the concepts related to the changing nature of innovation, Business & Finance Assignment Homework Help

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500 word answers to each of the following questions.  I've attached the textbook and highlighted in bold below the chapter references for each of the questions.  Please include a citation from the book in each answer.  For question 3, a domestic company would be one that is US based.  

1) Choose a technology, and using the concepts related to the changing nature of innovation and how knowledge is increasingly dispersed in Chapter 1 and Appendices One and Two of Managing Global Innovation (Doz and Wilson, 2012), describe how global innovation is changing for this particular technology.

2) Choose a new international market for a company and discuss the pros and cons of using attracting, foraying, and experiencing from Chapter 2 of Managing Global Innovation (Doz and Wilson, 2012) to enter this new market for this particular company.

3) Choose a domestic company (one that has yet to expand globally) and combine the locational approaches of substitution, complementarity, and discovery from Chapter 3 of Managing Global Innovation (Doz and Wilson, 2012) to propose a multinational business structure and approach for this particular company. 

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foreword by cesare mainardi, ceo, booz & company Man agin g Global Inn ovation fr amewor ks for in teg r ating capabi liti es ar ou nd the wor ld Yves L. Doz Keeley Wilson This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). h a r v a r d b uCopying s i n e sorsposting r e v isi eanw infringement p r e s s of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. MANAGING GLOBAL INNOVATION This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 1 29/08/12 5:37 PM This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 2 29/08/12 5:37 PM MANAGING GLOBAL INNOVATION FRAMEWORKS for I N T E G R AT I NG C A PA B I L I T I E S AROUND the WORLD Y V ES L . DOZ   K E E L E Y W IL S ON H A R VA R D B U S I N E S S R E V I E W P R E S S Boston, Massachusetts This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 3 29/08/12 5:37 PM Copyright 2012 Harvard Business School Publishing Corporation All rights reserved                   No part of this publication may be reproduced, stored in or introduced into a ­retrieval system, or transmitted, in any form, or by any means (electronic, ­mechanical, photocopying, recording, or otherwise), without the prior ­permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. Library of Congress Cataloging-in-Publication Data Doz, Yves L. Managing global innovation : frameworks for integrating capabilities around the world / Yves L. Doz, Keeley Wilson.    p. cm. ISBN 978-1-4221-2589-2 (alk. paper) 1. Technological innovations–Management. 2. Diffusion of innovations–­ Management. 3. International business enterprises–Management. I. Wilson, Keeley. II. Title. HD45.D679 2012 658.4'063–dc23 2012012904 Find more digital content or join the discussion on www.hbr.org. The web addresses referenced and linked in this book were live and correct at the time of the book’s publication but may be subject to change. This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 4 29/08/12 5:37 PM CONTENTS Forewordxi Preface xv Acknowledgmentsxxi Part I Managing Global Innovation The Challenge 1. The Innovation Challenge 3 Part II Optimizing the Innovation Footprint 2. The Optimized Footprint 25 3. How a Site Creates Value and Why the Size of the Network Matters 55 Part III Optimizing Communication and Receptivity Integrating the Network 4. The Barriers to Integration 5. Improving Receptivity and Communication 93 107 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 5 29/08/12 5:37 PM CONTENTS Part IV Optimizing Collaboration Succeeding Globally 6. Organizing for Global Innovation Projects 139 7. Collaborative Innovation 171 8. Globally Integrated Innovation 201 Appendix 1:    The Nature of Innovation Is Changing 211 Appendix 2:    Knowledge Is Increasingly Dispersed 219 Notes227 Index233 About the Authors 249 vi This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 6 29/08/12 5:37 PM TABLE OF SIDEBARS Chapter 1 Tata Communications: A Globally Integrated Model10 Chapter 2 HP Labs India: Experiencing via Immersion in a New Context38 Snecma: Foraying via Learning Expeditions42 Nokia: Attracting Leading-Edge Research50 Chapter 3 John F. Welch Technology Center: From Substitution to Complementarity in India62 Novartis Institute for Tropical Diseases: Learning from a New Location72 Fuji Xerox: From Market Access Joint Venture to Key Innovation Hub79 Chapter 5 Xerox: From a Culture of Secrecy to Open Knowledge Sharing and Reuse108 Synopsys: Connecting Dispersed Teams116 vi i This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 7 29/08/12 5:37 PM TA B L E O F S I D E B A R S Siemens: DFSS, a Tool to Impose a Common Language 120 GSK Affymax: An Approach for Integrating Complex Knowledge129 Chapter 6 Apcantes: A Troubled Global Project 142 ATV-71: A Successful Dispersed Project 154 Sapphire: Strong Project Management Delivering Success162 Chapter 7 IBM’s Collaboratories 178 Boeing: From Dreamliner to Nightmare Project183 PixTech: From Great Potential to Downfall 188 Intel: Building the WiMAX Innovation Ecosystem 194 vi ii This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 8 29/08/12 5:37 PM In Memoriam To Gunnar, Sumantra, and C. K. They paved our way. This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 9 29/08/12 5:37 PM This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 10 29/08/12 5:37 PM FOREWORD This book explains how to conceive, build, and hone a global innovation capability that is enduring, practical, and rooted in the realities of both global competition and a company’s particular approach to its market. Yves Doz and Keeley Wilson have brought their considerable expertise to bear on a subject of fundamental strategic importance, both rich in promise and perilous in its potential for misinterpretation and misapplication. Innovation has become such an all-encompassing concept and powerful driver of modern business strategy that company leaders lose focus when asked to define innovation and how they intend to achieve it. Globalization only adds to the challenge. Along come Doz and Wilson with a blueprint for organizing, building, and managing a global innovation capability, from design through execution. And they offer seasoned counsel on how to tailor this blueprint to the parameters of a particular industry and the priorities of a given company. Just as we do at Booz & Company, the authors start with focus. It is our shared belief that companies create long-term competitive advantage by recognizing, developing, and continuously improving a limited set of interrelated winning capabilities. Assets and market positions are transient. In contrast, core capabilities are sustainable and defensible in the long term. In the new world context of open market access and dispersed knowledge, managing global innovation will become an integral component in many companies’ systems for growing xi This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 11 29/08/12 5:37 PM F O R E W O R D winning capabilities. To continuously create and capture value, ­companies must not only know how to design and develop a valuable and flexible innovation footprint, but also learn to integrate worldwide knowledge and experience through effective processes and systems driven by strong leadership. The notion that Doz and Wilson are onto something is not news to us—Booz & Company has worked with both authors for almost a decade, developing insights on innovation and how it has taken shape around the world, market by market. In 2004 we undertook a study of global innovation networks with INSEAD that provided a preview of some of the trends explored in this book, and we have continued to participate in their work on innovation regimes and global innovation in specific industries, such as telecom and pharmaceuticals. Looking back just a few years, it is remarkable how rapidly our early findings have taken hold and become key issues for companies around the world, both in developed and developing economies. Our early study focused on companies from developed economies that were expanding their innovation footprints into China and India. In fact, that is where most of their incremental R&D investment was going. Now, we’re observing a turn in the tide, as companies in China and India are investing their R&D and innovation currency in the United States, Europe, and even Japan. India’s Tata Motors acquired not only brand equity, but also technology and a European automotive R&D footprint by acquiring Jaguar and Land Rover. China’s SANY Group has opened R&D centers in Germany and the United States. Huawei Technologies has an extensive global R&D footprint and a $4.5 billion global R&D budget. All of these companies now face the challenge of managing innovation on a truly global basis—identifying, accessing, xii This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 12 29/08/12 5:37 PM FO R EWO R D stimulating, and integrating the best ideas and capabilities from around the world into innovations that will serve world markets while at the same time pioneering new ways of collaborating both inside and outside company walls. It’s a daunting challenge, and few companies have found a winning formula. Senior leaders need practical suggestions to find the proper architecture for implementing global innovation networks and meeting the day-to-day challenges of crossing borders in the development of ideas into products and services. This book is for corporate leaders but also for frontline innovators, and not only in developed economies, but also in China, India, Brazil, Indonesia, and other developing economies now spreading their wings on the global stage. It combines an understanding of the fundamental drivers of success in managing global innovation with practical strategies for building a productive and enduring innovation capability. It describes a long journey that requires a set of guiding concepts and principles, as well as an architecture of systems and processes. Doz and Wilson provide both in this expert road map for building the capability to manage global innovation. —Cesare Mainardi Chief Executive Officer Booz & Company xi i i This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 13 29/08/12 5:37 PM This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 14 29/08/12 5:37 PM  PREFACE In an essay arguing for a shift toward a more globally ­distributed and integrated approach to innovation, Sam Palmisano, the highly regarded chairman (and recently retired CEO) of IBM, cautioned, “As the twin imperatives of [global] integration and innovation render the old MNCs’ networks of national hubs ­inefficient and even redundant, it is becoming increasingly clear that the twentieth-century corporate model is no longer optimal for innovation.”1 Similarly, at GE, Jeff Immelt has put the globalization of innovation at the center of his strategic agenda. During Henning Kagermann’s tenure as CEO of SAP, when asked by one of the authors what he considered his company’s most difficult strategic challenges, he answered, “To build a global innovation network.” Along