Summary:
A survey reveals that an increasing number of manufacturers are keen to outsource R&D and innovation. The main motivation is skills shortage in design and engineering. To keep pace with the breathtaking pace of product innovation, outsourcing elements of research and development may be the only viable way forward. The biggest barrier to outsourcing innovation is trust, i.e. losing IP to partners or competitors. Better IT technology is needed to prevent this, as well as better communication and an open culture. (Published: 16/06/08)
Notes:
- new paper by EIU suggests manufacturers are increasingly keen to outsource R&D
- "Outsourcing innovation: A manufacturer's perspective"
- outsourcing was pioneered by manufacturing companies
- especially in automotive sector
- two top motives:
- cut costs
- focus on core competences
- survey:
- 22% of manufacturers use outsource-providers as a source of innovation
- product design or process improvement
- 41% admits that, in past three years, little or no innovation has been derived from external partners
- 37% says only about one quarter of innovation has been derived from external partners
- respondents clearly see a benefit in seeking innovation outside the organisation's R&D laboratory
- skills shortages in design and engineering
- 58% of the survey sample said that, in the past three years, it has become somewhat harder or much harder to hire talented employees who can deliver innovative ideas
- “With the war for talent intensifying, especially in the design and engineering arena, manufacturers can no longer rely on finding all the best ideas under their roof. To keep pace with the breathtaking pace of product innovation, outsourcing elements of research and development may be the only viable way forward.” (Robin Bew, EIU)
- biggest barrier to outsourcing innovation: trust
- companies fear losing IP to partners and competitors
- most physical products start life as a blueprint on a computer
- is when they are most vulnerable
- 5 years worth of R&D can be loaded onto a memory stick in seconds
- IT security can go some way to preventing this from happening
- 51% of respondents feel their firms need to invest more in technology in order to facilitate the outsourcing of innovation from external partners
- more openness needed
- most respondents believe that establishing better communication channels with partners—both face-to-face and virtual—would make capitalising on their ability to innovate easier
- majority of companies believe that having an open culture in which knowledge is shared is essential to capitalising on innovation from external partners.
- note on measuring innovation:
- counting the new products and businesses they launch (64%)
- calculate the proportion of revenue growth that is attributable to these new products and businesses (54%)
- counting the number of patents filed comes in a distant third (32%)
- not measuring innovation at all (8%)
- related links:
