Case study findings and discussion approach

¶ … outsourcing design and innovation. The issue has become more topical of late as the practice has become more widespread. There are benefits, such as lower development costs, associated with the practice that makes it popular with some companies. There are costs, however, in that the product will typically be less differentiated if companies buy off-the-shelf designs or other low-end technology. While the story is not about any company in particular, if I ran a telecommunications hardware company I would have to think about whether or not I wanted to outsource this aspect of my business.

Alternative Solutions: Without a problem, there are no alternatives to consider. For firms in this industry, there is a decision that they need to make with respect to how much innovation and design they would like to outsource. If all is outsourced, the company may accrue high licensing fees, and the company itself becomes almost strictly a marketing company. In some other cases, companies will outsource their low end, "commodity" products, in order to meet the pressures of price competition. With this option, the company can sell design as a feature in its high-end products, but will be able to remain competitive in low end as well. The case cites Apple and its choice to keep its innovation outsourcing in house. One outcome of this choice is that the company as little ability to compete at the low end, because its costs of development would have to be too high. For Apple, this has led to a strategic decision to pursue only the high end.

The final option, therefore, is to ensure that all of the development for innovation remains in house. This might result in a product being higher-cost, but it also results in the company having more control over the innovation function, which is essential for a firm that wants to promote itself based on innovation and design. For firms that do not have a distinctive competency in innovation or design, their best efforts should be made in marketing, while outsourcing almost the entire research and development process.

Recommended Solution. Clearly, the solution depends on what company we are talking about and what its main issues here. In this case, many companies will focus strictly on marketing as their sole source of value, contributing to the commoditization of these personal electronic products. Other companies will choose the middle path. These tend to be the major companies, ones that sell across a broad spectrum, in part because of the nature of their retail channel partners.