with many other managers, these executives have all recognized that over the past decade, there has been a growing need for radical change in the way their firms innovate. As with any radical and systemic change, embracing global innovation will be difficult. It requires new structures, processes, tools, capabilities, and perhaps most important, new mind-sets. Our goal in writing this book, which is the result of more than a decade of research, is to give executives and managers from companies—both large and small, established and new—a guide to achieving that change and repositioning their ­companies to compete in the era of global innovation. xv This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 15 29/08/12 5:37 PM P R E F A CE To explain the origins of this book requires us to go back to 2001, when Yves Doz and two colleagues at INSEAD, Jose Santos and Peter Williamson, published From Global to Metanational.2 This was a manifesto for highly dispersed innovation, based on a few pioneering firms that were tapping the world for new knowledge. Although From Global to Metanational described what this new form of innovation looked like, it didn’t explain how firms could build the structures, mechanisms, and processes needed to undertake dispersed innovation. The magnitude of the challenge facing firms in building and managing a global innovation capability began to emerge in the fall of 2002 at a forum we organized at INSEAD for senior executives from leading global companies. By the end of the three-day event, we were left in no doubt of the genuine need for a deeper understanding of how firms could become global innovators. Over subsequent years, our quest to understand how companies can build an effective innovation network and manage global innovation led us to conduct field research at forty-seven companies around the world, including Citibank, HP, Hitachi, IBM, Infosys, Intel, LG Electronics, Novartis, Philips, Samsung, Schneider Electric, Siemens, Toshiba, Vodafone, and Xerox. In 2004, with our field research ongoing, we teamed up with Booz & Company (then Booz Allen Hamilton) in a joint research agenda to gain a better understanding of global innovation footprints. We jointly conducted in-depth field research into innovation footprints in a number of sectors, but the centerpiece of our collaboration was a survey, “Innovation: Is Global the Way Forward?” This survey was completed by 186 companies from 19 countries and 17 different sectors, with an annual innovation spend of more than U.S.$78 billion.3 Throughout our research and theory-building process, we have been able to hold various x vi This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 16 29/08/12 5:37 PM P R EFAC E symposia bringing together executives from global companies as sounding boards and intellectual sparring partners. In the past few years, the relevance and urgency of successfully implementing global innovation has intensified and the need for a book addressing the “how” aspect has become urgent. This book draws together the findings, observations, and managerial lessons arising from our research. Our hope is that it provides stimulating ideas as well as practical guidance for senior executives to strategically approach the configuration and deployment of innovation activities. For managers working in innovation-related functions, we have provided the frameworks and tools to support the coordination of global innovation and to maximize the benefits and minimize the costs of managing a global innovation network. Although we researched dispersed service, business model, and product innovations, we found the same lessons holding true for all. For illustrative purposes in the book we have mainly used the latter, simply because the innovation is more tangible and therefore clearer for descriptive purposes. The book is divided into four parts based on the core “managing global innovation” (MGI) framework. In part I, chapter 1, “The Innovation Challenge,” we introduce the fundamental conundrum that innovating with complex knowledge is best suited to a colocated environment (the traditional model of innovation), but the complex knowledge needed for innovation is increasingly dispersed, so global innovation needs to tap into this diversity. We put forward the MGI framework as the solution by providing a model for globally integrated innovation. In the final part of the chapter, we look at the evolution of innovation footprints over the past three decades and reveal that, with key capabilities remaining at home, poor network integration mechanisms and processes, and adherence to short-term xvi i This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 17 29/08/12 5:37 PM P R E F A CE cost-saving strategies, most companies are failing to build ­effective and efficient innovation networks. Part II focuses on the frameworks a company needs to optimize its innovation footprints. Agility and flexibility are key, given increasing knowledge dispersion, shorter cycle times, and the need for greater efficiency. An innovation network of traditional bricks-and-mortar sites is not only expensive to run, but is never going to deliver adequate agility and flexibility. In c­ hapter 2, “The Optimized Footprint,” we suggest a new approach to building a global innovation network, where a company uses bricks-and-mortar sites for accessing and absorbing complex, systemic knowledge. If the knowledge at a location is either ­codified or embedded, we describe alternative, more flexible ways of accessing that knowledge from a distance or via learning expeditions. An optimized footprint still needs bricks-and-mortar sites, though fewer. In chapter 3, “How a Site Creates Value and Why the Size of the Network Matters,” we introduce a dynamic framework for organizing bricks-and-mortar sites for value creation and assessing the usefulness of new locations for increasing productivity, contributing differentiated knowledge, or seeking new opportunities for radical innovation. The optimal size of a bricks-and-mortar network alters, depending on a range of factors specific to individual companies. In the second part of the chapter, we explain how strategic choices, capability constraints, legacy, and corporate culture all play a role in determining the optimal size of a physical network for creating value. In part III, we move from focusing on the configuration of innovation footprints to the integration of sites. A well-configured, flexible, and agile innovation network that ­ provides access to critical knowledge and competencies both x vii i This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 18 29/08/12 5:37 PM P R EFAC E internally and externally still fails to create and deliver value if that knowledge isn’t shared and reused. In chapter 4, “The Barriers to ­Integration,” we outline the four main impediments companies face when transferring and integrating knowledge: a lack of connection mechanisms to share codified knowledge and connect knowledge holders within a network; communication barriers between different parts of the firm; an inherent difficulty in moving complex, rooted knowledge; and organizational cultures that fail to promote reciprocity. Chapter 5, “Improving ­Receptivity and Communication,” identifies some of the tools and processes that the firm can put in place to overcome each barrier and leverage dispersed knowledge in innovations that will build competitive advantage. The final part of the book, “Optimizing Collaboration: Succeeding Globally,” examines why and how companies need to mobilize their dispersed innovation networks around global projects and extend their reach and capabilities through collaboration with external partners. When the knowledge needed for innovation is dispersed, it’s impossible for product, service, or solution development to remain colocated. Yet many firms have experienced difficulties managing innovation projects dispersed across multiple sites. Chapter 6, “Organizing for Global Innovation Projects,” provides insight into why. We then present a framework to guide organizations through the entire global project process, setting out new structures, mechanisms, tools, and approaches to adopt in order to build this critical capability. Sometimes it’s not a local presence that a company needs to access new knowledge, but a local partner. In chapter 7, ­“Collaborative Innovation,” we describe how the nature of collaboration with partners changes over the course of an innovation project, from open approaches in the early stages when xi x This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 19 29/08/12 5:37 PM P R E F A CE the opportunity is evaluated to building an ecosystem for the ­diffusion of the innovation. For each phase of the collaborative innovation, we outline the key considerations in selecting ­partners and m ­ anaging the process. In chapter 8, we propose an action plan based on the three dimensions of change. The familiar model of innovation that has proved so resilient for so long is woefully inadequate for the current reality in which the critical knowledge for innovation is increasingly dispersed across a wide geographic canvas; firms must respond to the rapid growth of new global competitors; and the deepening financial and economic crisis in the West calls for effective and efficient innovation in all sectors. Unless firms change the way they innovate and embrace the structures, processes, mechanisms, and mind-sets for a globally integrated approach, they will face i­ rreversible decline. xx This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 20 29/08/12 5:37 PM ACKNOWLEDGMENTS This book would not have been possible without the contributions of a great many people. Two in particular stand out: S ­ teven Veldhoen made a significant contribution to the research on innovation footprints and has been a valuable intellectual sparring partner and friend over the past decade; Peter Williamson played a vital role in the early stages helping us shape and sharpen some of our arguments. The research work of colleagues past and present, including Kaz Asakawa, Chris Bartlett, Robert Burgelman, John Cantwell, Sumantra Ghoshal, Gary Hamel, Gunnar Hedlund, Arnoud de Meyer, and C. K. ­Prahalad, played an important role in directing our research and informing our arguments. Many people at INSEAD made valuable contributions; in particular, Jose Santos and Mary Yoko Brannen had important research insights. We owe thanks to Anil Gaba, Ilian Mihov, and the R&D department at INSEAD for their continued support, to Ian Edwards for helping us fund the work, and to Jeanne Larson and Muriel Larvaron. Without the support, both financial and intellectual, of Booz & Company, much of our field research would not have been possible. To this end, we thank Neil McArthur, Georg List, Thomas Goldbrunner, Kate Gulden Pinkerton, and Georg Altman. We owe a huge debt of gratitude to the many managers around the world who showed generosity and patience in sharing their xxi This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 21 29/08/12 5:37 PM  ACKN OWLEDGMENTS experiences and insights with us. Although there are far too many to list, we thank each and every one of you. P ­ articular thanks are due to Mark Bennett, Gita Gopal, Paul Herrling, Dick Lampman, Alain Marbach, and Jean-Pascal Tricoire for l­ eading