Intending to outsource innovation activities, companies and their management need to decide on the outsourcing business model to be used. The landscape of available models is huge, starting with outsourcing of small parts of the innovation value chain to Single Service Providers specialising on exactly the required activity and ending with risk shared Strategic Partnerships with companies having the capability to run large parts of the value chain.
Regardless of the business model used, management expects outsourcing to deliver value and to drive innovation success. Since risks and chances vary a lot depending on the business model applied, management should select carefully.
Seen from top management perspective the “big chunk” outsourcing (End2End or Strategic Partnerships) has a lot of charm. Less fixed costs, lower headcount, less infrastructure and risk sharing fit well to the business thinking of today. However, top management should keep in mind that the potential additional value usually comes along with additional complexity and additional risks. Challenges to manage collaborations and to monitor progress and achievement of objectives increase significantly. Full internalisation of results and achievement of true intellectual ownership is problematic. And loss of internal expertise may permanently close the door to internal innovation.
Selecting the right service model for Innovation Outsourcing is a critical management decision and the various business reasons should be well considered especially before going down a one-way road.
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