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Outsourcing Innovation?

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Much has been made of the concept of core competencies.  In a hypercompetitive world, a CEO can easily argue that a firm should do what it does well and outsource the functions that others do more efficiently or effectively.  Emphasis on outsourcing has grown to encompass entire business processes or entire functions.

What, then, can we say about outsourcing innovation?  If a business can readily outsource its procurement functions, or its manufacturing processes, can it, or should it, outsource its innovation functions?  And if so, to whom?

Let’s start by stipulating that few firms can claim innovation as a core competency.  If we follow the logic that a firm should outsource functions or processes that aren’t a core competency or that the firm doesn’t do well, then by all means, clearly most firms should outsource innovation.  But it certainly doesn’t seem to make much business sense to follow that dictum.  Innovation is critical to growth, profits and long term strategy.  Outsourcing innovation may lead to short term gains, but over the longer term can an innovation “outsourcer” fully understand a firm’s goals and strategies?  Does a third party offer that much better insight into your customers’ need and wants?

If we then argue that it is dangerous for a firm to outsource innovation entirely, then perhaps we can argue that certain functions can be safely outsourced to third parties with deep capabilities or experience.  We consider innovation to be an end to end process defined by these phases or steps:

  • Trend spotting and scenario planning
  • Identifying unmet or unarticulated needs
  • Idea Generation
  • Idea management, evaluation and selection
  • Prototyping
  • Concept testing
  • Commercialization

Let’s examine the possibilities of outsourcing one, or several, of these phases.

Trend Spotting and Scenario Planning

Few firms do a good job of trend spotting and scenario planning, so this is a capability that can be outsourced to third parties that understand how to collect and assimilate trends and develop scenarios.  However, any third party developing scenarios must understand your strategy, your vision, your customers and your time horizons in order to develop meaningful scenarios.  That work can’t be done in a vacuum, and your strategies and definitions must be carefully communicated to a third party, otherwise the scenarios and their implications won’t amount to much.

Identifying unmet needs

The concept of ethnography and other qualitative research can help identify unmet needs or unarticulated needs, yet few corporations have these skills in house.  This work can be outsourced to firms that specialized in identifying customer needs and wants using qualitative research tools.  However, these firms must be educated about your products, your strategies and your goals.  While ethnography and other tools can provide compelling insights, differing scope definitions, a poor understanding of your purpose or needs can create meaningless insight.

Idea Generation

Many firms assume they can outsource idea generation – to customers, consumers, business partners.  This is a reasonably safe assumption if your firm does a good job providing scope, strategy and context.  If this “framing” is provided effectively, others can generate ideas in your behalf.  If you fail to provide strategy, scope or can’t define a problem or opportunity effectively, then the people who attempt to provide you with ideas will return a large quantity of ideas, but with little applicability to your needs.

Idea management and selection

While you could conceivably outsource idea management and selection, this work should be done by people on your staff.  Picking a new product which will drive new revenue and defining the features and attributes of that product should be driven by your internal teams, in conjunction with your development teams. 

In fact, after idea generation, I’ll argue that it is exceptionally risky to outsource any step, with the possible exception of testing a potential solution with consumers.  If your product development capabilities are on par with your industry, there should be little reason to outsource anything after idea generation.

Note as well that even in the phases where it may be possible to outsource innovation work that there are several consistent caveats, mostly focused on strategy, vision and scope.  Innovation, whether accomplished with internal resources or external agents, simply can’t function effectively without these factors, well-documented and well communicated.  It won’t matter if you have leading third party consultants or an embryonic internal innovation team.  If you can’t provide clear strategy, clear guidelines and clear scope, you can’t outsource innovation.

One last barrier

Finally, let’s assume you’ve successfully outsourced innovation, and a brilliant consulting team has identified an important need, generated ideas and selected an idea for development.  Now, all that’s required is to translate that idea from the consulting team to the product or service development team.  Simple, right?

Not typically.  Product development teams have their own priorities and most likely weren’t involved in the development or generation.  Rather than seeing the consulting team as a partner in innovation, they may see them as a threat.  So it is entirely possible that good ideas originating from a renown consulting firm can’t be commercialized effectively due to a transition barrier from idea to product, external to internal.

Conclusion

While core competencies matter, and firms should stick to what they do best, it is difficult to outsource innovation effectively even in the best of circumstances.  There are certainly specific steps or phases of an innovation effort which may be outsourced without difficulty, but only if the goals and strategies are well defined.  Any firm outsourcing an entire innovation process is likely to discover it has also outsourced its strategy as well.

Written by Jeffrey Phillips. Jeffrey is a senior consultant and VP Marketing for OVO Innovation.

Entrepreneurship

Women on Top in Tech – Daphne Ng, CEO of JEDTrade

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Daphne Ng is the CEO of JEDTrade, a blockchain technology company focused on trade, supply chain, and financial inclusion projects in ASEAN. She is also the Scretary-General at ACCESS and Exco. of Singapore Fintech Association

What makes you do what you do?
I was introduced to blockchain technology in 2016 after I left my corporate banking career after 10 years. It was my mentor who first got me interested in this technology, which I then went on to delve further into, on its potential applications in the lending and trade finance space – domains where I came from.

