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Innovation sourcing makes good business sense

Organizations should adopt external innovation versus relying soley on internal research and development efforts, says a study published by CAPS Research, the research arm of the Institute of Supply Management.


September 15, 2011
Sandy MacIsaac

Purchasingb2b: July/August 2011

Organizations should adopt external innovation versus relying soley on internal research and development efforts, says a study published by CAPS Research, the research arm of the Institute of Supply Management.

The study, “Innovation Sourcing Contributing to Company Competitivness”, says that in some cases organizations are looking to increase revenue by adopting such external innovation—or open innovation—and cites Proctor & Gamble as looking to get 50 percent of its revenue through such external innovation over the next five years.

The study also argues that innovation is making a comeback as a high-priority corporate strategy following the recent economic downturn.

One factor influencing the shift is intellectual property protection, says the study. Organizations can save effort that would have been used trying to duplicate something that has already been patented and licensed. As well, the study notes, patent infringement risks legal action that hurts the bottom line and tarnishes an organization’s reputation.

Sourcing external innovation also recognizes the benefits of inventions developed outside of internal research and development departments, the study says. To advocates of this strategy, it’s common sense to adopt a proven technology rather than trying to reinvent the wheel to get similar results.