us into new territory. We are eternally grateful to Andrea Cuomo, not only for his infectious intellectual curiosity, but for introducing us to many interesting companies. We thank the anonymous reviewers for their feedback and suggestions in relation to an earlier draft and also Charlotte Butler for her suggestions for improving the final manuscript. Last, but certainly not least, our heartfelt thanks go to our editor Melinda Merino, who worked closely with us to improve the clarity and flow of our arguments and who played the dual roles of critic and enthusiastic supporter so well. Although so many people have contributed to this book, any errors, misinterpretations, and shortcomings remain our own. x x ii This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. FM.indd 22 29/08/12 5:37 PM [  PART I  ] MANAGING GLOBAL INNOVATION The Challenge This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 1 29/08/12 5:42 PM This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 2 29/08/12 5:42 PM [  CHAPTER ONE  ] The Innovation Challenge E very so often, businesses face a seismic shift in the way they operate. One of those shifts is currently underway in how and where firms innovate. Take a product many peo- ple use every day, eyeglasses. People with bad eyesight once had to wear glasses with heavy, thick lenses. Not anymore, thanks to the ability of lens makers like Essilor to access and integrate ­innovations from around the world. One of us, who has poor eyesight, recently bought a new pair of glasses in France. After choosing a frame and giving his prescription to a local optician, he was told to return at the end of the week to collect the new glasses. Little did he know the journey his lenses would take: the prescription was first sent to a local division of lens maker Essilor for screening to establish the complexity of the lenses. This was then engineered in Germany 3 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 3 29/08/12 5:42 PM M anaging G lobal I nnovation by the Carl Zeiss Company (a partner of Essilor), which then sent specifications to PPG in the United States (another Essilor partner) to make the blanks from high-transparency polymer materials. From there, the blanks traveled across the Pacific to a Nikon plant in Japan ( yet another partner), which put ­twenty-three coatings, each a few microns thin, on the blanks, including antiglare filters, photochromatic adjustments (so that the lenses darken in sunlight), and an antiscratch finish. The lenses then traveled back to France to be fitted and aligned to the frame, ready to be collected at the end of the week. Essilor is one of the world’s foremost corrective lens producers, a position it achieved by bringing together from around the world the leading innovators in their respective ­capability domains: PPG is a world leader in developing and making ­high-transparency light polymers; Nikon, with its ­long-standing ­leadership in high-quality camera lenses, excels at polishing and coating lenses; and Carl Zeiss is renowned for specifying the optical properties of corrective lenses. By integrating its partners’ unique competencies in a global product-creation and manufacturing process, Essilor has built a strong innovationbased advantage. Although our example’s logic may seem obvious, it is a far cry from the way companies traditionally carry out innovation (for a detailed description of how the nature of innovation has changed, see appendix 1). Even before the recession beginning in 2008 forced many companies to reassess the effectiveness and durability of their innovation strategies, the need for changes to compete successfully in a rapidly altering world had become increasingly apparent. Whereas, in the past, it was sufficient for firms to innovate in their home market and disseminate those innovations across other markets, now innovations need to draw on dispersed and differentiated ­competencies, 4 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 4 29/08/12 5:42 PM Th e I nnovation C h allenge capabilities, markets, and customer insights from around the world. As with sales and manufacturing, innovation must become global. The need for this change had become increasingly o ­ bvious during the decade leading up to 2012, yet few companies seem to have embraced it. The results of our joint survey with Booz & Company of 186 companies from 19 countries and 17 different sectors highlighted that, although the European companies were the most dispersed group, only 20 percent of their foreign innovation sites were outside the region. Less than half of the U.S. firms’ innovation sites were outside the United States, while the companies from Northeast Asia had slightly more than half their innovation sites located in other parts of the world. Only 12 percent of sites in India and China were involved in ­value-­creating innovation, while less than a third of foreignbased innovation sites as a whole made a contribution to core innovation activities. Few companies undertook global innovation projects involving multiple sites in their networks. This chapter focuses on explaining why firms are finding it so difficult to make the transition from local to global innovation. Why Companies Can’t Innovate Globally Firms that have previously been successful innovators by creating one or two major innovation hubs in their home country and lead market aren’t necessarily able to transpose that success to a globally integrated innovation regime. They have based their approach on an inherent logic of knowledge complexity and dispersion trade-off that assumes the only way to access and utilize complex knowledge for innovation is through colocation, and conversely, that a more dispersed approach to innovation is only 5 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 5 29/08/12 5:42 PM M anaging G lobal I nnovation suitable for and capable of accessing and integrating explicit knowledge. The significant limitations of this conventional wisdom are potentially worrying for any company with an ambition to ­innovate globally: complex knowledge is critical for c­ reating competitive advantage because it is context-dependent and can only be understood by familiarity with its context, making it difficult for competitors to replicate. A good way of thinking about the nature of complex knowledge in a more tangible way is to look at how chefs train. Most aspiring chefs need to acquire a deep understanding of the world’s great cuisines, the philosophies that underpin them, and the techniques required to recreate them. Chefs can’t achieve this by reading a range of cookbooks, because all the context and nuance critical to understanding a cuisine is lost in the codified lists of instructions. Instead, chefs undertake years of apprenticeships in leading restaurants around the world. Only by experiencing the environment and local conditions in which great dishes are devised and created can chefs truly master various cuisines and later transpose elements of them into their own creations. Explicit knowledge, on the other hand, travels easily. In the seventeenth century, scientists all over Europe were able to disseminate new knowledge by publishing their research and observations. Now, explicit knowledge for innovation is typified by software development and testing in which teams in Asia, Europe, and North America work on the same project twenty-four hours a day. Figure 1-1 captures this knowledge complexity and dispersion trade-off, illustrating why colocated innovation is more feasible than a dispersed global approach when complex knowledge is involved. The problem and challenge is that innovations increasingly rely on inputs of multiple, dispersed, complex knowledge ranging from location-specific skills to local customer insights. 6 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 6 29/08/12 5:42 PM Th e I nnovation C h allenge Figure 1-1 The knowledge complexity and dispersion trade-off Complex knowledge A Knowledge complexity B Explicit knowledge Colocation Innovation footprint Dispersion In the figure, the x axis represents the footprint of sites involved in innovation, from colocated innovation at a few sites on the left, to a greater number of globally dispersed sites on the right. Meanwhile, the y axis represents the nature of the knowledge required for innovation, from explicit, codified knowledge to context-dependent, complex knowledge. Currently, most companies are limited to innovation opportunities along the concave curve: because complex knowledge is locally rooted, companies dependent on this for innovation are forced into colocation, around the point marked A on the curve. Over the past decade, many companies that have traditionally relied on a strong home-base innovation capability have faced pressure to access knowledge that is more dispersed, which has led them to simplify that knowledge. Take Infosys as 7 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 7 29/08/12 5:42 PM M anaging G lobal I nnovation an example. In the 1990s, as Infosys attempted to serve global customers with the advanced services and system integration and facility management skills it had developed, it implemented a global delivery model. In essence, it structured, codified, and ­standardized its knowledge so it could incorporate more sites into serving ­clients and facilitate the global integration of its activities. In other words, it moved from point A to point B on the curve. But what if, instead of having to choose a position along the curve with all its limitations, it were possible to transcend the knowledge complexity and dispersion trade-off, or change the curve from concave to convex? What would it take to be able to access and integrate highly dispersed complex knowledge to deliver global innovations? Building a global innovation capability that relies on complex knowledge will be difficult, though not impossible. As figure 1-2 depicts, flipping the curve to transcend the knowledge complexity and dispersion trade-off calls for new understanding, strategies, processes, and tools across three critical vectors: the innovation footprint, communication and receptivity, and collaboration. To change the shape of the curve and overcome the complex knowledge and dispersion trade-off, the first step is to optimize the innovation footprint. This means being selective in both the choice and number of locations in which a company performs innovation. An optimal footprint is as compact as possible while still providing access to all the sources of knowledge needed to contribute to an innovation. Part II of this book introduces the frameworks, tools, and processes that enable companies to build an optimal footprint. The next step is to improve communication and r­ eceptivity. Few companies have the tools, processes, and mechanisms to 8 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 8 29/08/12 5:42 PM Th e I nnovation C h allenge F i g u r e 1 - 2  Managing global innovation rt Pa Complex knowledge rt Pa rt Pa co Op lla tim bo iz ra e tio n IV co O an mm pti m d re uni ize ce ca pt tio iv n ity III th Op e tim fo ot ize pr in t II Knowledge complexity Explicit knowledge Colocated Knowledge dispersion Dispersed support the internal knowledge sharing and integration e­ ssential for a dispersed innovation network. Company cultures tend to lean toward original