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The Innovator’s Dilemma meets Outsourcing

I am just done reading The Innovator’s Dilemma, which by the way is a good basis for anyone questioning himself about how to innovate, and I am convinced there is a compelling case to be made about innovation through outsourcing.

Now I may need to introduce Clayton M. Christensen’s point to illustrate where this idea is coming from. You can skip that part if you’ve read it!

Failure to disrupt

In his book, Christensen’s first defines disruptive innovations (as opposed to sustaining ones), and shows that the main reason why large companies fail while facing disruptive innovations is that they do not follow the right framework to properly develop it.

In short, these large companies lack flexibility, focus and financial incentive (why target a 10m market when you need 10b to ensure a 10% growth ?), and their resources, processes and values are in fact not designed to tackle such innovations.

The flaws of these resources, processes and values are very well covered in the brilliant chapter eight (which I strongly recommend reading), and Christensen then proposes three solutions to create the right innovation framework: acquisiton, internal refocus or spin-out.

Innovation through Outsourcing

That’s where outsourcing comes in line.  I believe that it offers a fourth alternative to solve the dilemma, as it addresses by construction the three main flaws previously highlighted : flexibility, focus and financial incentive.

Flexibility brought by outsourcing allows companies to commit just enough for developing innovations, and can even turn non-profitable ventures into profitable ones.

From a financial viewpoint, disruptive innovations can be considered as non-core (since it does not contribute to the company’s main objectives), and non-core activities are the primary targets of any outsourcing business. More than that, they become the outsourcing supplier’s core activities, ensuring the first condition: focus.

The financial incentive is quite obvious here, without even needing to mention outsourcing’s most worn off argument : the cost logic.

A fourth alternative

The main critics to this idea will argue that outsourcing is by definition targeting well established processes or technologies, and that we can’t achieve innovation through it. Others will point out that disruptive is core (since it can precipitate a company’s fall), hence outsourcing is here again not applicable.

But be it to penetrate the online market, take the digitization turn or propose a 3.0 customer experience, I believe that outsourcing is well positioned as a fourth option to choose from when tackling the Dilemma.

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