How did you rise in the industry you are in?
Being in the space for 2 years and actively involved in the ecosystem, I was able to bring on the projects, network and a good degree of thought leadership in this vertical. Early on in the startup journey, our team faced many challenges. And to me, the key to rising above failures are two essential factors – resilience and support. While resilience is innate, I received a lot of help be it in terms of connections or advice. ‘Nobody succeeds without help’ rings very true for me.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
From the start, I focused on my domain expertise in trade finance and the application construct of how blockchain and DLT can be applied to these use cases. Also, my strategy from the start was to build a technology company made up of 80% tech and engineers, which is also our key competitive advantage today. At the end of the day, deliverables are about strategy and execution, which includes building and leading an ‘A’ team.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have many mentors, which includes our company advisors (all of whom are well-known in this industry) and mostly informal mentors I meet via my connections, and on various occasions and circumstances. Creating opportunities also means putting myself in the right place, at the right time. And in my case, these were mostly organic and genuine friendships formed from the initial connection.

How did you make a match if you and how did you end up being mentored by him?
To me, a match in values is very important. It also takes humility to ask for help and be willing to listen to advice, which is important in order for mentorships to be successful – be it formal or informal.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I love this question! I am passionate about building strong teams and helping my people grow. I abide by the 3Rs when identifying talents: resourcefulness, resilience and right values. And then I invest in the ‘potential’ and this means giving them room to lead, make decisions and take risks.

Do you consciously or unconsciously support diversity and why?
My support of diverse talents, skillsets and characters can be seen in the make-up of our core team – all helming specific roles and each bringing their own value to the table. We need the sum of all parts to build a great company.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
Great leaders emerge in times of failures and challenges, never abandoning the team, and always putting the team’s interests before her own. And I consciously live by these mottos every day.

Advice for others?
My advice to other entrepreneurs: be resolute and dare to be different. If you are going to follow others, then you will end up on the same path as them. No right or wrong; but I would rather chart my own path. This June, we are officially launching our blockchain project, Jupiter Chain (www.jupiterchain.tech), which have garnered much interest in the industry, even before we made it public. We believe this project is the epitome of marrying innovation with practical implementation, and we want to be the first to truly operationalize blockchain for our ecosystem projects in this region.


If you’d like to get in touch with Daphne Ng, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/daphne-ng-%E9%BB%84%E7%91%9E%E7%8E%B2/

To learn more about JEDTrade, please click here.

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Callum Connects

Jace Koh, Founder of U Ventures

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Jace Koh believes cash flow is the lifeblood of your business. Understanding it will enhance your ability to run and manage your business.

What’s your story?
My name is Jace Koh and I am the Founder of U Ventures. I’ve always been inclined towards investment and entrepreneurship. I’ve played a hand in starting businesses across these industries – professional services, cloud integration, software and music. I believe that succeeding in business is tough, but that’s what makes the rewards even sweeter.

What excites you most about your industry?
Everything excites me. These are my beliefs:

  • Why is accounting important?
    The accounting department is the heart. Cash flow is like blood stream, it pumps blood to various parts of the body like cash flow is pumped to various departments and/or functions in a business. It is vital to the life and death of the business.
  • Is accounting boring?
    Accountants are artists too. They paint the numbers the way they want them to be.
  • What makes a good accountant?
    A good accountant can tell you a story about the business by looking at the numbers.
  • Why is budgeting and projection important?
    Accountants are like fortune tellers, they can predict the numbers and if you wish to understand your business and make informed decisions, feel free to speak to our friendly consultants to secure a meeting.

What’s your connection to Asia?
I was born and raised in Singapore, and here’s where I want to be.

Favourite city in Asia for business and why?
Singapore is my favourite city. We have great legal systems in place, good security and people with integrity. Most importantly, we have a government that fosters a good environment for doing business. I recently went for a cultural exchange programme in Hong Kong to learn more about their startups. I found out that the Hong Kong government generally only supports local business owners in terms of grants. They’ve recently been more lenient and changed the eligibility to include all businesses that have at least 50% local shareholding. But comparing that to Singapore, the government only requires a 30% local shareholding to obtain government support. In the early days of starting a business, all the support you can get is precious. It’s great that we have a government that understands that.

What’s the best piece of advice you ever received?
The best time ever to plant a tree was 10 years ago as the tree would have grown so big to provide you with shelter and all. When is the next best time to plant a tree? It is today. Because in 10 years time, the tree would have grown big enough to provide you shelter and all.

Who inspires you?
Jack Ma. His journey to success is one of the most inspiring as it proves that with determination and great foresight, even the poorest can turn their lives around. I personally relate to his story a lot, and this is my favourite quote from him, “If you don’t give up, you still have a chance. Giving up is the greatest failure.”

What have you just learnt recently that blew you away?
I’ve faced multiple rejections throughout my business journey, and recently came across a fact on Jack Ma about how he was once rejected for 32 different jobs. It resonated very deeply and taught me the importance of tenacity, especially during tough times.

If you had your time again, what would you do differently?
Nothing. I live a life with no regrets. Everything I do, regardless of whether it is right or wrong, happy or sad, and regardless of outcome, it’s a lesson with something to take away.

How do you unwind?
I love to pamper myself through retail therapy and going for spas. I also make a conscious effort to take time off work to have a break outside to unwind as well as to uncloud my mind. This moment of reflection from time to time helps me see more clearly on how I can improve myself.

Favourite Asian destination for relaxation? Why?
Taiwan! Good food with no language barriers and the people are great!

Everyone in business should read this book:
I don’t really read books. Mostly, I learn from my daily life and interactions with hundreds of other business owners. To me, people tell the most interesting stories.

Shameless plug for your business:
We’re not just corporate secretaries, we’re “business doctors.”
U Ventures is a Xero certified advisory firm that goes beyond traditional accounting services to provide solutions for your business. You can reach us on our website: http://uventures.com.sg/

How can people connect with you?
Converse to connect. You can reach me via email at [email protected] or alternatively, on LinkedIn here: https://www.linkedin.com/in/jacekoh/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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