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While many manufacturers are comfortable outsourcing non-core parts of their business, most have been reluctant to outsource research and development (R&D). However, according to "Outsourcing innovation: A manufacturer's perspective", a paper by the Economist Intelligence Unit, this is about to change.

In an online survey of 306 senior manufacturing executives, conducted for this report, 57 per cent of respondents said they expect to see an increase in the proportion of innovation coming from external partners.

As product lifecycles become more compressed and the complexity of the product-development process escalates, companies are looking to broaden their supply of new ideas. As a result, they are turning to R&D capabilities that lie outside their organisations and embrace a variety of  "open innovation" models.

Henry Chesbrough, a business professor at the University of California, and author of "Open Innovation and Open Business Models", said that managers can tap into a vast pool of knowledge and ideas, many of which lie outside their organisations. Companies, he said, do not have to originate research to profit from it.

This is something that Proctor & Gamble (P&G) has demonstrated. Over the past decade, the company has radically altered the way it sourced new ideas and products, using the Internet and other methods to turn to independent investors, universities and suppliers.

Companies have long recognised that they cannot do everything themselves. The whole outsourcing movement, now decades old, is based on the idea of handing over tasks such as manufacturing to third parties to allow a company to focus on what it does best, whether marketing, branding and selling or managing customer relationships.

But while outsourcing and offshoring were used purely as cost-cutting strategies, some organisations are looking to gain more from their relationships with external partners by tapping into their ability to innovate.

Part of the drive behind the desire to increase use of external sources of innovation is the pressure to speed up product-development cycles. In our research, 26 per cent of respondents believed that deriving innovation from partners would help them get their products to market faster.

A vice president in Booz Allen Hamilton's Tokyo office Steven Veldhoen said, "By and large, everything goes much faster these days." Veldhoen is the author of "Innovation: Is Global the way Forward?" a joint study by Booz Allen Hamilton and Insead. "I do a lot of work with automotive companies and the development cycles are shortening all the time," Veldhoen said.

At the same time, the pipeline of talent needed to research and develop the innovations behind new products is shrinking in mature markets. About 39 per cent of respondents reported that, in the past three years, it has become "somewhat harder" to recruit the kind of skilled workers needed to deliver innovative ideas, with 19 per cent saying this has become "much harder".

Open-innovation strategies may fill this talent gap. P&G believes its open approach to sourcing innovation allows it to tap into vast pools of skilled individuals. "We have about 9,000 researchers internally, but ...  out there in the world as a whole, there are 1.5 million researchers in that space," P&G global business services external business development manager Bill Metz said.

"One of the challenges we face as we get bigger is that it's more and more difficult to grow organically through only your own internal R&D," Metz said.

One of the ways P&G does this is through its "connect+develop" website, where individuals or companies can respond to the needs the company has posted or submit unsolicited input. The task then is for P&G to identify viable submissions to which the individuals offering them have the rights.

Other examples of open innovation include InnoCentive, an open-innovation company that uses a website to offer financial rewards to people who solve specific criteria posted on the site, and Lego Factory, which allows children who are Lego's customers to design products.

Meanwhile, principal of Innovaro, a UK-based consultancy, Tim Jones argued that confusion often surrounds the term "open". Jones said, "Open source is free of intellectual property [IP] and that's the whole point of it. Open innovation is all about trading intellectual property. If there's no IP, then you can't do the deal."

For many companies, however, externalising innovation means turning to existing suppliers and other business partners.

Often, it is users, rather than manufacturers, who turn innovators out of necessity. Eric von Hippel, a professor at MIT Sloan School of Management and author of "Democratising Innovation", cited the example of Massachusetts General Hospital, which developed a slow-acting syringe that releases small amounts of fluid containing antibiotics into the bloodstream. This innovation would replace more expensive intravenous fluid bags and be better for patients.

As the survey indicated, most companies expect the proportion of innovation derived from either external partners or open sources to increase. However, when polled on how much innovation has been derived from these sources over the past three years, the results are quite different. About 41 per cent of respondents said little or none of their innovation has been derived from external sources in the past three years.

Part of the reason behind this mismatch between stated intent and actual activity may lie in the way companies define innovation - by volume of new products and businesses they launch. The majority of the companies in the survey (64 per cent) measure innovation this way. The second most-popular method, cited by 54 per cent of respondents, is to tally the revenue growth from these launches, whereas 32 per cent said counting the number of patents filed is the method they use.

However, a very real barrier to open approaches to innovation lies in many companies' lack of trust in their suppliers. These fears have been realised in some instances where contract manufacturers have made the leap from supplier to brand owner, as Acer, a computer manufacturer, has done. "Particularly in the computer world, you're getting these weird-sounding brands you've never heard of suddenly being available directly," Jones said.