Why you should outsource your innovation

The search for new products, new routes to market and new business models can't stop at your front gate, says AAR's Robin Charney.

by Robin Charney
Last Updated: 17 Sep 2018

Businesses of all sectors are feeling the need to innovate in the face of disruption. There isn’t a single conversation I have with senior business leaders that isn’t about the often-uncertain future of their company.

Many businesses are being squeezed from two sides: competitors adapting faster than them and start-ups entering their sector to steal market share. As a result, business leaders and CEOs are very focused on fostering a culture of innovation. However, innovation is most easily achieved by looking outside your organisation. Just like the electrics or divorce, some things are best left to the professionals.

Looking back to move forward

Not that long ago, most big businesses had a wholly internal innovation function. It was called new product development (NPD) – a separate department, where new products were invented. It was relatively simple back then: you created new products based on insight from your existing customers; marketing told the world about them and retailers sold them.

Then, two things happened: the internet and the recession. Consumers now had more choice about what and how to buy, and businesses achieved growth through cost-cutting and retrenching. While innovation remained on the C-suite agenda, staying in business was a bigger priority. These new dot com businesses? Surely not a threat...

As we know, the world had changed forever. Corporates who had once been able to overtake their smaller competitors through a bigger spend on innovation at product level or more investment in marketing communications were now struggling to compete with new start-ups intent on disrupting their sector. These new, digitally-enabled players had innovation at the very heart of their business model – something which money can’t buy.

The rise of innovation theatre

With the market changing rapidly, businesses had to adapt, and began dipping their toe back into the waters of innovation. Entrepreneur networks, incubators, accelerators were all the rage. You could become more entrepreneurial and invent new products and services just by working with a start-up. Many FMCG, auto and retail businesses jumped on the bandwagon. Incubators like Techstars, Startupbootcamp and Ycombinator helped corporates connect to start-ups, often without a clear brief of the challenges they were trying to address. Though some good examples did emerge out of this early era, such as Unilever’s Foundry and Diageo’s Distill Ventures, much of the activity was innovation theatre, heralded by PR departments and CEOs looking to reassure the markets that innovation was firmly on their agenda.

Welcome to innovation 2.0

Today, both the innovation function inside businesses and the partner marketplace are much more sophisticated. Businesses have learned from their early missteps. Successful programmes such as those of Unilever and Diageo have been joined by the likes of Aviva’s Garage and Bupa’s Blue Table accelerator initiative.

However, innovation teams, who remain relatively small, can’t deliver the scale and scope of innovation required by most companies, which also require different types of innovation. Some need new business models, others need new products and other need to move into completely new markets. Innovation is simply too important, too varied and too vast. To do it well, it’s essential to call on external resource.

Who you gonna call?  

Our recent research, Navigating the Corporate Innovation Partner Landscape, supports the idea that there is enormous value in working with businesses outside your organisation to deliver innovation programmes. Here’s why:

  1. Partners challenge existing thinking and offer unique insights
  2. Partners act as sensemakers - helping navigate rapidly changing markets, technologies and consumer behaviours
  3. Partners deliver executional abilities – this is crucial. No one is short of ideas. Delivering on them is where most companies fail
  4. Partners are great at knowledge transfer. They teach you to develop your own innovation processes and help you hire the right people

This increasing need for outside help and the growing sophistication of the innovation function has led to the UK becoming one of the world’s most diverse marketplaces for innovation partners.

Innovation consultancies, growth consultancies, management consultancies, digital product and service design studios, start-ups, entrepreneur networks and venture builders are but some of the types of businesses you can and should turn to for innovation help.

Each of these partner options has its own benefits, and there are many different factors to consider when entering the selection process. The best partner for your business must be the right fit in terms of culture, approach, process and team (not to mention your budget).

This vibrant innovation landscape is more complex than ever, but the right partner for your business is out there, and finding them could be the key to your survival.

Robin Charney is director, Digital and Innovation at AAR

Image credit: Saeid Anvar/Pexels

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