creation and knowledge hoarding, while few human resources policies encourage and reward the international experience paramount to global innovation. This deficit of ­integration capabilities paints a worrisome picture in which innovation networks comprise a group of autonomous or semiautonomous centers with neither the incentives nor ability to function as an integrated whole. In part III, we address the m ­ anagement and organization challenges companies need to overcome to improve communication and cooperation between dispersed sites. Finally, effective global innovation depends on companies that collaborate both internally and externally. Unfortunately, collaboration falls outside most companies’ comfort zones. ­ 9 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 9 29/08/12 5:42 PM M anaging G lobal I nnovation In part IV, we introduce the frameworks and processes essential for successful global innovation projects and collaborative innovation with external players. In the preface, we mentioned Sam Palmisano’s observation that a new corporate model is needed to optimize ­innovation. Some companies are already beginning to transcend the ­knowledge complexity and dispersion curve. They are b ­ uilding a new type of globally integrated firm that looks very different from the usual organizational models. For example, Tata Communications’ footprint is designed to access the best knowledge around the world (see sidebar 1-1). It has a dispersed top team, reflecting the need to be close to critical sources of knowledge. It is able to leverage this knowledge by having organizational structures, processes, and a culture that support and reward communication and collaboration. SI D EB A R 1 - 1 T AT A CO M M UN ICA TI O N S : A G L O B A L L Y IN T E G RATE D MO D E L Tata Communications is a young, rapidly growing company. It is already the world’s largest telecom wholesale carrier (selling capacity to other telecom firms). It has one of the largest submarine cable networks in the world, a Tier 1 Internet Protocol (IP) network, and an expanding enterprise business (providing solutions and services directly to large customers). Yet, in 2002, as the monopoly provider for India’s overseas telecom services, it was operating in only one market.1 By 2011, it had registered offices in 31 countries with 7,545 employees and 73 percent of its revenue generated outside India. 10 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 10 29/08/12 5:42 PM Th e I nnovation C h allenge This rapid growth from local to global began in earnest in 2005 with the strategic acquisition of the submarine cable firm Tyco Global Network. The same year, Tata Communications acquired the Canadian voice carrier, Teleglobe. These acquisitions provided valuable capabilities and knowledge as well as a springboard for subsequent expansion. From the outset, Tata Communications’ proposition was intrinsically international, and although the company had originated in India, it didn’t need to remain headquartered there. What made sense was to disperse the entire organization around the world so it could access widespread competencies and be close to important sources of market knowledge. Of the executive team, CEO Vinod Kumar, is based in Singapore; the head of voice, in Montreal; the head of data, in London; the head of strategy, in Mumbai; and the head of product and services development, in New Jersey. This level of dispersion requires a strong emphasis on communication, collaboration, and feedback mechanisms. The company has invested in a raft of information and communication technologies (ICTs) to support everyday collaboration and communication between geographically dispersed teams, including Telepresence, internal social media platforms, and forums that supplement face-to-face meetings. The firm sees unity as critical for a globally dispersed organization and central to its own culture. Every day, the collective culture is reinforced across the company by cross-location accountability. So, for example, a team in the United States may be responsible for deliverables in India or a team leader in India might take charge of a project in the United Kingdom. At a managerial level, the firm achieves unity through the constant need for collaboration and shores it up with regular face-to-face meetings. For example, the (continued) 11 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 11 29/08/12 5:42 PM M anaging G lobal I nnovation forty most senior managers meet three times a year, while the top one hundred get together at least once a year. Tata Communications recognizes that not everyone is suited to working in a globally integrated organization. According to Kumar, “to be globally innovative, you have to let go of control and this doesn’t come easily to most managers.” Laurie Bowen, head of global data and mobility solutions, concurs: “Working in a highly dispersed organization can be chaotic. You have to let go of formality, be flexible, and focus on the overarching initiative.” Consequently, the company pays a lot of attention to hiring people who will thrive in this environment. Most managers at Tata Communications have cosmopolitan backgrounds with deep international experience from having lived and worked outside their home countries and a genuine openness to new ideas and cultures. In comparison to traditional organizational forms, a globally integrated organization presents much more complexity and places a greater onus of responsibility on every individual to adapt. Working in dispersed teams is demanding due to time and cultural differences, but Tata Communications has found that employees can find it an empowering and exciting environment. From a business perspective, dispersion gives Tata Communications significant advantages: it’s able to innovate quickly by tapping its own expertise around the world; through proximity, it can build durable relationships with global partners and suppliers; and it is able to keep its finger on the pulse in a rapidly changing industry. In some ways, Tata Communications, along with other emerging market global players, had a significant advantage over its old-world competitors. It didn’t have a huge legacy structure 12 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 12 29/08/12 5:42 PM Th e I nnovation C h allenge and processes to overturn and overcome but was able to build a globally integrated model from the ground up. The journey for companies without that advantage will be much more difficult but no less urgent. Moving the Innovation Frontier Since 1975, after years of merger and acquisition (M&A) a­ ctivity, there has been significant growth in both the number of sites where companies pursue innovation activities and the dispersion of these sites across a diverse range of economic and cultural environments. But most companies with dispersed innovation footprints have failed to capitalize globally on local innovations. At the other end of the spectrum, executives in companies that have remained steadfastly focused on the home base have hesitated to internationalize innovation for various reasons: the risks of intellectual property infringement, a strategically critical issue, are high; recruiting, retaining, and integrating good staff in unfamiliar locations is difficult; and choices about where to open new innovation units have become mired in indecision. As outlined in table 1-1, globalization and the opening of new consumer markets; increasing technological complexity and convergence; demographic changes; greater external ­pressures and, in particular, environmental concerns; and offshore ­outposts and outsourcing are together driving a trend toward greater knowledge dispersion (for a more detailed analysis of each of these factors, see appendix 2). As this trend is more likely to intensify than abate, how well placed are companies today to meet these challenges? To answer this question, we will look 13 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 13 29/08/12 5:42 PM M anaging G lobal I nnovation T A B L E 1 - 1  Radical shifts forcing greater knowledge dispersion The world then The world now •• Traditional consumer markets in developed economies •• Large new consumer markets opening in emerging economies •• Specialization within industries based on discrete knowledge elements •• Increasing knowledge convergence across industries •• Locus of brainpower in U.S., Japan, and Western Europe •• External pressures limited to low-impact local regulations and standards in some industries •• Innovation taking place in the home market and kept largely in-house or with trusted local suppliers •• Locus of brainpower shifting to emerging economies, in particular India and China •• Growing external pressures with a focus on climate change and environmental concerns, resulting in varied local regulations •• Greater movement of parts of the innovation value chain to offshore outposts and outsourcing at the results of the survey we conducted in conjunction with Booz Allen Hamilton (now Booz & Company), examining what ­current innovation footprints look like and what has driven their past and current configurations, the organizational structures and processes that support dispersed innovation, and the challenges these present.2 We will then highlight what companies need to do to bridge the gap between today’s reality and the requirements of knowledge diversification and dispersion. The results of our survey revealed that the innovation footprints of most companies are becoming more global and that this trend had been in progress for three decades, during which the share of foreign sites increased from 45 percent to 66 ­percent of all innovation sites. Although using different methodology, other surveys were conducted around the same time, and subsequently all concurred with our headline findings that innovation footprints are expanding.3 The headlines were interesting, but the detail revealed that the dispersion phenomenon is much more nuanced. 