October 23, 2020

Innovation Outsourcing: How To Offshore Strategy and Management

Innovation outsourcing is not a new concept. It can be traced back through history, with the 1900s being prime years for specialized companies running outsourcing businesses. While these disappeared from the scene since then, the 2000s have seen a strong resurgence in outsourcing. 

For companies interested in competing in the global market, innovation outsourcing has moved from an option to a necessity. With thousands turning to offshore outsourcing, no company acting alone can keep up with every competitor. 

This doesn't mean that companies are giving up and throwing in the towel. Through offshore outsourcing, hundreds of companies are taking the future into their own hands. 

By hiring out external employees with specialized skill sets, they continue to keep the competitive advantage they worked hard to procure. 

Before we see how a company can properly offshore strategy and management, we need to understand the importance of innovation outsourcing. 

The Importance of Innovation Outsourcing

Innovation outsourcing, or offshoring, is defined as "the strategy of using external parties to engage in idea generation for new products and services and the development of strategies for bringing products to market."

No one will argue that regularly generating new ideas is pertinent to the survival of a company. Leaving these areas to chance would ultimately result in an inability to progress. Therefore, it's crucial to manage innovation in a company. 

Innovation management is a blanket statement that covers all the areas of innovation in a company. This includes anything from new products to contemporary business models.

Properly executing innovation management results in a company maintaining it's selling power and position in the market. They keep their relevance in their customers' eyes by consistently adapting to their changing needs and wants. 

When a company strategically chooses to outsource innovation, they are placing themselves in a leadership position. By opening up their company to new ideas and locations, they put themselves at their respective industry's frontier. 

How Companies are Integrating Offshore Strategy and Management 

Collaborate With External Innovation Partner

At times, it's in a company's best interest to collaborate with an external innovation partner. Employees trying to do a little bit of everything end up doing everything poorly. An external partner with a specific skill set and focus eliminates the need to train new employees or re-train existing ones. It allows everyone on the team to play to their strengths and improve the quality of work. 

As the external partner continues to work with its partner, they begin to understand the client better. They will start to recognize areas where the client can improve and make suggestions accordingly. This, in turn, allows the company to tap into any potential enterprises they are leaving untouched.

As opposed to a subsidiary, an external partner can start the project immediately. There is no adjustment period or integration process needed. 

Create A Subsidiary For External Innovation

Rather than turn to an external partner, other companies have created internal companies to outsource innovation management. It's relatively straightforward in a subsidiary to provide training and outsourced workers to get up to speed. 

Creating a subsidiary also works as a form of insurance. While it's linked to the original company, there is no chance of it going out of business during a contract, unlike some third-party vendors.

Although this may initially seem more convenient, it can result in missed opportunities. Workers already affiliated with the company mail fail to re-evaluate existing practices. Thus, areas of improvement may be ignored or fall through the cracks altogether.

How to Effectively Offshore Management 

Although outsourcing offshore is a celebrated method for increased productivity in a company, some businesses lose sight of properly offshore management and innovation. The following are a few ways that companies can prepare and execute successful outsourcing.

Create and Identify Objectives 

Companies need to have a clear idea of what tasks need to be outsourced and their goals for outsourcing. Before choosing an outsourcing method, leaders in the company must determine what they hope to gain. This will later help them decide a direction to take the outsourcing and whether to go with an external partner or create a group internally. 

Once their objectives have been identified, an outsourcing strategy needs to be created. This will ensure the highest rate of success in the offshore team.

Develop an Airtight Outsourcing Strategy

This strategy must take into account the overall business strategy of the company. A company should consider creating a relationship with an offshore team for multiple projects. Testing out a single project may fail and can ruin any future attempts at outsourcing. 

To truly benefit from an outsourced team, a long-term working strategy should be cultivated. This team will become familiar with the company's inner workings, raising the levels of success for future projects. 

Determine What Will Be Outsourced

After you've completed this step, determine what type of work will be outsourced in your company. Take stock of what resources are available to you and what you expect to have on hand. 

Grow and Maintain A Thriving Relationship 

Finally, create a thriving relationship with your offshore team. Take time to become familiar with the team and communicate your project needs.

The distance of teams can often breed misunderstanding, so make a special effort to communicate if your offshore team is located in another country. Encourage open and frequent communication from both sides, and pay attention to detail. If necessary, outline a firm but realistic schedule for both parties. 

Building a strong relationship with your offshore team will inevitably result in them clearly understanding their expectations. This will create a positive cycle of confidence and deliverance of projects that meet the company's standards. 

What Offshoring Strategy and Management Can Accomplish

Companies typically choose to outsource innovation to take advantage of the lower costs of goods and labor. Others want to bring in specialists to complete specific tasks that their existing employees cannot handle.

Regardless of the reason, offshoring strategy and management can bring a whole host of benefits to a company. Let's take a closer look at the advantages of innovation outsourcing. 

Advantages to Innovation Outsourcing 

Sticky notes

Improved Innovation 

The main advantage of innovation outsourcing is in the name itself ⎼ innovation. Outsourcing to a third party improves the chances of innovation within a company. Highly trained specialists can offer new ways of thinking and process to the parent company. New strategies and procedures can improve efficiency and lower costs.

Interact With External Partners Offering Specialized Skill Sets 

While the company's internal members may be highly skilled, they may fall short in other areas, such as IT or analysis. Outsourcing projects that require highly specialized skill sets ensure that the company can fulfill each project's needs. 

Increased Cost Savings 

Companies new to innovation outsourcing will quickly see the cost-benefit of doing so. Rather than hiring full-time employees, remotely managed teams obtain the same level of services at a much lower cost. 

Skip Time Consuming Recruitment Processes

According to a Glassdoor study performed in 2017, the average hiring process takes about 23 days. While some companies may have the time and ability to perform extensive recruitment processes, others do not. 

Through innovation outsourcing, this burden is removed from the company's shoulders. Qualified candidates are provided through the outsourced teams, allowing them to focus on their more important tasks. 

Enables Companies To Become Globally Competitive 

Companies with offshore management catapult their business into global markets. They can successfully expand outside their familiar domestic market and have a greater outreach. 

With the groundwork and relationships in place, it opens up future opportunities for expansion in these countries. In turn, this expansion may give companies a leg up in competing in that country's market.

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