Why Outsourcing Innovation Makes Sense

Companies from Boeing to Sepracor are retaining innovation consultants to get a head start on economic recovery

Earlier this year, BusinessWeek asked readers how they would advise their boss to boost innovation internally. Only 3% of the 614 respondents said they would hire an outside innovation and design firm. In fact, hiring an outside firm was the least popular solution. (Other options included internal crowdsourcing, which got the most votes, or hiring a chief innovation officer.)

Faced with this alarming reality, design and innovation companies have been forced to hustle. The innovators have had to innovate themselves, to tailor their pitches to acknowledge clients' straitened circumstances and show they're not themselves a luxury. One way to do that: to make the case that companies should use them to get a head start on developing new products and services for the post-recession marketplace.

"Some [clients] were hit hard and are hunkering down. But crisis is a great opportunity. If it will take years to show results, [they] might as well start now," says Dev Patnaik, founder and chief executive of Jump Associates, a San Mateo-based consultancy with clients that include Nike (NKE) and Target (TGT). Patnaik says that business started to pick up again in the end of the second quarter.

Boeing (BA) has worked with the Seattle-based industrial design firm Teague since 1946. "I'm sure Teague would be quick to tell you Boeing's spending on design has been reduced in recent months," says Klaus Brauer, the former director of Boeing's Passenger Satisfaction & Revenue for its commercial airplane business. During his tenure there he spent seven years working with Teague on the interiors of the 787 Dreamliner, retiring earlier this month. "But reducing is very different from dropping outside design and innovation consulting altogether," says Brauer. "You have to preserve your capability to come back."

A Good Time for New Perspectives

The idea of outsourcing innovation might seem counterintuitive to the pressures of a recession, but it's a strategy that clients can use to provide fresh perspectives—and save themselves hours of time and effort in terms of industry research.

Sepracor (SEPR), the Marlborough (Mass.)-based pharmaceutical company, recently downgraded but did not ditch a relationship with a New York innovation firm, futurethink. In 2007, before the recession, Sepracor had hired futurethink to conduct live innovation workshops. These customized workshops generally cost between $9,000 and $15,000, according to Andrew Der, futurethink's director of marketing.

This year, Sepracor opted to spend $1,900 on membership to futurethink's online tools, which include items such as checklists for questions to ask job interviewees to see if they think creatively. Recently, Sepracor employees logged on to a customized Webinar on "innovation in difficult times" created by futurethink. It's certainly not as hands-on or as engaging as the workshops that Sepracor had paid for before the recession, but such online innovation tools still provide employees with access to futurethink's research and thinking.

Why doesn't Sepracor cut the expense entirely? "Bringing in a third party brings in a level of credibility," says Melissa Klinkhamer, the company's senior director of corporate learning and development. "Our employees know that they're doing research with other big companies. Maybe it's just human nature, but we like to partner with experts." Just as companies such as futurethink like to partner with clients.

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