Approximate reading time: 4-8 minutes. Outsourcing innovation can be a strategy to become innovative. We show why you should invest in creating your innovation capability.
Why not outsource innovation to competitors and then buy them? Suppose your company has highly appreciated products on the market, they sell well, and customers are satisfied. Your competitor begins to change its product portfolio with new products. The competitor also turns to a new market, with new needs, achieved in another way. They do not take your market share but grow, so it’s cracking. They may have an innovation whích makes it possible.
Outsourcing innovation to the competitor?
Instead of being a “Follower” (as described in this blog post) and copying their innovation, you are attempting to buy them and succeed! Instead of spending time and money on cherishing and developing innovation skills internally, you’re leaning back and waiting to be able to buy the most innovative products and businesses. Surely it works? And indeed it will happen.
M & A often fails
Even if M & A sometimes are successful sometimes, between 70-90% of all acquisitions fail (source: Clayton Christiansen in the article “The new M & A Playbook at www.hbr.org). Other studies may show more positive numbers, or your company may have a specialist with an outstanding track record. Regardless of the time and investment in protecting and developing internal innovation, the strategy seems to be “buying in innovation when innovation proves to be profitable.” It would be interesting if you were able to set a success rate for M & A of innovations versus with innovation capability internally. That is, what gives better results; innovate yourself or buy in innovation from an external party?
“In the same way that companies can have an M & A capability, they can also have an innovation capability” Joakim Wahlberg, CEO of InventiveBoard and Ph.D. candidate at the School of Business, Economics and Law at the Univercity of Gothenburg.
The alternative cost of investing in its innovation capacity is low. Given that no ideas were worth the while you compare, your company is better prepared for future innovation.
Investing your business in your capacity for innovation is one of the following: The company’s individuals have learned what ideas did not work and why. Employees and managers can return to the documentation of the ideas. Then you can see if the ideas are better suited now and have better timing. Employees are more motivated because the company has invested in them, and the motivation is higher than if no effort has been made to improve innovation capacity.
An intellectual dialogue about “outsourcing innovation”:
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