MIT Sloan Management Review

Although many organizations initiate business process outsourcing to reduce costs or acquire new skills, it can evolve into much more. Sometimes, service providers deliver substantial long-term improvements to the client’s operating efficiency and strategic performance. But these improvements seldom happen unless clients and providers implement a process that combines acculturation across organizations, a method for generating ideas, adequate funding and a system for managing change.

Innovative companies fund internal research and development to gain an edge in the marketplace. They also work closely with suppliers to offer greater functionality and performance for their customers. However, some critical new product insights don’t come from suppliers and customers working together but from the customer’s customers. Drawing on numerous examples from technology companies, this article explores the various ways parties can collaborate so that everyone benefits.

New research shows that people who borrow money often have a “self-serving bias” and recall having paid back a larger proportion of the loan than they actually have. If you lend money to a friend, you should be prepared to have to walk out of your life.

”As long as we cheat by only a little bit, we can benefit from cheating and still view ourselves as marvelous human beings,” writes behavioral economist Dan Ariely in his new book “The (Honest) Truth About Dishonesty: How We Lie To Everyone — Especially Ourselves.”

Products and markets with nothing in common “taxonomically” can have “thematic similarity,” which may open up important business opportunities.

It's not always easy to bridge the gap between academic research and the business world. Two recent articles offer perspectives on different aspects of the process:

TURNING IDEAS INTO START-UPS. A recent New York Times article highlights university "idea incubators" -- such as MIT's Deshpande Center for Technological Innovation -- that help professors bring their innovations to market.  Notes The New York Times:

"M.I.T.

Universities can be major resources in a company’s innovation strategy. But to extract the most business value from research, companies need to follow these seven rules.

Service businesses that collaborate with many organizations tend to be less innovative — and less profitable — than those that work with a smaller number of partners.

How has Microsoft adapted to the era of open source? A new book, Burning the Ships: Intellectual Property and the Transformation of Microsoft, gives a detailed view into that question.

“Not invented here” has become an outdated mind-set in the modern corporation, as shrinking product life cycles and rapid technological evolution have opened corporate attitudes toward external research and development partners. Yet three business school professors conclude that companies should be careful when selecting the partners with whom they collaborate.C

Conventional wisdom suggests that companies should avoid growing dependent on their business partners.

Relationships with academic institution scan play an important role in continuing to generate new value for shareholders if you know how to approach those relationships.

The concept of “co-opetition” — particularly collaboration with rivals involving jointly developing technologies — is inherently paradoxical.

The very factors that make partnerships with customers or suppliers beneficial can leave those relationships vulnerable to deterioration.

Should birds of a feather flock together? Not if the goal is to promote innovation, says Rachelle C. Sampson, assistant professor of logistics, business and public policy at the University of Maryland’s Robert H. Smith School of Business.

Reverse auctions can save money and create better relationships with suppliers. But there also can be a backlash.

Research shows that the most successful strategic alliances are in companies that have a dedicated function specifically assigned to oversee alliances. Such companies more readily solve problems related to the four key alliance-management elements — knowledge management, external visibility, internal coordination and accountability.

Effective supply-chain management requires choosing a type of relationship appropriate to product and market conditions and adapting management practices to that relationship.

Breezy Services Company, a medium-sized service provider, was in trouble.1 New entrants threatened its domination of particular market segments, and competitors attacked its customer base.

Supplier-customer relationships in the United States are changing rapidly. Where once contracts were short-term, arm’s-length relationships, now contracts have increasingly become long term. More and more, suppliers must provide customers with detailed information about their processes, and customers talk of “partnerships” with their suppliers.S