Is it possible to outsource innovation?

A new study from Booz Allen & NASSCOM argues that it is possible – and that an increasing number of smart companies are developing global innovation footprints.

The first survey to analyze the global market for engineering and technical services, the study found that growth in “innovation outsourcing” is exploding at a rate much faster than anyone expected even two years ago. At the root of this surge are the twin factors of technology and talent:

  • Technology. Design and manufacturing processes are becoming more technology-intensive. As a result, it has never been easier to compartmentalize a production process or split a value chain, or for firms in North America and Europe to send segments of work to pockets of expertise in China, India, Thailand and Brazil.
  • Talent. Both demographics and pedagogy are conspiring against America’s continued dominance of global engineering. Every year, India produces 95K graduates in electrical, IT and computer-science engineering (vs. 85K in the US). Look at China and the gap is even more staggering: 650K tech-savvy workers, vs. 220K in the US. And with the data suggesting American students are no more likely to study engineering than ten years ago, this spread will only widen.

But before concluding that innovation can be offshored as easily or as naturally as call centres, let’s take a deep breath and step back for a minute.

Although its conclusions are impressive and well-documented, the Booz Allen/NASSCOM study focuses on a very specific type of innovation: engineering and technical services.

To me, the bigger question is not whether technical services can be offshored, but whether creative services can – and there I think the jury’s still out. After all, MaRS is built on the assumption that place matters – and that the most dynamic and diverse communities are built around personal interaction and engagement, what we call “collisions.” And if MaRS is to succeed, it will be because core aspects of innovation and commercialization happen by building the kinds of new relationships, conversations and collaborations that can only happen face-to-face.

So despite the size of the market that Booz Allen and NASSCOM identify — US$15 billion today and rising to $150 billion by 2020 — I’m still not convinced that creative innovation can ever be stripped from the community “soil” from which it grows.