14 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 14 29/08/12 5:42 PM Th e I nnovation C h allenge Some Sectors Are More Dispersed Than Others To a great extent, a company’s innovation footprint has been a function of the sector it is in. Industries that have historically experienced high levels of M&A activity or those whose products have been subject to strong local variation demands tend to have more dispersed footprints. So, for example, given that in the past there were extremely high levels of local variation in cars and trucks (catering to different safety standards, consumption concerns, price points, and local branding), the automotive industry understandably ranked as the most dispersed sector in our survey. The chemicals sector, which has had very high levels of M&A activity over the past twenty years, was also highly dispersed. As was the electronics industry, although we can trace the roots of its dispersion to the need to combine product innovation from the West with process innovation in Japan. It’s worth noting that in all of these sectors, the knowledge base is codified, and because this type of knowledge, captured in mathematics and the scientific lexicon, travels well, globally dispersed innovation becomes easier. In contrast, we found that sectors, such as consumer goods, pharmaceuticals, and health care, that greatly rely on complex knowledge had less dispersed innovation footprints. Where a Company Is Born Makes a Difference With some exceptions, there are distinct regional differences in the dispersion of company innovation footprints. We found that Western European companies had the highest levels of dispersion, although other European countries dominated with regard to their innovation footprints, with 80 percent of foreign sites located within Europe. Meanwhile, during the 15 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 15 29/08/12 5:42 PM M anaging G lobal I nnovation past decade the share of U.S. companies’ innovation sites based in the United States fell by seven percentage points, although more than half of innovation sites were still based there. At the same time, the locations of U.S. companies’ investments in overseas innovation are changing. India and China combined are on the brink of overtaking Western Europe as favored innovation destinations for U.S. firms. Japanese companies fall somewhere in between their Western European and U.S. counterparts. New Innovation Investments Aren’t Where They Used to Be In the 1980s, manufacturing migrated eastward and changed the competitive landscape for many Western companies. Today, the lure of India and China as locations for innovation is having much the same effect. From around 2000, the proportion of f­oreign-owned innovation sites in Western Europe and the United States declined as the number of sites in India and China grew dramatically. According to Booz & Company, between 2004 and 2007, the world’s top–one thousand R&D spenders increased their total number of innovation sites by 6 percent and global R&D staff grew by 22 percent. But 83 percent of these new sites and 91 percent of increased head count were in India and China.4 These findings correspond with the predictions of future growth from our own survey. When we asked about planned future growth, we found strong evidence supporting a continued migration of innovation toward India and China, both in terms of new sites and head count. Perhaps more striking was the response to our question asking where companies would choose to open or scale up existing sites to achieve an “optimally configured” innovation footprint. The results, consistent 16 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 16 29/08/12 5:42 PM Th e I nnovation C h allenge across ­sectors, company size, and home country, revealed that 22 ­percent of all sites would be in China, with 19 percent in India. Changing Drivers of Innovation Footprint Expansion Is this shift toward India and China the result of well-thoughtout strategic decisions with value creation in mind, or is it, in the words of nineteenth-century journalist Charles Mackay, the result of “extraordinary popular delusions and the madness of crowds,” the modern-day equivalent of the South Sea bubble or Tulip mania?5 Over time, the drivers of dispersion have shifted, echoing advances and changes in other parts of the value chain as much as reactions to the external environment. What has remained constant is that the most significant drivers at any time reflect a shift in the underlying knowledge base. As figure 1-3 illustrates, where F i g u r e 1 - 3  The changing drivers of footprint dispersion Then Now Low-cost skills 9% Legacy 29% Legacy 17% Skills and capabilities 16% Proximity to production 18% Close to headquarters 14% Market customer 10% Low-cost skills 2% Skills and capabilities 16% Proximity to production 17% Subsidies incentives 13% Close to headquarters 10% Market and customer insight 19% Legacy 11% Skills and capabilities 22% Proximity to production 13% Close to headquarters 7% Market and customer insight 19% Subsidies incentives 14% Subsidies incentives 9% The first period is up to 1979, the second from 1980 to 1995, and the final from 1996 to 2005. 17 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 17 29/08/12 5:42 PM M anaging G lobal I nnovation once the largest proportion of innovation footprints were “­ legacy” sites, a more focused approach on postmerger i­ntegration and rationalization has meant that the number of legacy sites in footprints has fallen. It was once very important for innovation sites to be colocated with manufacturing, but the digitalization and automation of production, together with reliable and low-cost logistics, have caused a decline in this once symbiotic relationship. Over the past decade, as products and services have become more complex and knowledge increasingly dispersed, the need to access new skills and capabilities has grown in importance to become the biggest driver of innovation globalization. Similarly, the emergence of new markets in Asia, Eastern Europe, and South America has resulted in the growth of innovation sites established to gain insights into new markets and customer groups. Given that in recent years the number of innovation sites in India and China has increased dramatically, it’s perhaps not surprising to see that the fastest growing driver of innovationfootprint expansion over the past decade has been the access to low-cost skills. But companies following a purely arbitrage logic have already begun to find the benefits short-lived, thanks to a combination of lower than expected levels of efficiency and rapidly rising wages. In 2005, a well-qualified engineer in India earned around half of someone doing a similar job in the U.S. By 2008, remuneration for the same job in India had increased to 65 ­percent of the U.S. equivalent and this trend is expected to continue increasing rapidly, reaching parity shortly after 2020. The smart companies in our survey recognize that the gains from chasing lower costs are short-lived and instead differentiate developing markets based on other attributes they can contribute. Companies saw that innovation sites in China offer significant opportunities to access large numbers of ­demanding customers. India, on the other hand, attracts investment not just 18 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 18 29/08/12 5:42 PM Th e I nnovation C h allenge because of its large population of people with tertiary ­education, but because of the high quality of its scientists and engineers. Far from being a newcomer to basic research, India has created a homegrown aerospace industry and world-class IT sector, and developed the complex technologies required to be a nuclear power. IBM, HP, and GE, among others, follow this dual logic in India, with low-cost operations running alongside innovation centers that focus on leading-edge research. To summarize, over the past few decades, the internationalization of innovation has both increased and changed in nature. Footprints are now more widely dispersed than previously, and based on the insights gained from our survey, we think that this trend toward greater dispersion will continue. At the same time, the drivers of innovation internationalization are gradually changing in response to the increasing dispersion of knowledge brought about by the radical shifts we outlined in table 1-1. But while footprints are certainly becoming more dispersed, is innovation becoming more global? Footprint Dispersion: The Costs Are Accruing, the Benefits Are Not Powerful global forces are rendering the technological and consumer knowledge needed for innovation more diverse and dispersed. On the face of it, companies would seem to be reacting well to this challenge, with ever larger innovation footprints expanding into emerging markets. But appearances can be deceptive. In fact, while a handful of firms have established new innovation centers for accessing knowledge to feed into a global innovation process, for the majority, arbitrage is still the core logic for investing in emerging markets. 19 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 19 29/08/12 5:42 PM M anaging G lobal I nnovation The Arbitrage Argument Is Flawed Despite India and China being home to 14 percent of all R&D sites in our survey, only a small proportion of these (12 percent) were involved in real value-creating innovation. The majority focused on low-end development support tasks, such as testing and verification, together with the adaptation of existing products and services (created in the West) to meet local market requirements. This is a zero-sum game. Managers need to ask themselves how long this strategy will be realistically sustainable. First, these new consumer markets are growing rapidly and will require unique products and services designed to meet local customer needs, not just last year’s castoffs that companies have adapted to suit lower price points. Second, wages are rising rapidly in innovation hubs like Shanghai, Bangalore, and Hyderabad, rendering any cost advantage short-lived. Third, companies will experience a dearth of qualified staff in developed markets, so it is inevitable that over time many more creative innovation activities will have to shift to where the brains are. It would surely make sense to begin building and integrating these capabilities now rather than wait until the tipping point has been reached. Finally, the well-qualified and talented employees that companies need for innovating in new markets are drawn not only by good salaries, but, more critically, by the possibilities of stimulating, challenging work and decent career prospects. Just as their counterparts anywhere else in the world, in terms of Maslow’s hierarchy of needs, employees in emerging economies need to attain higher levels of esteem and s­ elf-actualization to be fulfilled and satisfied in their work.6 Innovation centers that focus only on repetitive, low-end work will find it ­impossible to 20 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 20 29/08/12 5:42 PM Th e I nnovation C h allenge retain and recruit the high-caliber staff needed for ­innovation. These people will choose to work for multinationals that enable them to make a valuable contribution, or for local entrepreneurial companies that will almost certainly be global competitors in the near future. In the critical battle for talent, which demographic changes will make more intense (detailed in appendix 2), those companies that have condemned their foreign innovation sites to low-end work will find it difficult, if not impossible to compete. Just because the arbitrage logic that seems to be driving much current investment in India and China is flawed, it doesn’t follow that there are no compelling reasons for setting up innovation centers in these and other emerging-economy locations. Both countries offer huge potential for companies to adopt cost-innovation strategies.7 These strategies can encompass the leveraging of unique consumer requirements to develop new products with global appeal. They can mean adopting frugal innovation by finding innovative ways to develop products and services for lower costs without compromising functionality. Or they could involve innovating to build local mass markets. India and China’s determined homegrown companies are currently stealing a lead by following a combination of these strategies. Instead of thinking in terms of arbitrage gains, Western companies need to play the same game and think of India and China as long-term, but big opportunities. Key Capabilities Remain at Home For every company that has embraced the real opportunities that a more dispersed innovation footprint offers, there are many more that are failing to exploit the potential of their networks and derive any sustainable benefits. While c­ ompanies 21 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 21 29/08/12 5:42 PM M anaging G lobal I nnovation have increasingly dispersed innovation footprints, by c­ ontrast, most are focusing their innovation activities on the home base. Our survey revealed a strong tendency for companies to keep their innovative capabilities in their home market. Only 32 ­percent of foreign-based innovation sites contributed to core R&D activities. So, although footprints have been expanding, true innovation capabilities and activities have remained stubbornly close to home. Put more plainly, many companies are taking on the costs of an expanded innovation network, with burgeoning communication budgets and high management coordination costs, without building the sustainable competitive advantage that comes from an effective global innovation network. Given the increasing dispersion of knowledge required for innovation, companies that have dispersed R&D networks but are limiting their innovation activities to their home markets are missing significant potential to create competitive advantage by accessing and utilizing valuable knowledge for innovation from their foreign sites. Of course, the reason that many companies keep innovation close to home is that their foreign sites genuinely have little to contribute. If this really is the case, and companies have innovation sites in the wrong places, then they need to reassess their innovation footprints so they are aligned with the knowledge needed for innovation. 