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In-house Innovation vs External Collaboration

Aug 23, 2022
In-house Innovation vs External Collaboration

3 minute read - enough time to switch off from that work project and enjoy your coffee 

Whatever product, service, or function that your business provides - at some point you’re going to be faced with the following choice: get expertise, materials, or resources from an external source, or, use someone in-house.

And, making this decision is harder than meets the eye.

Let’s take Ford Motor Company as an example. 

They started to produce their own steel instead of buying it (outsourcing this part of their product development). 

When you buy from an external supplier, you pay a premium for high quality, or receive lower quality for a more affordable price. 

Ford knew that if they produced their steel in-house, they could control the quality, as well as how much capital they were willing to invest. However, going in-house isn’t always the answer. In fact, it can be incredibly nuanced depending on the type of industry you’re in and what value you’re looking to add to your team/product/service. 

Why go in-house?
Pros: 
#1 You can upskill your team

You can empower and upskill your team in new areas, which creates more value for the organisation and the individuals within it. 

#2 It’s more cost-effective

In some instances, using resources in-house can be a great way to save costs on suppliers, freelancers, or consultants that you may be currently relying on.

#3 You can improve your retention

Ultimately, you’re giving individuals in-house more interesting projects that they can take on, which can help with retention within your team/organisation as there is a constant flow of new things that individuals can do. This isn’t guaranteed, but if you are constantly allowing individuals to progress, they’re less likely to leave.

Cons:
#1 It takes longer to train and develop someone

L&D is important in every organisation, but the problem with training and upskilling is that it takes time, and a lot of businesses don’t have time at their disposal!

#2 There’s no guarantee that they will stay with the company

This is a pessimistic (but also realistic) view a lot of businesses have when they’re deciding whether to outsource to go in-house. There is no guarantee that you will retain that employee, so you could be upskilling them to potentially leave and join a competitor or even become a consultant/freelancer in their own right. 

#3 Quality may take longer to achieve

The individuals you have in-house can take time to train up to become specialists, so high-quality processes and work will take longer to achieve in the initial stages until they’re upskilled successfully. 

Why collaborate externally? 
Pros:
#1 Someone out there knows more than you

It’s a learning experience for all involved. When using an external partner, you’re opening up the opportunity for those in your team to learn from someone new. Additionally, if you’re using a new supplier - you can upskill yourself and become educated, which can only be seen as a benefit.

#2 You escape tunnel vision

The beauty of using an external partner is that they can have an objective view of your business. Let’s say you’re using a graphic designer, for example. 

Not only do they have impeccable expertise and specialist skill, but they can also breathe life into your designs because they are working with so many other clients behind the scenes. They are less “attached” to your brand, and thus can make more interesting suggestions!

#3 You get what you pay for

With external partners, you really do get what you pay for. Whether it’s a service, resources, a product, or a consultation - the pricing is clear and you (rarely) ever have to pay outside of an agreement. 

Cons:
#1 Availability

You aren’t always guaranteed availability and have less control over how long things take (in certain instances) unless you have a strict agreement in place.

#2 Price/rates

Although the beauty of working with an external partner/third party is that “you get what you pay for” - usually this comes at a premium, especially if the service/resources are premium or specialist. 

#3 Longevity 

Depending on your relationship with the supplier/freelancer/consultant - they may only want to work on short-term projects, which can be difficult if you need someone for the long haul!

The bottom line

It’s clear that to find the right fit, you (ironically) need to make a pros and cons list of when it’s appropriate to go in-house, and when it’s appropriate to start outsourcing. Both can be incredible for your business, however, we believe a healthy mix of the two can yield the best results - depending on your industry, budget, and team structure!



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