March 16, 2016

5 Reasons Why Companies Should Outsource Prototyping

5 Reasons Why Companies Should Outsource Prototyping

We know that getting out of the building (both literally and metaphorically) is the best thing for a company's innovation program. We also know that employing the lean startup methodology can rapidly accelerate even the largest company’s growth - after all, GE was able to reduce time to market validation by 80% in its industrial business unit by teaching its staff the lean startup philosophy and creating the Fastworks Program. But could a company outsource prototyping for a new idea completely and let a third-party organisation do all the testing and market validation?

Prototyping is all about running small experiments to validate ideas, test assumptions and recreate certain experiences about an idea, even if in a non-scalable way. For a large, traditional company, there are many significant advantages of outsourcing prototyping.


It's Cost Efficient

It's very common for enterprise and startups alike to spend tens-of-thousands to build one iteration of an idea, only to have to scrap the project because all the resource have been burnt out or there’s not enough market appetite (or both!). Outsourcing to a company that understands and employs the lean methodology can be incredibly cost effective. By using alternative prototyping methods to test assumptions, outsourced teams can design and run hundreds of tests for multiple hypotheses. As a result, these teams can complete multiple build-measure-learn cycles at a fraction of the cost, allowing for a far more refined and thoroughly tested idea when it comes to actual development.

Companies who develop prototypes in-house also run the risk of either overloading their current development team with the extra work, or find themselves being unable to provide steady development work should they source a new in-house development team while they test their current iteration. This leads to burnout and low staff morale, which is costly in the long-run. On the flip-side, you can employ an outsourced team on a project-by-project basis, meaning you only pay for outcomes, and not thumb-twiddling time.

Click here for 5 Ways to Avoid the Most Common Prototyping Mistakes


Faster Time to Market

Lack of speed kills innovation, and bureaucracy, overarching values and instilled processes kill speed. An outsourced team are unencumbered by these constraints, and as a result, move much faster through the design, building and testing phases.

According to a 2015 BCG Report - The Most Innovative Companies 2015: Four Factors That Differentiate Leaders, long development times were the most-cited obstacle in generating returns on innovation and product development, with the second obstacle selecting the right ideas to commercialise.

Using a fast-moving outsourced teams goes a long way to mitigating both issues. Alternative prototyping methods mean teams can gather data and validate ideas in a matter of days and weeks, as opposed to months. For example, one of the prototyping methods we employ is building simple website landing pages to test market appetite for a particular solution to a problem. This landing page takes a few hours at most to build, meaning we can get a test developed and designed in the morning, launched by lunch-time, and initial data to use by breakfast the next day.


Fresh Pair of Eyes

One of the first things to do with a new business the idea is to flesh it out with a business model canvas. Initially, this new business model canvas will be propped up by assumptions - who the target market is, whether the solution is solving the problem, whether the problem exists for this particular segment, etc.

It's natural at this point to get groupthink and tunnel-vision, often leading to business-breaking assumptions getting glazed over and other opportunities missed. Grace Ng, founder of Javelin and Lean Startup Machine, states that it’s very often for teams to end up testing the wrong things, building bloated MVPs and asking the wrong questions, leading to invalid experiments and long development times.

An outsourced team can get vital new eyes on a project, bringing fresh ideas, testing methods and networks to the table.


Savings Reinvested into Ideas

The savings from outsourcing allow for companies to reinvest in more ideas and incubate the ideas that gather traction. Adopting a portfolio mindset, as venture capitalists do, is critical for the overall success of an innovation program.

One of the best things to do for corporate innovation is to create an innovation outpost and startup accelerator to support any ideas that show promise and give them the best chance at survival. This might include giving these fledgling startups a small amount of seed funding and access to company resources and networks in return for some equity. Cost efficiency in the idea-validation part of the process would mean more resources to spread across the entire program, resulting in a higher chance of success.


Supports Taking Many Small Bets

The lean methodology is all about taking many small bets, rather than a few make-it-or-break-it type bets. By moving fast and being cost-efficient, outsourced teams can validate (or invalidate) ideas and experiments very quickly, before moving onto more ideas.

Peter Sims, author of Little Bets, spoke about the importance of taking small-bets to push innovation, stating companies should focus on what they can afford to lose, and by taking little bets by testing quickly and cheaply, they can avoid losing too much. Taking small bets also allow for diversity, not only in the ideas a company pursues and incubates, but also in expanding the corporate value network.

Issues such as cost, long-development times and only heavily investing in big bets have killed many an organisation. Outsourcing your prototyping is a great way to move faster and cheaper, while creating the much needed distance to really allow the idea to grow.

Want to find out more? Talk to us today about how we can help you prototype your company’s next idea!

Innovate or die.

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Josh Li

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