Contracting out a business function; be it IT services or Innovation; to an external provider will qualify as outsourcing. So what’s the big fuss about, why is open innovation being mentioned in all innovation forums?
On the face of it – there isn’t much difference.
While the traditional outsourcing based on Cost saving and on demand resources; allows one to focus on their core business, it is also true for open innovation. However why open innovation is getting popular has more reasons than what meets the eye.
a) Outsourcing focuses on repeatable tasks, open innovation focuses on one- off task. (One would most probably try to open innovate when the answer is not a phone call away; at Bangalore or Beijing)
b) Outsourcing focuses on the getting job done, open innovation focuses on increasing the probability of getting that complex job done. (There are no guarantees in open innovation, but one can surely reduce the risk of not reaching out to a possible great idea)
c) Outsourcing success is based on identifying the right partner for medium to long term, open innovation success is based on having the right processes in place to leverage the long tail phenomenon. (Here the quantity of solutions does not matter, but the relevancy does and this relevancy may not be possible to be bought from a predefined source)
d) Outsourcing helps enterprises improve predictability, Open innovation helps enterprises improve novelty in their offerings. (Predictability is hygiene, consumers now want to be delighted)
e) Outsourcing is based on push, open innovation is based on pull. (Push works better for traditional business function outsourcing, Pull works better for creativity and innovation)
Reasons to go for open innovation could be a subset of reasons to go for a typical business function outsourcing, but the former has lot more underneath it.