22 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch01.indd 22 29/08/12 5:42 PM [  PART II  ] OPTIMIZING THE INNOVATION FOOTPRINT This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 23 29/08/12 5:35 PM This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 24 29/08/12 5:35 PM [  CHAPTER TWO  ] The Optimized Footprint M ost innovation footprints comprise a series of bricksand-mortar sites. These physical sites undoubtedly play a vital role: they provide a colocated environment in which companies can develop complex ideas and concepts. They provide grounding in a local environment where companies can build and manage relationships with external players. And they provide the continuity that enables companies to amass and leverage deep expertise. Always at the heart of how companies “do” innovation, bricks-and-mortar sites have remained the default option when companies are expanding or restructuring their innovation footprints. But how close to an optimized footprint is this default option? Far too many companies have discovered over the past three decades that building or acquiring physical innovation sites around the world has stymied rather than promoted innovation. 25 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 25 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint The networks are expensive to operate, difficult to c­ oordinate, and rife with duplicated effort. The sites tend to compete rather than collaborate with each other. They are inefficient and largely ineffective. Agility and flexibility are becoming ever more paramount for creating competitive advantage. As cycle times contract, there is mounting pressure to cut costs across the board and efficiency is key. At the same time, the knowledge needed for innovation in any given sector is increasingly dispersed across different consumer markets, industries, and emerging hot spots, and the rate of this knowledge diffusion is growing rather than dissipating. Against this backdrop, building new centers to tap dispersed knowledge challenges the dual mantras of speed and efficiency. This approach is not only costly, but will result in a significant lead time between the inception of the new site and its contribution to the innovation pipeline. The purely bricks–and-mortar approach is no longer a sustainable strategy for building a global innovation footprint. It slows companies down, limits the opportunities they can pursue, and places them in a reactive competitive position. The solution to optimizing the innovation footprint is to build in agility and flexibility—to create something that is sensitive and adjustable to current and changing innovation needs. Achieving this type of footprint doesn’t mean abandoning physical sites altogether. On the contrary, it means recognizing when they are the most suitable approach for accessing new knowledge for innovation and when alternative and complementary approaches are more effective. Whether a company is expanding its footprint or restructuring its current footprint, it needs to decide where to locate physical sites versus alternative approaches based on the type of knowledge it seeks. When the knowledge is complex and deeply rooted in the local c­ ontext, 26 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 26 29/08/12 5:35 PM T he O ptimize d F ootprint then a physical site is probably the best option. But when the knowledge needed is more easily defined and transferable or explicit and codified, there are more effective and efficient alternative means to access that knowledge than sinking cash, time, and commitment into bricks and mortar. In this chapter, we examine the pitfalls of an innovation footprint that relies wholly on physical sites and the causes of inertia that prevent companies from restructuring around a more agile model. We then describe each of the constituent approaches required for an agile footprint and the circumstances, based on the nature of the knowledge being targeted, in which each is best deployed. The first approach is a bricks-and-mortar presence that we call experiencing, in which companies access complex knowledge by being immersed in a particular location. The second, foraying, enables companies to mount learning expeditions to access embedded knowledge without building a costly, longterm presence. In the final approach, attracting, companies become magnets for explicit knowledge. The key to agility and success is having a balanced footprint and knowing when it’s appropriate to experience, foray, or attract. The Limitations of a Bricks-and-Mortar Innovation Model Think of an innovation center in New Jersey, Shanghai, Basel, or anywhere. What probably comes to mind is a building filled with people conceptualizing, designing, developing, and testing products or new services. Close by, business development and marketing people contribute to the innovation pipeline by finding new market and business opportunities, seeking to understand latent customer requirements, and identifying embryonic trends. From the mature pharmaceutical to newer software 27 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 27 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint industries, this conventional approach to innovation prevails. It presents a real impediment to flexible, fast-moving, and agile innovation. Physical innovation footprints carry high quantifiable costs: sites can be expensive to run and maintain, communication budgets are high, and management coordination costs significant. But it’s the hidden costs that really damage a company’s innovation capability. By their very nature, these sites are immovable, which limits a company’s scope for accessing knowledge to the places where its innovation sites are already located. So as new sources of knowledge emerge—with customer groups, new technologies, or centers of competence—companies reliant on a purely physical footprint can never be at the vanguard. But just think of the opportunities and flexibility available for companies that have broken free of this conventional approach. Rolls-Royce, maker of integrated aircraft and marine engines, is a good example of a company that recognizes the limitations of an expensive, cumbersome global innovation network. The growing need for specialization and modularity in its leadingedge products prompted Rolls-Royce to radically restructure its footprint and regain leadership in advanced power systems. It replaced its physical corporate R&D sites by flexibly partnering with twenty-nine university labs around the world. It reviews the relationships regularly against output and changing knowledge requirements. This model provides Rolls-Royce with the flexibility to continually find and access the most relevant knowledge in the world for the development of its products. Unlike many companies, it isn’t burdened with outdated innovation centers. The argument against a purely bricks-and-mortar model is even more compelling with regard to opening new sites. With the growing dispersion and diversification of knowledge, most 28 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 28 29/08/12 5:35 PM T he O ptimize d F ootprint companies recognize that they need to expand their innovation footprint to access new customers and markets, capabilities, partners, and external experts. But it takes time to recruit and train staff and then integrate the site into an existing network. In some locations, particularly emerging hot spots, recruiting staff can be a particular challenge. For example, in places like Shanghai and Bangalore, there is huge competition for skilled, high-quality employees. When HP Labs opened its R&D center in Bangalore (see sidebar 2-1 later in the chapter), it took five months just to find the right local director who had the requisite experience in multinationals, contacts with local institutions, and scientific credentials to head the lab. Additionally, in some locations, there aren’t enough qualified people to meet the demand. A McKinsey study of engineering talent in China found that despite large numbers of engineering students graduating from China’s universities each year, only a tiny fraction were seen as good hires by Western companies and only 10 percent had the necessary social and communication skills to work effectively in a multinational corporation.1 This recruitment problem is exacerbated in some places by difficulty in retaining good staff, annual attrition rates in double figures, and salary inflation not far behind. Even after a company recruits and trains staff for a new innovation center, it still has to integrate a new site into an existing innovation network before the center can contribute. According to Dave Guidette, who set up new innovation centers in Mexico, India, and China for Schneider Electric, getting the growth rate of new sites right presents a challenging balancing act: “The new site needs to learn about products and processes and initially has to focus on low-end work whilst they build up competencies. At the same time, the best hires have to be motivated and committed. Developing codependency between the new and existing sites is 29 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 29 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint key to the growth and success of new R&D centers. You have to create a ‘need’ for these sites and this doesn’t happen overnight.” At the crux of the argument against an overreliance on bricksand-mortar sites is the fact that locations seen as critical for innovation in a given industry today can quickly become superseded by another location tomorrow. Companies will be left with a network of legacy sites that no longer meet their innovation requirements, are expensive to run, and yet are difficult to wind down. So why are companies so wedded to their physical innovation networks? And why do they find it so difficult to restructure these activities? We believe they have fallen victim to what we call footprint inertia. Footprint Inertia: Why Bricks-and-Mortar Innovation Networks Are Difficult to Restructure We can easily attribute the failures of companies with ineffective global innovation networks to a lack of management attention, focus, or innovation strategy. But this view would be too simplistic, ignoring some of the unique characteristics of innovation and R&D centers that lead to footprint inertia or, in other words, the seeming inability or unwillingness to rationalize and restructure innovation footprints: •  Social networks and relationships.  