Innovation in outsourcing – A step by step approach

February 24, 2012:  One common compliant that arise from the side of clients is that service providers do not bring innovation in the outsourced business process. Clients often say that service providers deliver what they have committed to deliver and do not deliver anything more that is expected by the client.

Innovation in outsourcing refers to developing and implementing new ideas that will have a significant impact on the delivery of the service or on the performance of the client’s business. This would lead to competitive edge, value addition to business and up dated services to the clients business.

In most of the cases the service providers during their presentations made to the clients say that they are a world class service provider and they follow the best practices in the industry. Most of them say that a partnership with them would help the clients to improve their business performance. But innovation is difficult to be explained and so it cannot be clearly specified in the contract.

Since it is difficult to specify innovation in an outsourcing contract, clients often are not satisfied with the level of innovation offered by the service providers. How ever there are different steps to ensure innovation in outsourcing.

Step 1

In the first place, the organizations need to make innovation a strategic factor and the top management need to identify what kind of innovation is needed, whether it is incremental or radical. They should determine what impact innovation should make in different levels such as operational and strategic.

Step 2

In order to measure the impact of the innovation, the management should develop instruments, which can be used at different levels. This helps to quantify the improvements in the business as a result of innovation.

Step 3

Before selecting the service provider, the management should assess their innovative capability. For this, the management should design a methodology that will help them to make innovativeness a factor in the selection process of service providers.

Step 4

The management should design and develop a contract for innovation, where the performance targets and rewards for incremental innovation are included. There should also be a clear idea on achieving radical innovation.

Step 5

Both the client and the service provider should pay attention in building relationship with each other. Both the client and the service provider should invest in mechanisms that will aid in developing and renewing their relationship in addition to the contractual relationship.

Step 6

The client should measure innovation and should run an evaluation to determine whether the performance targets are met in the case of incremental innovation and to monitor the improvements and performance in the case of radical innovation.

With the help of the above steps, the organizations can not only benefit from innovation, but also measure the monetary value of innovation.

Innovation is something difficult to achieve, but the trends and projections says that innovation is closely related to the success of any business. So organizations should make sure that innovation is harnessed in the process of outsourcing to ensure success through out the lifecycle.

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