Innovation 101 – Cost vs. Quality. Deuce.

To me it doesn’t matter whether India will be able to maintain its cost advantage. What does is sustainable and long-term value as a combination of cost and quality. In my view we are seeing the end of the traditional benefits of outsourcing. In whichever way customers were disguising their need to leverage lower costs, the only reason for outsourcing was cost arbitrage. We have seen that gap closing especially in the case of Indian talent. Squeezing benefit from outsourcing purely on a cost basis is clearly the last remnants of Industrial age thinking, which besides all other untenable factors, seems to think of human beings as alternatives to machines. I suggest for this reason alone, that we delete ‘outsourcing’ from business lexicon.

Joel Delman, Los Angeles design director for Product Development Technologies(PDT) points out

Having already gained the lion’s share of  manufacturing work, countries like China and India are now focusing on building  their capabilities in the innovation and design phases of product development.  While some may dismiss the seriousness of this trend, we’d be naive to believe  that the United States has a monopoly on a creative workforce.

(read Cost vs. Quality: The Dangers of Outsourcing Design Overseas)

But what if we could partner instead of confronting each other? Might also help to water down Joel’s concerns about

[…] the potential for the United States to give up yet another  area for competitive advantage that, as a nation, is so critical to our  economic well-being. U.S. design and development firms have decades of experience in gaining insight into the needs of users and opportunities unmet in the marketplace. There’s much to be said for the  proven methodologies of research and design strategy practiced by creative  professionals here.

Partnering is about trust and transparency. Second, there must be identified complementarity (synergy if you may) for a partnership to sustain. Third, the equation has to provide for shared risk and shared reward.

Partnerships are like marriages. They need long-term, reciprocal commitments and a willingness to stick together to make things work. You don’t up and leave home one day just because your spouse didn’t cook your breakfast to your taste. The mindset needed for marriage is different from ‘shopping around’ for a better deal.

Say for example you need to design a product or a software solution. The outsourcing model would have you collect all requirements and put them together in the form of a Design Brief – what the IT guys call a Requirements Book. Next you would design the ‘product’, specify it and then look around for resources, internal as well as external, that could create prototypes for you to test. At that stage you would have to break up the work into tasks, some of which could be outsourced to a company that had the skills available. One of the most popular outsourcing tasks is CAD, basically drafting, where factories of bodies do the detailed drawings of your design. The drafting shop simply takes the design sketches, estimates the time required and puts a bunch of people on the job. These people do not need to understand anything about the product – they simply have to create the drawings.

In a partnership, while you were going about doing your part in your geography, your partner would be doing all the things that needed to go on simultaneously, including design sketches and drawings. Later on, when your partner’s market needed a similar product, he would be able to take the lead and ensure that local contexts are addressed.

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3 Replies to “Innovation 101 – Cost vs. Quality. Deuce.”

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