Open Innovation vs Outsourcing

Open Innovation involves the exploitation of ideas and intellectual property from outside of the organisation. As such it is a kind of ‘cousin’ of outsourcing. However there are clear differences.

Firstly, outsourcing is a means of providing regular, repeatable services – which are not the core skills of the organisation and are therefore better – and almost certainly more cheaply – carried out by others who have specialist knowledge, and equipment. Thus, an outsourcing partner is likely to be a partner over the longer-term as part of a long-term contract or agreement. The services provided are fully specified, agreed and predictable – both in concept and in volume; the job of the outsourcer is to add reliability and consistency.

Open Innovation, on the other hand, focuses on a particular one-off task – solving a problem, designing a new product, creating a new marketing strategy or whatever. We are still using external agencies because they offer expertise and experience we do not have, but we are now looking for ‘disruption’, new ideas and novelty (rather than predictable supply).

We might be looking for a short-term association with a new partner ... or we might be looking to collaborate with several partners at once.

The ‘service’ we are looking for IS designed but the outcomes are not necessarily fixed …. We are looking for someone to create an idea that changes the way we think and the things we are going to do. There is no guarantee that the exercise will be successful … but if it isn’t, we are probably looking ‘at the wrong thing’ or ‘in the wrong place’.

So, if you are looking to obtain a regular supply of specific goods or services over the longer-term – and you do not have the in-house expertise to provide them yourself – select an outsourcer.

If you want to import new ideas and new thinking to solve a particular problem or create new opportunities, think about open innovation.


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