Innovation, innovation, wherefore art thou?

Outsourcing buyers and providers have long suffered from an expression barrier when it comes to innovation. But the digital economy is about to change that. Enterprises can no longer afford to dismiss their providers' new ideas and capabilities. The time is now for buyers to say what they mean and capitalize on provider investments.

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For years, innovation has been a sensitive and largely misunderstood subject in the outsourcing industry. Buy-side enterprises insist on it, stipulate it in their contracts, and complain bitterly when they don’t get any. Meanwhile, service providers meet their quota of ideas each quarter, hiring armies of talented PhDs to re-invent the pharmaceutical supply chain, for example, only to be summarily dismissed by the client as “too risky” or “not at all what we meant when we said innovation.” It’s been a discouraging cycle for both parties, to say the least.

The trouble herein lies in what a former colleague and influential IT thinker Peter Weil calls the “expression barrier.” It is the inability of the demand and supply side of IT services to understand each other. And, in this case in particular, I believe blame most often falls on the client.

As my seventh grade English teacher used to say, the truth is in the grammar. You can’t demand something new and untested—the definition of innovation—and then ask “where have you done this before?” every time the service provider offers an idea. To parse the terms, what most outsourcing buyers have really been looking for is continuous improvement or the application of best practices. And, while these are worthy goals unto themselves, they are not true innovation.

This tired dynamic is about to change.

With the emergence of digital, cloud, social and mobile technologies, clients can no longer afford to turn away their service providers’ ideas. In fact, they would be foolish not to harness providers’ investments in innovation that, in all likelihood, dwarf their own. Let’s face it, succeeding with emerging technologies is an essential survival strategy for providers. Outsourcing buyers that fail to take advantage of such investments (which are being made on their behalf) are leaving money on the table and jeopardizing their near-term competitiveness. If nothing else, they need to be crystal clear in how they articulate the level of risk they can tolerate and what they really want when they say innovation, otherwise they lead their providers on a wild goose chase.

Service providers, in the meantime, are caught between a rock and a hard place. They must trudge ahead with their quarterly innovation offerings or suffer the slings and arrows of the client. Insisting on innovations that their clients deem too risky is a frustrating exercise with the potential to damage the relationship—but insist they must. If they don’t, the day will come when the client blames them for having fallen behind. Despite the fact that they will always get the blame for lack of progress—even when their client may the biggest barrier—smart providers know they will not get ousted for proposing too many new ideas. They may, however, have a hard time holding onto their existing business if they don’t keep their clients—at the very least—up to snuff with new technologies.

Make no mistake: unlike most other technological revolutions in our lifetime, today’s advances are more about competitive advantage than operational efficiency or cost reduction. Seizing the moment requires companies and their outsourcing providers to engage in open dialogue, experiment frequently, fail fast, and collaborate to bring differentiating solutions to market more quickly than all the others.

I’ve been waiting for this moment my entire career, and I can’t wait to watch it unfold.

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