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Case Aims: To illustrate the benefits of exploiting outsourcing elements of the innovation process to access new knowledge.

While lower transaction costs such as lower wages were initially a primary motivation in outsourcing, more recently the concept has become recognised, especially among smaller high-tech firms as an effective way of acquiring a wider breadth of new knowledge; thereby leveraging organisational assets for use in innovation (Nambisan and Sawhney 2011). An example is provided by Apple's relationships with contract manufacturer Foxconn and a network of component suppliers which permit a rapid rate of development for next-generation products (Duhigg and Bradsher 2012).

Areas which can be outsourced to acquire new knowledge included industrial design, engineering, prototyping, component sourcing and manufacturing. Marion and Friar (2012) noted some of the most successful knowledge outsourcing occurs in firms where the founders rely on teams that are geographically distributed providing access to resources on a


global scale. These researchers determined that in the initial discovery phase of innovation, as well as in detailed design, the outsourcing of industrial design tasks was common among major firms engaged in developing leading-edge new products. External design firms were tasked with user research, conceptual development and every aspect of physical design ranging from external appearance to user interfaces. Contract employees were used to support design and engineering functions during all phases, but primarily during the detailed design phase. To aid in design iteration, rapid prototyping and prototyping vendors were utilised by many of these firms. The support provided by external suppliers assists in the design vetting and product evaluation. Manufacturing partners were also utilised. These manufacturers often acted as close partners, investing in projects and funding the tooling needed to support production of the new product.

Marion and Friar opined that firms engaging successful innovation outsourcing should:

  • 1. Select partners that complement and enhance their strategic mission.
  • 2. Exploit applied rapid prototyping solutions to support agile product development.
  • 3. Use short-run manufacturing partners to test market acceptance, rather than pushing towards costly and risky full commercialisation at too early a stage in an innovation project.
  • 4. Take full advantage of outsourced partners to reduce fixed costs, add flexibility and domain expertise.
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