Are you winning the global innovation game
Being successful at innovation today means changing the way you think
about where critical knowledge comes from and how to use it.
How successfully firms innovate has
long been a source of competitive advantage and as the world changes, so do
principles about how best to organise for innovation. We have seen the customer
put at the heart of the process with the concept of user-driven innovation and
more recently the idea of achieving cost reduction breakthroughs by innovating
in emerging economies was championed by the proponents of reverse (and of
frugal) innovation. But these approaches to innovation fail to address the
biggest challenge facing companies today: The capabilities, market and
technological knowledge needed for innovation are increasingly dispersed around
the world.
In my new book, “Managing Global Innovation: Frameworks for Integrating
Capabilities Around the World” (Harvard Business Press, 2012), written
with INSEAD senior researcher Keeley Wilson, we tackle that challenge
head-on. Based on research at more than 50 global
companies and a global survey in collaboration with Booz and Company, we
argue that the only sustainable form of innovation is one in which distributed
knowledge contributions from a variety of places are brought together in
innovations.
This is a new model of
innovation which takes new ideas and new technologies and new knowledge of
markets from different locations, often at the periphery of an organisation,
bringing them together and integrating and aggregating these ideas,
technologies and market insight into innovative offerings, be it products, a
new business model, a new growth platform or a specific solution for customers.
Traditionally, a company’s country
of origin was the main locus of its innovation activities. Even when companies
have adopted reverse innovation practices, the innovation process has remained
co-located - albeit away from the home base, typically in a lead market. This
approach to innovation that is so strongly rooted in the ease of co-location is
no longer sufficient. Instead, we argue that companies need to
embrace the opportunity and the challenge to learn from the world: to seek out
new perspectives, new technologies, new inputs and new customer requirements.
It’s all too easy for a country with
a colonial tradition like Britain and France, for instance, not to be fully
aware of the benefits that can be gained from accessing sources of knowledge in
Asia because of the legacy relationship. For innovation we are now talking
about a network of equals: differentiated contributors of equal importance, no
dominant location.
The Global Innovation Challenge
Even for companies from countries
without such one-sided legacy relationships, the journey of transformation from
co-located to global innovation is not without its challenges. Most companies
tend to innovate at home and then farm out routine tasks such as testing,
verification and adaptation for local requirements to their international
networks. Part of the reason for this home-centric approach lies in the
intrinsic difficulty of actually sharing knowledge – particularly complex
knowledge that is context-dependent, tacit and collectively held. To illustrate
this challenge consider the example of Cisco’s “cities of the future “
programme. Initially the project made little headway because the female
engineers in Mountain View (California) didn’t understand how Saudi women were
using social media and the Internet as a tool of freedom in a very tightly
controlled social environment. The complexity was in understanding both the
similarities in human nature and the huge cultural and societal differences
between the solution developers In California and the solution users in Saudi
Arabia.
Some companies have indeed been able
to simplify and codify complex knowledge and so move down the curve towards a
more dispersed model of innovation. Infosys for example structured and codified
much of its system integration and facility management knowledge to develop a
global delivery model serving a multinational client base. Simplifying
knowledge isn’t an option available to every company and even those who are
able to do this still find themselves trapped by the limitation of the
knowledge complexity trade-off curve.
The real value of global innovation
comes from transcending the lower curve. From being able to access and
integrate dispersed complex knowledge from multiple locations in innovations.
Companies will only be able to flip the curve by developing new strategies and
building new capabilities to optimise three key areas: the innovation
footprint, communication and collaboration.
The Innovation Footprint
Optimising the innovation footprint
means keeping things simple, minimising the challenge. Companies obviously need
to access the best knowledge from around the world but this doesn’t equate with
having vast innovation networks. Aim to keep the number of places you draw
from in your network for a particular innovation to as many as you need but as
few as you can. The management and co-ordination costs of a global innovation
network increase with every additional site and there comes a point at which
these costs outweigh the potential value being created.
The Swiss pharmaceutical company
Novartis provides a good example of an optimised innovation footprint. Their
innovation network includes a large institute for biomedical research in
Cambridge, Massachusetts with strong links to MIT and nearby research
hospitals, an institute for tropical diseases in Singapore (where they also
work with NGOs), a centre in California focusing on genomics technology and a
lab in China specialising in manufacturing processes. “What they’ve done is
look at where critical knowledge is in the world and then built their research
and development network around accessing that critical knowledge as opposed to
thinking, ‘we’re sitting in Basel, we’ll develop drugs, and then we’ll send
them out to the rest of the world’,” explains Wilson.
Communication and Collaboration
Global innovation requires an
investment in communication to support collaboration. The type of investment
the authors talk about goes well beyond buying ICTs (information communication
technologies) to creating a range of communication channels suitable for each
type of knowledge being shared. This includes capturing codified knowledge in
workflow systems, establishing communities of practice to connect knowledge
holders for problem solving, adopting common development languages across
different contexts and allowing for periods of temporary co-location to build
trust in dispersed teams.
Companies should use the same
criteria when thinking about communication and collaboration between their own
sites as they use when working in strategic alliances with external partners.
Time needs to be spent planning internal collaboration, the strategic rationale
for the collaboration has to be clearly articulated to everyone involved and
senior management has to play an active role in driving the collaboration,
resolving potential conflicts and being responsible for quick decision making.
Finding the Right People
But all the best-laid plans will go
nowhere without the right people in the right places: bi-cultural managers with
a deep understanding of more than one culture can play a vital role in global
innovation. These people are able to understand complex knowledge in one
location and translate how it might be used in another. They are the bridges
between different contexts, cultures and value systems.
To understand the role bi-cultural
managers play, Wilson cites the example of HP Labs in Bangalore. Although
established to develop radically different products and solutions to meet the
needs of developing economies, the lab had to work with HP’s business units
around the world to co-develop innovations. One of the directors of the lab was
an Indian lady based at HP’s headquarters in Palo Alto California. An American
HP veteran, with a lot of international experience, was based in the lab in
Bangalore as was an Indian director who had extensive contacts and a very
strong reputation in the Indian administration and science community. Between
them, these three provided the bridges between the different contexts of HP’s
home base and India, HP’s global business groups and the Indian lab and the
local Indian environment and HP.
The importance of these bi-cultural
managers isn’t in doubt. “Our survey, found a resounding consensus that
companies found bi-cultural people were very much better at working across
cultures, absorbing new knowledge and integrating knowledge from different
places.” Wilson explains. “But despite this, very few companies were doing
anything to build a cadre of such people.” This isn't something that can
be taught in a classroom. It has to be practiced. For our MBAs and executives
in seminars, the very broad mix of nationalities and cultures, and the emphasis
on teamwork so typical of INSEAD offer a learning context where working across
cultures is practiced, not just talked about.
It’s clear that after decades of
co-location companies will have to learn new capabilities to compete in an era
of global innovation. It’s also clear, that failing to meet this challenge
isn’t really an option if companies wish to remain competitive.
Yves Doz is Emeritus Professor
of Strategic Management and The Solvay Chaired Professor of Technological
Innovation at INSEAD.
http://knowledge.insead.edu/innovation/are-you-winning-the-global-innovation-game-or-are-you-being-left-behind-2327?utm_source=INSEAD%20Knowledge&utm_campaign=b1a99208e0-INSEAD_Knowledge_November_Newsletter11_8_2012&utm_medium=email
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