Innovation is again the hot topic for clients, as it was before the economic downturn. Clients have a renewed interest in innovation and business growth, and they seek services partners who can help. But what is innovation in this context?

In this context, clients seek business innovation. They want a provider who delivers new ideas and insights that will change business processes to drive revenue or improve business processes (for example, through product innovation, customer process innovation, supply chain innovation). They do not mean delivery innovation or continuous improvement, where the provider improves service delivery efficiency to drive lower IT cost and/or higher quality of IT service to clients (for example, through improved delivery processes, shared services, reusable assets). (Of course, they usually do want this as well — but this will not necessarily drive business innovation such as new products and processes.)

What do leading firms do to drive ongoing business innovation from services providers?

1) Put process around innovation. Organizations who successfully get innovation from their services providers put processes in place, from idea discovery to incubation to implementation to measurement. They also select services providers who have codified the innovation process. Ongoing innovation cannot happen by accident.

2) Use social media to collaborate at fast paces with customers, partners, and employees. Tools such as social networking sites, microblogs, and collaboration sites let firms gather ideas, evolve ideas, and rank ideas with a wide audience. 

3) Incent services providers to innovate through outcome-based or other shared incentive models. Organizations are moving to models that tie provider compensation to successful business innovation that drives results. Models that have provider “skin in the game” such as gain sharing or profit sharing can work well to make sure that your services partners are working towards the same goals as your business.

Interested in talking more about innovation? We'd love to hear your comments! We'd also love to see you at one of our upcoming Sourcing and Vendor Management Forums, where innovation will be a key theme! These events takes place in Las Vegas, May 24-25 and in Paris, June 19-20.

Liz Herbert