Companies Need To Go External For Lean Innovation

Before I start, I must warn you that this is yet another article inspired by Ben Legg’s portfolio career workshop. It has led me to do a lot of thinking around the potential of portfolio careers and the necessity for them in the coming years. If you haven’t checked it out I would highly recommend it (don’t worry, it’s free).

After the lockdown comes to an end and we reenter offices we are going to feel the full force of the impact that COVID-19 has had on our companies. Millions have been made redundant, yet whilst we’ve been at home the impact of this is not really being fully realised. There are 9.5 million workers furloughed in the UK, so colleagues are already accustomed to not working with the same people. When they aren’t in the office next to them these losses will be really felt.

However, these losses will potentially have more of an impact on company strategy, particularly when it comes to innovation.

Those jobs that are most involved in the creation of new products and ideas are by definition non-core roles, so are often those most highly at risk of redundancy during down turns. This loss will blunt innovation at a time when differentiation in the market and beating your competitors is most important.

Whilst companies are likely to be short on cashflow, with fewer employees needing to do more work just to survive, the chance to move them away from the core business for innovation purposes is simply not an option. A situation like this is not conducive to successful innovation practices.

Instead companies should be looking outside of their core employees in order to adopt lean innovation practices and with the labour market saturated with talent companies have a huge opportunity to up their innovation game.

The idea of outsourced innovation is not new, with some of the UK’s largest and most innovative companies adopting this practices with great success. I recently read CRSE’s ‘The Freelance Project and Gig Economies of the 21st Century’ report which gave several case studies of how this works in practice.

A great example is Tony Lahert’s approach when he launched Argos Direct in the mid 2000's.

Argos was already a successful business with several hundred shops around the UK, but its online presence wasn’t what it could be. Tony looked to improve this, initially by creating a service that would allow customers to order large goods online and have them delivered directly to their homes.

This was something new for Argos as their business model revolved almost entirely around their brick and mortar stores for ordering and collection. Moving full-time employees from their already successful business to lead it would be risky and expensive, especially as this was an untested idea. Tony did not want to deal with the stress and expense of bringing full time employees from the main business, replacing them with others to fulfil their current positions, and then having to fire people if the experiment didn’t work. Instead he opted to create a team of specialised freelancers and portfolio workers.

Utilising an external workforce without centralised contracts minimised cost and meant that he could hand pick people based on their specific skills. Day rates were higher, but overall costs were lower and specialised work was done quicker and to a higher standard.

An indirect benefit of this move was that long term job security was not a concern for these freelancers and portfolio workers, so they were free to speak their minds without dealing with politics. In Tony’s words members of his team would “not be afraid of the boss — since they are not employed or reviewed by the boss — and will speak up to say when something is wrong”. This ability to speak frankly and work solely on the data you see is one of the most important foundations of the success of the project.

As a result Argos Direct launched successfully and its legacy is that Argos is now second only to Amazon in terms of UK retail websites.

Argos Direct is one of many case studies of how outsourced innovation has been used in the past, but this approach isn’t yet widespread despite it being so powerful for agile innovation.

The ability to fail fast is key to any new project, but through taking this approach with full time employees companies are paying more for their innovation experiments and moulding tasks to skillsets rather than choosing skillsets for tasks. Through using portfolio workers and freelancers, companies get a more specialised innovation team that costs less and offers fewer risks. If the experiment doesn’t then work, they do not need to make anybody redundant and the company hasn’t lost productivity from the core money making business.

This kind of approach is something that companies across the UK can adopt to innovate and iterate during the downturn in order to boost innovation. At a time when the labour market is so flooded with high quality and skilled options, businesses need to update their innovation practices and move to a more decentralised and lower cost model to succeed.

This article was originally published on Medium