrary, clients who are really interested in innovation know that it has a cost, and are ready to invest in it. The most important failures, often come from clients who have not understood that innovation has a cost. In that particular case, the vendor also has a duty to educate its client, in the interest of both parties. As I am used to saying, there is no such thing as a free innovation lunch. I have never met a client who did not understand this perfectly,

Lastly, the allocation of resources and their level in the hierarchy is fundamental. Once again, this is a mistake that should not be overlooked. The failure to allocate a dedicated resource is a non starter. Choosing people whose competencies are not up to the job (the head of innovation needs to be good at marketing and technology, see my dossier on ICT marketing regarding this subject) is another non starter. Besides, such competencies have to be allocated on both sides of the contract (many of the failures in innovation within outsourcing work contracts are due to the lack of a stable head of innovation on the client side).

There may be other points, but these are the main ones. Other details are available within our White Paper on innovation which describes our approach minutely.