Energizing Innovation – Tips from Collaborate 2016

Few would argue that innovation is hard. Whether sourcing technology directly or from a third party, and whether software, equipment, integrated platforms or services are involved, innovation is hard to define, hard to measure and hard to reward.  The issue of innovation is a particular thorn in the side of many outsourcing relationships. We’ve all heard clients moan about providers who aren’t proactive or committed to innovation, as well is providers who counter that clients aren’t willing to invest and can’t even define what they mean by “innovation.”

Seeking to gain some fresh insight into the matter of innovation broadly speaking, as well as it directly relates to outsourcing, Alsbridge organized a panel discussion on innovation at our recent Collaborate service provider event in San Antonio. I had the privilege of moderating the discussion, and the easy task of soliciting thoughts from a group of opinionated and articulate group of experts.

Renowned business strategist Michael Porter relates innovation to differentiation, and “deliberately choosing a different set of activities to deliver a unique mix of value.” However, most of what today is considered “strategic sourcing” ultimately steers towards sameness, just at a lower price point.

Addressing this point from a different perspective, the general consensus was that outsourcing contracts can present an obstacle for innovation. For one thing, the prescriptive nature of traditional contract language can stifle the initiative to try new ideas – if you’re told the job has to be done a certain way, why bother trying to change it? The panel also agreed that simply adding an “innovation clause” as a check-the-box exercise is rarely effective.

One potential path through the innovation conundrum we discussed was a “bi-modal” approach to IT management that triaged “run-the-business” and “change-the-business” requirements into separate buckets. The former would be managed with the rigor, specificity and discipline required, while the latter would embrace the agility and fail-fast approaches needed to facilitate innovation.

Other observations:  panelist Tim Harris, CTO at Tesoro Corporation, said that innovative ideas are often born at the lower levels of the organization, and then die on the vine before they get noticed by executives.  To address this, he argued that clients and providers need to define incentives to encourage the movement of ideas up the organizational ladder.

In a related vein, Et’Chane Williams-Towers, Director of Value Engineering at SAP, said that too many businesses view innovation as an overwhelming “science project” that never gets off the ground. Instead, he suggested, the focus should be on quick wins and moving the needle.

Nicholas Smith, a Partner at Milbank Tweed, said that a good way to achieve the client engagement essential to innovation is to require buy-side executives to invest time to the process, and to explore ways for a customer to share in the economic benefits of customer-specific innovation that can be commercialized with additional clients. This can be a powerful incentive to energize clients and ensure their collaboration in the development of new ideas, rather than staying in “receiver mode.”

Underscoring these insights and observations was recognition of the critical importance of collaborative relationships to innovation, and specifically, of the notion that relationships cannot be commoditized.

About the author

Bill has led major sourcing and transformation projects for some of our largest clients.  Prior to ISG, Bill led IBM's Sourcing Managed Services for its portfolio of more than 30 external customers. In this role he had global responsibility for leading the client sourcing team comprising consulting managers, sourcing consultants and global category strategy leaders. Prior to IBM, Bill was a partner in ISG's (formerly TPI) BFSI Vertical and responsible for both Business Development and Delivery of Strategic Advisory Services. In this role, he focused on business advisory services in the area of SG&A and operational transformation and served as a trusted advisor to the world's largest corporations.