Much of the knowledge used in innovation is tacit and built up over time within and between small networks of people who have worked together on various projects and programs. While ­databases can capture and store codified knowledge relating to products, services, or solutions, valuable knowledge about why one solution was chosen over another, for example, or why a component was designed 30 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 30 29/08/12 5:35 PM T he O ptimize d F ootprint in a particular way is held by individuals and networks. ­Culling or reorganizing an innovation footprint can destroy or seriously disrupt these valuable networks, which act as the knowledge kernel for many innovation projects. •  Retaining star performers.  Successful innovation requires a critical mass of talented scientists, engineers, technologists, strategists, or marketers, but every company has a number of star performers within its ranks who, by virtue of experience and/or sheer talent, make exceptional contributions. For example, when one of Intel’s lead scientists, Dov Frohman, decided to emigrate to Israel in 1975, rather than lose him, Intel opened a small R&D center in Haifa so he could continue making a valuable contribution. This center eventually became a fifteen-hundred-person research facility. Many companies are reluctant to close innovation sites that are home to some of their star performers for fear they will be unwilling to relocate. •  Intellectual property.  Whether via copyrights or patents, protecting core intellectual property (IP) is vital for the competitiveness of innovative companies. Many companies are reluctant to restructure their innovation footprints because it would entail closing sites in established markets where IP protection is strong in favor of new sites in rapidly emerging economies with weak IP laws and the very real potential that critical knowledge will leak to local competitors. •  Hostage to home base.  Many companies have a sense (often real as well as perceived) of national responsibility or corporate citizenship to their home country. The news 31 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 31 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint that a national champion plans to downsize or close local innovation centers often results in a national outcry not only at the immediate job losses but also at the resulting effect on local suppliers and subcontractors. For e­ xample, many global IT companies have been vilified in their national media for establishing large new R&D sites in India. Even though this hasn’t resulted in direct job cuts at home, they have been accused of denying locals work in favor of cheap labor in the subcontinent. Creating an optimized footprint will inevitably lead to the closure or downsizing of existing sites. Companies need to be aware of the causal factors or combination of factors to overcome this barrier. Once they understand the impediments to restructuring, companies can put strategies and mechanisms in place that will enable them to retain the positive aspects of their legacy network within their new agile footprint, while reducing the downside of a wholly bricks-and-mortar model. Prior to restructuring an innovation footprint, a company should draw up a map of crucial knowledge networks. Most companies will already know the critical relationships within the innovation community, but a simple question like, “Who do you talk to when you encounter a problem?” quickly highlights networks of knowledge gatekeepers in any organization. These are the people and networks that the company needs to keep. But knowing who the gatekeepers are doesn’t necessarily entail maintaining large physical sites. Rather, the company can formalize the gatekeepers’ roles by giving them interesting, stimulating, and global work within the new agile network, either relocating to or liaising with sites charged with 32 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 32 29/08/12 5:35 PM T he O ptimize d F ootprint ­experiencing work, or taking on responsibilities within foraying or ­attracting activities. Similarly, closing a site doesn’t necessarily mean the loss of star performers. A company can motivate people to relocate by offering more resources, greater latitude to publish work early, or the challenge of experimenting with new concepts in new locations. Concerns over possible IP infringements and weak legal systems in many emerging markets will lessen over time as more countries join the World Trade Organization and the growth and development of homegrown companies in these markets lead to stronger IP laws and enforcement. Even so, many companies have found that the benefits (including new consumer markets, access to innovative suppliers, and talented and skilled staff) of placing innovation centers in countries that currently have weak IP laws far outweigh the potential problems. Finally, a company may find it difficult to avoid being a hostage to a home base. Cutting jobs at home always leads to bad publicity, and more so when the jobs in question are at the core of the knowledge economy on which so many developed countries now base their economies. A public relations campaign arguing that the tax revenue from a company that is flourishing because of its strong innovation output based on an agile and flexible footprint is preferable to lower taxes from a company that is struggling to survive may soften the blow. But local politicians and media are unlikely to readily accept this. Instead, on this facet of inertia, companies will have to accept that the alternative is worse: doing nothing could spell long-term demise because the days of innovating primarily from a home base and shipping the results to markets across the world are truly over. 33 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 33 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint Achieving a Flexible Innovation Footprint With regard to innovation, perhaps the most knowledge-based activity in the value chain, there has ironically been no discernible knowledge-based approach to organizing footprints. ­Companies have treated all knowledge requirements as more or less equal, perpetuating the bricks-and-mortar mind-set. But, as figure 2-1 illustrates, the characteristics and accessibility of knowledge vary greatly, from complex, highly context-dependent, tacit knowledge to explicit, codified knowledge. In addition, the halflife of any knowledge needed for innovation rapidly diminishes, while the number of knowledge sources needed increases. An agile innovation footprint is configured to exploit the differences in knowledge types and ensure against shifting knowledge requirements. It enables a company to vary the mode of access based on the nature of the knowledge it is seeking (see figure 2-2). At the top of the scale is complex, locally rooted ­knowledge. FIGURE 2-1 A simple typology of knowledge Increasing knowledge complexity Knowledge type Characteristics Complex Highly context-dependent, systemic, exists in behavior and norms, can only learn by doing Embedded Context-related, observable, loosely definable, accessible by seeing through different eyes Explicit Codified, definable, transferable via common language or processes 34 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 34 29/08/12 5:35 PM T he O ptimize d F ootprint This knowledge is held in norms, behavior, or ­cultural a­ ssumptions; the only way to access it is through shared experience—being there and learning through doing. To access this type of knowledge requires a bricks-and-mortar approach—experiencing. Moving down the scale, knowledge that is embedded in user behavior or technologies can be accessed without the need for a full-time, longterm presence via foraying. Finally when knowledge is explicit and can be codified and is likely to make a small contribution to the final innovation, the mode of attracting, which doesn’t require any presence in the originating location, can be employed. •  Experiencing.  When the knowledge is complex and systemic, and is impossible to attribute to a specific owner (either an individual or entity), a company needs to access it via a long-term presence on the ground in the form of an innovation center. •  Foraying.  When the knowledge sought is technological but embedded in a local context, user behavior or some facet of how the technology was originally created often has to be understood. The knowledge needs to be accessed in situ, but this doesn’t necessarily require a dedicated innovation center. Instead, small teams can embark on foraying exercises to see and understand the knowledge in its original context before translating it for use more widely across the organization. •  Attracting.  When the knowledge needed is explicit, codified, and modular, for example in programming code, blueprints, and computer-aided designs, a company in a virtual environment can attract it. The knowledge needs to be able to move from its location of origin to the attractor company via ICTs without losing any of its integrity or meaning. 35 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 35 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint FIGURE 2-2 An optimized innovation footprint Type of knowledge Complex Full immersion (bricks and mortar) Experiencing Foraying Embedded Attracting Explicit Distance Mode of access Experiencing: Immersion in the Local Environment The limitations of physical innovation networks we have described shouldn’t preclude the continuation or establishment of bricks-and-mortar sites in the future. The only caveat is that these sites are used to access the systemic, diffuse complex knowledge held in norms, social interactions, and culture. Only under these circumstances is an actual, physical site a viable option. Complex knowledge is locally rooted and deeply embedded. It is difficult to define and will invariably be very different from a company’s existing knowledge base. To access complex knowledge requires learning by doing, seeing, and being there. It means growing local roots and cultivating local relationships, which can only be done by immersion in the local context or experiencing. 