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Can You Outsource Innovation?

by Chris Curran on August 13, 2010 [email] [twitter]

I’m writing this as I finish up a great week of vacation on the Baltic Sea with my wife and some friends.  While our main destination was St. Petersburg, Russia, an unexpected surprise was our visit to Tallinn, Estonia.  As you can see in the photo above, Tallinn has many old churches and a well-preserved walled old town.  What you can’t see in the photo is the energy and positive outlook in its people, much driven by their desire to distance themselves from the old Soviet ways.  One of the ways you can see this spirit is in the way the city has embraced high-tech.

You may remember that in 2003 Skype was started by Sweede Niklas Zennstrom and Dane Janus Friis.  What you may not know is that the three programmers that made it happen were all Estonians - Ahti Heinla, Priit Kasesalu and Jaan Tallinn.  In fact, it’s this same team of 5 who developed the peer-to-peer file sharing system Kazaa.  The city and country have also done some great work to automate many services, from parking to taxes, using mobile phones.  Here’s a fun fact: there are 20 daily ferries that run between Talinn and Helsinki (can you say “Nokia?”), a 2-3 hour trip each way.

Estonian innovators haven’t stood still either. is an example of a new online clothing fitting service developed by ecommerce and apparel entrepreneurs and Estonian university professors.

Tapping into E-stonian Innovation?

What strikes me as unusual is that Estonia doesn’t seem to be positioning themselves as just another offshore development location.  Instead, they are attracting foreign investors, starting new companies and building local talent.

Would it be possible for a North American or global company to tap into the Estonian tech energy and focus on innovation?

I know that when we talk about outsourcing we usually talk about the functions that are non-strategic, like payroll and software maintenance.  Innovation has generally been off the table because it’s seen as strategic and something that needs to be kept close to home.  But, when you combine a very high quality workforce, with a deep appreciation of IT, an entrepreneurial spirit and a relatively low cost base, I think it is worth re-opening the discussion.

What do you think?  Would you consider engaging a foreign firm to help drive (or at least seed) your innovation efforts?

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  • Laura Petti Rusick

    To answer that question, I would suggest you have to assess these factors as a baseline:
    1) Is the culture of the foreign firm more or less risk adverse than your company? If there is a strong mis-match, they could spend a lot of time spinning their wheels, along with your funding.
    2) Innovation isn’t about IT, it’s about the business. IT is an enabler. Can you afford to have your key executives working with the foreign firm, preferably meeting in person at least once? Are you willing to?

    Overall, I think this approach to innovation works much better for ground up new businesses than innovations in existing businesses.

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