Open innovation
The answer to this is very similar to the Agile revolution that happened within projects. The answer is to bring the suppliers to a state of equal partners and establish trust-based collaboration, which is based on the concept of Open Innovation. Of course, this is easier said than done as you are fighting the cultural change process, knowledge gaps and often large distance that make trust very difficult. The two concepts that are really useful and work well are product platforming and collaboration.
In the first approach, the product is restructured as an extendable platform where external partners can innovate independently and provide extensions that become part of the overall solution. Apple and Google Store concepts can be seen as such and undoubtedly are the key reasons why Symbian platform quickly lost its competitive edge.
The collaboration approach does not require any changes to the product, but instead the methodology of work with external partners needs to change. This will require companies to invest into build a culture of collaboration and trust based on close communication, autonomy of individuals and mastery of work. This can be a very long process if the gaps between partners are significant and major human relations issues need to be resolved on the way. Establishing a culture of collaboration is a significant undertaking that should be implemented in a structured way.
Partnership
What can you do to avoid falling into the “outsourcing trap”? The first step is to choose the right partner — one that has the right approach to outsourcing and a culture of work that is similar to yours. You will have to replace the command and control oriented approach to managing partnerships with a culture that is based on trust and autonomy. And most importantly, you need to shift your focus. Instead of only focusing on cost reduction, you need to start thinking about how to create value through your partnership.
Value and innovation creation should be the main goal of every partnership. To successfully achieve this, you need to keep your core activities in-house and outsource non-core activities to your partner. This way you will be able to avoid the “outsourcing trap”. You will be able to accelerate innovation, improve the value-to-cost ratio and become an agile, open and adaptive organisation.
Once you pass the bridge from outsourcing to open innovation, you’ll never want to go back. Why? The reason is simple — because strategic partnerships based on open innovation bear so much more value.
Marko Javornik is director for international services with Comtrade.
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