Send work to India? If you want to innovate, keep it close to home

Well, the bloom is off the offshoring rose (see this recent article in the Wall Street Journal). So it was with interest I read the interview with Michael Porter last week in the Harvard Business School Working Knowledge blog. In the interview, Porter makes the case that the synergy of industry clusters, like Toyota City or Silicon Valley, can overwhelm cost advantages from sourcing in low-cost regions.

It was even more interesting to learn that this item was originally published four and a half years ago.

Among other points, Porter makes a persuasive case that offshoring harms a company's ability to innovate.

Changing products and processes is more complex and time consuming across separated sites. Knowledge and technology are fragmented and dispersed. All these costs decline markedly within a cluster.

And, by contrast, a cluster contributes to the speed and quality of innovation.

In a cluster, a company can draw on a local supplier base, skilled people, specialized service providers, and local institutions that can provide training and perform research. Moreover, within a cluster there are many companies with which to partner. Being part of a cluster facilitates change and speeds innovation....

A similar argument was made in a New York Times article last winter, which argued that the Silicon Valley cluster allowed companies like Apple to succeed with technologies that other companies had launched with less success.

So, to innovate quickly and smartly, get close.

(Photo by levdavid via stock.xchng)

innovation offshoring outsourcing strategy