36 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 36 29/08/12 5:35 PM T he O ptimize d F ootprint For most companies, the business rationale behind the need to access complex, locally rooted knowledge is to achieve growth by entering new businesses and or new markets.2 For example, when the Japanese cosmetics group Shiseido decided to enter the global perfumery business, it chose France, the world’s leading market in this segment, as a base. As we describe in chapter 5, trying to understand the subtle nuances of design, packaging, and marketing in perfumery from Japan was impossible. However, learning by doing, seeing, and being in France helped Shiseido develop the Issey Miyake and Jean Paul Gaultier ­ brands, among others, that have had lasting success. In recent years, a new phenomenon is the growing importance of low-cost, high-value innovation in markets where necessity is the mother of invention.3 To participate in this growing field and innovate at the bottom of the pyramid, companies need to access complex knowledge that requires them to undertake innovation activities in situ.4 Building on Tata’s lead in developing a low-cost, fuel-efficient car for India’s vast and growing middle class (currently estimated at over 100 ­million households), many auto manufacturers, including Suzuki and Hyundai, set up innovation hubs in India to enable them to compete in what the industry widely acknowledges will be one of the few future growth areas. Only by being on the ground and understanding consumer requirements and preferences, road conditions, maintenance, and servicing constraints can manufacturers come up with a radically different vehicle at a price point for those at the bottom of the pyramid. Similarly, HP recognized that, although a potentially huge market, India was underserved, and by the time the economy had developed sufficiently for HP to sell its global product range (albeit pared-down versions to achieve attractive price points), local competitors would have emerged to make 37 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 37 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint market entry ­difficult. To develop products and services that would be ­attractive in an Indian market, it needed to open a ­bricks-and-mortar innovation center (see sidebar 2-1). HP realized that it had to have a deep understanding of how people lived and worked in India and the challenges the government, the administration, and businesses faced. SI D EB A R 2 - 1 HP L ABS IN DIA: E X PE R I E N C I N G V I A I MM E R S I O N IN A N E W C O N TE X T In the 1990s, HP Labs began to recognize the strategic imperative in examining what kind of ICTs it would need to create a market in developing countries. It saw that most of HP’s future growth would be in these markets and realized that most MNCs in developing countries focused on serving the tiny proportion of rich people at the top of the pyramid. But the greatest and most underexploited opportunities lay with the group in the middle of the pyramid. HP already had an interest in developing economies with its emerging market solutions (EMS) group. Its role was to adapt existing HP technologies to make them affordable and usable in poor countries. But this approach didn’t address the real opportunity of understanding the unmet and unarticulated technology needs in developing economies. The type of research that would tap into these needs had to be on the ground, immersed in the local context. In 2000, HP Labs set up a new lab in Bangalore India (HPLI) with a dual mandate to develop new solutions and products for the underserved populations of developing economies and also “learn how to learn” in new, very different markets. 38 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 38 29/08/12 5:35 PM T he O ptimize d F ootprint Building a management team to establish the lab with the right attributes, vision, experience, and connections to HP’s businesses, head office, and local networks of contacts was paramount. Gita Gopal, who had been involved in the project from its inception, took on the role of the lab’s associate director. But rather than being based in India, she remained in Palo Alto to provide a voice for the lab back at the center. The lab also hired an HP veteran to be based in India and to forge relationships with HP’s global businesses. The local director’s role for the first few years while the lab established local connections and partnerships would be quite different from its later incarnation once the lab was up and running. So, initially, HPLI needed to hire a prominent local to give the lab credibility and provide an external network of contacts. It asked an executive search agency to find candidates who met some challenging criteria: they had to be eminent scientists in their own right, have business experience, and understand how an MNC operates. The search process took almost five months resulting in the hiring of Srinivasan Ramani. He had a long and distinguished career that included serving on the United Nations’ high-level panel of advisers in ICTs. The lab’s approach to conducting research differed radically from the traditional approach that began by identifying technical challenges. HPLI’s mandate was to understand the end-user problems that needed to be solved and to identify the potential of the market. The softer sciences, such as ethnography, anthropology, and sociology, would play a prominent role in driving the research effort. Although HPLI focuses on creating technologies for markets that don’t yet appear on the radar of the business divisions, it falls to the businesses to take those concept technologies to market,  since HPLI has neither the skill nor the charter to manufacture and sell its innovations. It’s therefore vital for HPLI to identify and adopt (continued ) 39 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 39 29/08/12 5:35 PM O ptimizing the I nnovation F ootprint business sponsors for the projects it pursues. For example, HPLI designed a “script mail device” to allow people to send and receive handwritten e-mails via the telephone without the need for an expensive PC or other script-based input devices. HP’s relevant business unit was able to target this device to institutional buyers. Similarly, when HPLI developed the “shopkeepers’ assistant,” a small, simple device that could track inventory, once the relevant HP business unit was brought into the project, it realized that trying to sell a single device to every shopkeeper would be unprofitable, if not impossible. But targeting large suppliers to India’s 5.5 million independent retail outlets (and thus allowing them to track inventory in the stores they supplied) would be much more feasible. HPLI is now a well-established research center in HP’s network, with its own network of research collaborations around the world. Its research projects focus on the needs of users and consumers in the developing world, but many of its developments have a wider impact, such as simplifying Web access and using technology in education. Any company can set up experiencing sites, but these will be successful only if the company makes and maintains the requisite resource and management commitments. To gain value from experiencing, the company should only make the commitment when the source of the knowledge and the nature of the knowledge it is seeking has some or all the following characteristics: •  Diffuse ownership.  No individual or identifiable group possesses all of the knowledge sought. For example, when Novartis opened a research center in Singapore to focus on tropical diseases (discussed in chapter 3), the k ­ nowledge it needed was highly diffuse. Physicians who treated patients suffering from the diseases, NGOs h ­ eadquartered 40 This document is authorized for use only by Jamaal Turner (whoknows951@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. Ch02.indd 40 29/08/12 5:35 PM T he O ptimize d F ootprint in Singapore that knew about delivering health services in neighboring poor countries, and Singapore’s own local scientific communities that had worked in these areas for decades held the critical knowledge. To learn from all of these different sources and then continuously c­ ombine this new, complementary knowledge with its core ­drug-development knowledge called for Novartis to use an experiencing approach. •  Complex.  The knowledge is tacit, deeply rooted in the local context in a combination of norms, behavior, actions, mental models, or beliefs. It is not easily articulated and is very difficult to transfer to other locations. For example, the knowledge that enabled HP to develop innovative new products for emerging markets was complex: it wasn’t possible by merely reading reports to understand the implications and ramifications of living and working in a country with an underdeveloped and unreliable infrastructure. Staff at HP had to learn by experiencing firsthand the impact and constraints on people’s everyday lives and actions. Only then were they equipped to recognize opportunities to develop solutions. •  Difficult to define.  Before embarking on experiencing, a company will find that the structure of the knowledge is unknown or fuzzy. A greater understanding of what can be learned will be revealed only through the process of learning. For example, HP Labs went to India to learn about the...
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Running head: BUSINESS QUESTIONS

1

Multinational Business Questions
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Institution

BUSINESS QUESTIONS

2
Multinational Business Questions

Question 1: Describe how global innovation is changing for this particular technology.
A particular observable change in the various organizations is the ways that the
particular companies have changed the ways in which the companies undertake their
innovations. One technology adopted by almost all companies is business intelligence. It is a
group of technologies that are used for data analysis. One of the most common terms that are
used in the context of business intelligence is data surfacing. The data technologies have been
developed to assist in the handling of the numerous volumes of data in an organization.
In keeping with the large volumes of data, business innovation may also apply to the
various strategies that based on the in-sights that can be used by the business strategies. This is to
interpret the data and at the same time the businesses to gain a competitive advantage as well as
establish long-term stability to the business about the competitors (Doz, & Wilson, 2012). As
such companies have utilized the technologies to make a wide range of business decisions such
as product positions as well as pricing. With the same regard, the basic operations that and be
conducted by the use of the technologies include asking strategic business decisions such as the
goals and the business directions to take in various scenarios (Doz, & Wilson, 2012).
The business intelligence technologies have also been applied by various organizations to
give a historical account of all the changes that have been encountered in the business and
therefore give a predictive account of the future views in the business operations (Chen, Chiang
& Storey, 2012). Subsequently, various companies have adopted the various business
intelligence functions to perform such roles such as reporting and performing more integrative
approaches. Another application of the technology is the online analytical processing coupled to
data mining as well as the various prescriptive ...


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