Intangible Loss of Outsourced Innovation

Today’s New York Times front page features “How U.S. Lost Out on iPhone Work” about the loss of American jobs overseas and the implications for our middle class.  I’ve been thinking about the 2^nd, 3^rd order effects of outsourcing, especially now that some companies are either doing or seriously considering insourcing. 

In November, I spoke with Bernard Charlès, CEO of Dassault Systèmes, (DS), creator of 3D simulation products for manufacturing to life sciences. Insourcing is a key component of Dassault and Bernard’s personal values: a company’s role includes contributing to society and the economy through the business itself.

I’ve wondered about the cost-benefit equation of in vs. outsourcing for a while.  Most cost-benefit analysis focuses on tangibles: lower labor rates, higher freight, etc.  Are 2^nd and 3^rd order effects accounted for in the equation: benefits of training and professional/career development, adjacent businesses in manufacturing or services, other opportunities?  I don’t know.  And what about innovation?

I agree with many who believe we learn by doing.   Many innovations arise by trying to do something one way and figuring out a better way or an entirely different way to do it.  If we’ve outsourced the ‘doing’ doesn’t it follow that we’ve outsourced the ‘learning’?   I wonderful how many opportunities for innovation we’ve lost because we weren’t ‘doing’.   In the NYT article, Apple’s executives said the reason for outsourcing went beyond cheap labor; overseas factories could scale faster and workers were more flexible and skilled than in the USA.  Perhaps because they learned to?

While ‘learning from doing’ is not easy to quantify and add into the equation, it needs to be.   Isn’t that an important part of the ‘business case’ for insourcing?  Perhaps it wasn’t viewed as important in the last century, but it sure is for this one. As we rapidly move from knowledge stacks to knowledge flows, per John Hagel, the ability to capture and apply learning becomes one of customer, and competitive, advantage, if not survival – of companies, economies, societies.

So, have you tried to quantify your ‘learning by doing’? Have you made it part of any business case for out/insourcing?  Please share – these are important and valuable lessons.

Is Innovation now Status Quo?

Heretical isn’t it? I’m just starting to wonder if some StatusQuo-itis isn’t seeping into innovation discussions.  Seems more people are sounding a bit more prescribed than experimental in their advice and counsel.  I hear more ‘should’, ‘ought’, ‘the’ than ‘could’, ‘can’, and ‘a’; more ‘best practices’ than ‘here’s a way’.

There are some great ways to do spur creativity and innovate, but I don’t think there is ‘the’ way.  One of the very freeing things about innovation is that it’s a continuous experiment; what works today may or may not work tomorrow (if you have kids, you know this well).  It’s good to innovate how you innovate!

I always get concerned when a vocabulary coalesces into jargon* and it seems like that’s happening with innovation.  The era of everything being prescribed, of best practices, are coming to an end.  While there are some absolutes, I believe success, intangible and tangible, will go to those who can experiment, learn, apply and iterate the fastest and most purposefully.

Do you agree? Am I over-reacting? Let me know your thoughts.  And, if you can, just I asked you to watch out for ‘but’ last week, this week, listen for ‘should’, ‘ought’ and ‘the’ - and when you hear it, challenge it, because, Innovation and Status Quo should truly be oxymorons.

*Jargon – Old French jargon “a chattering” (of birds) from mid-14^th C “unintelligible talk, gibberish, chattering, jabbering” also from English gargle from which we get gargoyle! 

Status Quophiles and Quophobes

Ever know anyone who will explicitly say he/she doesn't think innovation is important? No! So listen carefully for the magic word - "but".   Some of you know how much I love to challenge the status quo so here's my theory: Status Quophiles see the glass as half empty and want to make sure it doesn't become totally empty.  Status Quophobes are Innovators - they see the half empty glass as half full, waiting to be filled up!  

I've been collecting some phrases I hear from Status Quophiles (SQ) and the rare responses from Innovators (I), Status Quophobes.  Do these sound familiar? If you can add any, please do so in the comments!

SQ: Could be a major breakthrough, but your predecessor tried that a while ago, and that’s why you’re here now.

I: Could be a major breakthrough, and we’ll support you in trying it.

SQ: That could work, but we risk not being able to get the coating on a reliable and consistent basis if the world blows up.

I: That would work, and we can diversify our coating suppliers to assure quality and price.

SQ: Wow, cool, but that’s going to be a problem for our customers.

I: Wow, cool, and that’s going to let us help so many more customers and markets than we can now!

SQ: Appreciate your enthusiasm and ideas, but once you’ve been around a bit longer and know how we do things here, you’ll understand the challenges involved.

I: Appreciate your enthusiasm and ideas, and the breath of fresh thinking and perspective is just what we need!

SQ: This makes sense in the long run, but remember, we are measured on quarterly results.

I: This makes sense in the long run, and we can show some benefits even in the short term by applying our learning early on.

SQ: Nice idea, but we have to recognize the sunk costs of our existing fixed assets.

I: Nice idea, and let’s face it, sunk costs are, well, sunk!       

SQ: We should pursue this, but let’s make sure it’s 150% vetted and tested and has met all the criteria before we start the project, let alone release it, even for a beta.

I: We should pursue this, and figure out how to prototype and test as we go along to make sure we get it right.

SQ: Interesting, but things are going so well, we’re profitable and growing so we must be on the right track.

I: Interesting, and that will let us start adapting to our customers changing needs while we have the resources and loyalty.

Here's my challenge to you to try for just a few days.  Listen for the 'but' in meetings and discussions.  Count them.  Then, listen for the 'and' and count those?  Which do you hear more? And (ha!) what can you do to change that (perhaps starting with yourself!)?  Please share what you hear, your count of but & and, and what you can do to change it!  Learning is no good if its not shared!