I imagine this could be a bit of a controversial article (Business Week). The article covers the outsourcing of innovation. We said we’d never do it, but here we are. Key snips from the article for me (bullet format is mine):
- … Underlying this trend is a growing consensus that more innovation is
vital — but that current R&D spending isn’t yielding enough bang
for the buck …
- … "It is a slippery
slope," says Boston Consulting Group Senior Vice-President Jim Andrew.
"If the innovation starts residing in the suppliers, you could
incrementalize yourself to the point where there isn’t much left." … - … Still, most companies insist they will continue to do most of the
critical design work — and have no plans to take a meat ax to R&D … - … Who will ultimately
profit most from the outsourcing of innovation isn’t clear. The early
evidence suggests that today’s Western titans can remain leaders by
orchestrating global innovation networks. Yet if they lose their
technology edge and their touch with customers, they could be
tomorrow’s great shrinking conglomerates …
I suppose that at the heart of the question is what part of the R&D chain can be outsourced without threatening a company’s ability to appropriate profits (and under what conditions). The Business Week article hints at looking at R&D more comprehensively and that the last line of defense may be having a competence in orchestrating innovation supply chains.
Steve Shu
Managing Director, S4 Management Group