Platt Perspective on Business and Technology

Innovators, innovation teams and the innovation process 13 – deciding where and how to source what types of innovations 1

Posted in HR and personnel, strategy and planning by Timothy Platt on July 12, 2013

This is my thirteenth installment in a series on innovators and the process of innovation (see HR and Personnel, postings 154 and following for Parts 1-12.) And I begin this posting by noting a clear point of distinction:

• Any business, and certainly any business that holds proprietary or trade secret information, or that offers unique sources of competitive value to its marketplaces is going to maintain at least some ongoing processes and functionalities that it would want to keep entirely in-house. And this is even true, just considering the issues of proprietary and confidential information as a case in point, if that business pursues the option of securely encrypting it to store it in the cloud and through third party storage providers. They would still want to retain exclusive access to the unencrypted and directly usable form of that information to themselves, except insofar as they might be required to reveal or share it in response to specific and compelling court orders or other legally mandating actions.
• But at the same time this same business might very well be carrying out a great many processes and activities that they could either outsource completely or carry out in-house but with outside support, and where that would be more cost-effective and without creating a risk management downside. To follow-up on the example of third party information storage, that business might very well host its web sites and any back-end databases that manage their content through third party service providers and on third party owned and managed servers – and without any specially secure encryption for any of that.

I wrote those two bullet points in terms of the business’ overall operations and the overarching strategy that those operations would functionally enable and enact. But a similar, parallel decision making process, and range of in-house versus outsourced options for fulfilling them also applies to the question of sourcing insight and innovation.

• Some forms and types of New might best come entirely from in-house, some might come together from combined in-house and outside sources, and some might actually best come essentially entirely from the outside and the marketplace – and for that category I particularly here that there are circumstances where it is necessary to limit in-house bias and the limiting effect of in-house preconceptions in order to develop and capture real long-term value.

That set of issues in general, is the topic area that I would at least begin to address here, and I will do so by connecting the issues of this third bullet point to those of the first two. And I begin that by setting up a brief checklist of due diligence questions that would be addressed at an absolute minimum, as part of any strategic and operational decision-making process for deciding what to develop in-house and what innovative insight to bring in, and if so from where:

• I begin at the core. What specifically sets your business apart from its competition, and serves as driver for creating its competitive strength and marketplace position?

Outside-sourced information might be essential for keeping your business’ in-house and proprietary value-creating capabilities in focus, with that outsourcing most likely including the gathering of information such as:

• Insights into your current market share and how that is trending,
• Finer grained information on current trends in what your customers and potential customers are looking for and with what price point expectations,
• Information that you can develop from the open marketplace and from third party business intelligence providers and analysts, on your competition and on how your industry as a whole is developing and evolving, and
• Information and insights as to new and even disruptively new emergent, outside innovations that you will have to address, and as coming from your direct competition at the very least.

And in this I propose a one-way, inward flow of information and business intelligence, and a very data-driven approach to developing and maintaining your defining sources of competitive strength and for keeping them marketplace-oriented.

• If you seek to bring in new and innovative insight for further developing or redesigning your defining sources of competitive value themselves, in improving your products and services or your key business processes where they offer unique value, you at the very least need to make sure that you retain uniqueness in what you do and offer, that your competition cannot readily replicate.
• That might mean purchasing or licensing innovation with appropriate exclusivity terms,
• Or it might mean adding in improvements that in and of themselves would not enable a competitor to readily replicate what you uniquely do or offer, simply from their knowing what you have brought in.
• Here, you need to assume that if you bring in new resources from the outside marketplace, your competitors will find out and know that even if they do not know how these acquisitions fit into your ongoing processes and systems. Consider that a conservatively prudent due diligence assumption, and with time your competitors really will find out if they study their competition – you, at all.
• And bottom line to all of this, your core defining sources of competitive value are resources that you would primarily if not exclusively want to develop and maintain in-house, and with outside innovation only added in to help maintain their ongoing marketplace relevancy in the face of market-driven and market-driving change, and where outside-sourced insight would facilitate that.

And that brings me to the third basic category noted in that third bullet point towards the top of this posting:

• Innovations and insight that would best come essentially entirely from the outside and the marketplace.

I am going to focus on that set of issues in my next series installment. Meanwhile, you can find this and related postings at HR and Personnel and also at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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