Often in the outsourcing sector, one person’s innovation is another’s best practice, while those driving it can risk simply rehashing old ideas with a slightly new angle and calling this innovation. But true innovation should be more than just the production of ideas – it must produce real and tangible benefits to the organization involved.

According to the experts, innovation in outsourcing can be defined as the production and implementation of ideas and methods from supplier to client that are completely new, or as using existing ideas that are nevertheless brand new to the specific client involved, so as to provide significant value to the end-user and its customers. This means that existing ideas or methods of adding value or providing better service can indeed be used, but they must be entirely new within that particular relationship.

Both supplier and end-user must engage in the process of finding innovative methods, and both parties must be willing to take risks and invest in the outcome. They must make innovation part of the companies’ and contract’s core DNA. Full collaboration and joint responsibility from the start is key, as projects often need equal effort, attention and even funding.

But how important is innovation?

The need for innovation within the outsourcing sector has never been more important. Recession often means that long-term outsourcing deals, and finding a way to innovate that leads to cost-savings, is high on the agenda. Innovation in financial areas then, is clearly of significant importance and has forced suppliers and end-users to get on the case.

But for all the encouraging ideas and examples that exist in the outsourcing sector on innovation and how to make it work, there is still a long way to go. Often, agreeing on a strategy for innovative methods can be difficult in itself at the beginning of a partnership, and it is widely accepted that the definition of innovation and the ways it can be implemented in a specific company is not an area that everyone agrees on at the start of a relationship.

The sector is coming up against challenges in fully driving innovation, and one of the biggest hurdles, from a supplier perspective, is a the feeling of risk-aversion that often comes from end-users. Clients often want to know when, where and how an outsourcing innovation has been tested before by the supplier and whether or not it worked - a mindset which only serves to quash innovation. Furthermore, the increasing short termist nature of deals (or expectation of short term ROI) could drive out innovation.

To overcome this fear, end-users need to be prepared to take the plunge with innovations which may not necessarily be tried and tested; by their very nature, they involve taking a leap of faith and necessitate a level of trust in their relationship with the outsource supplier. To facilitate this process of mutual trust, it may be necessary to set the foundation for future innovations with some basic, manageable objectives for the end-user involved, leaving the riskier strategies until further into the sourcing partnership.

Companies also need to be mindful that some ideas will fail along the way – but taking the risk to innovate is certainly worthwhile.