There’s a growing trend in organisations to outsource their future through innovation labs and innovation competitions.

I like to question the rationale behind these decisions and look at the host company more closely. After all, what is behind its decision to handle innovation from outside-in, rather than inside-out?

Reasons

Innovation Ideas

So let’s explore. Why would an organisation decide to innovate from outside?

1. Because directors/senior management do not believe the company holds the skills for innovation within itself
2. Because it doesn’t actually hold the skills for innovation within itself
3. Because it doesn’t have a culture that nurtures innovation
4. Because it doesn’t have a financial model that permits innovation
5. Because it wants to perform innovation theatre

Let’s look at each of those in turn and see if the innovation competition is the best approach

1. Because directors/senior management do not believe the company holds the skills for innovation within itself

This is an issue of perception and/or distance. Perception in that the skills exist but are not exposed in a way that directors know that the skills are there. Maybe those skills are hidden performing other tasks. Distance in that the directors are too remote from the sources of innovation in the company. In this case, outsourcing innovation is likely to be met with resistance internally, by those who have ideas, have an appropriate approach and behaviour but are not recognised.

2. Because it doesn’t hold the skills for innovation within itself

In this scenario, the host is attempting to outsource the provision of innovation skills. However it’s only sourcing them for the life of the innovation programme, typically an accelerator. It may have a desire to borrow innovation skills from the startups it works with, however the issues are often more fundamental than that. Leading to requiring a change in culture rather than just skills. And a change in culture may require fresh blood.

3. Because it doesn’t have a culture that nurtures innovation

By mixing its own employees with that of startups, the host organisation hopes to have some of the culture rub off on its own employees. This culture-transference is fine in principle, but only works for those that are directly engaged. The effect dissipates quickly as those that were engaged then re-encounter the culture of the host organisation, especially if that host organisation has severe governance procedures.

4. Because it doesn’t have a financial model that permits innovation

Spending money on an innovation programme is a known cost within standard parameters. The host organisation can commission the accelerator or competition under its in-house business rule policies. Whereas if the same business case authors had presented individual and separate innovations to the same approval board, they may have been rejected due to the differences between innovation accounting and more traditional financial accounting.

5. Because it wants to perform innovation theatre

I’d like to think that innovation theatre is a product of accident. In that I’d hope that no organisation sets out with the express wish, whether in terms of vision or other goal, of performing innovation theatre.

Assuming it occurs by accident, we find examples of idea generation, possibly in terms of a internal staff panel competition (think Dragon’s Den/Shark Tank), running a 12 week incubator, hosting a hackathon. How many of those innovation events result in real, lasting change of the same magnitude as predicted during the innovation session? Or do they fizzle when they encounter the host organisation?

Next

I’ve addressed this from a few different angle in a following article.