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Chapter 10

Global Innovation

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Global innovation

Forces at work:

Increasing costs Shortening product life cycles Increasing importance of TIME-to-MARKET for competitive advantages Increasing importance of customers participation in technology development Increasing importance of networking, partnerships and alliances

in technology development Increasing importance of multi-disciplinary integrative technologies Emergence of new centres of technological excellence: India, China

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The world of R and D

Source: Barry Jarulesky and Kevin Dehoff, Beyond Borders: The Global Innovation 1000, Strategy and Business, Booz and Co, 2008

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R&D capabilities

Country

2000 2005/2009 2000 2005/2009 2000 2009 2000 2009India 0.77% 0.80%** 112971 149892* 1569 10143 8503 28940**China 0.90% 1.44%*** 692698 1411000*** 40837 348295 51906 314513Japan 3.04% 3.44%*** 648411 712062*** 127376 99210 419543 348592USA 2.74% 2.71%*** 1264372 1392000** 196698 141519 295895 456154European Union 1.80% 1.85%*** 1102045 1459151*** 385186 515167 165513 130278

R and D Expenditures Number of Researchers High Technology Exports Patents Applications(% of GDP) ( million US$)

Source: World Bank World Development Indicators (2011).For the period 2007/2009 data with * are for 2005, ** for 2006, ***for 2007

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Increasing Importance of Emerging World

Source: Unctad, 2005

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Globalisation of R and D and Performances

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Source: Deloitte: Innovation in Emerging Markets

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Source: Deloitte: Innovation in Emerging Markets

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Managing global innovation

• Knowledge creation

• Knowledge sharing / transfer

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Internationalisation of Research And Developmentin multinational corporations

CentralLab

CentralLab

CentralLab Central

Lab

Knowlege Creation

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• “Critical Mass Requirements”: 50 to 100 minimum size for a multi-disciplinary laboratory

• Linkages with sources of scientific knowledge: Proximity to universities

• Face to face communications: Personal contacts

• Pooled R & D more efficient than sequential

• Growing need for closer interaction with customers

Some of The Well Established TraditionalR & D Management Principles

Knowledge creation

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International R & D Networks

ADVANTAGES DISADVANTAGES• Close to markets• Close to production• Close to raw materials• Close to universities• Small size• Flexibility• Integrating acquisitions

• Loss of critical mass• Difficult to communicate• Risk of duplications• Difficult to integrate

Knowlege Creation

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Research laboratoriesIn charge of long projects, dealing with new technologies or scientific discoveries that are not necessarily related to a particular product. These laboratories are global by nature, and most often, but not always, are located near the corporate centre.

Development laboratories In charge of projects which has the objective to lead to a product or process innovation. Supporting/adaptive unitsProvide product or process adaptation according to local contexts.

Scanning units Monitor technological development and contribute to the knowledge platform of the company.

A Typology of Research Units

Knowlege Creation

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Knowledge dispersion profile for ST in Hard Disk Drive electronics

Engineering and Design Capability / Close understanding of customer application / Design Center: S. Jose CA

Engineering and Design Capability / Close understanding of customer application / Design Center: S. Jose CA

Process technology R&D in Bipolar and BCD; Design competence on analog and mixed chips: Castelletto and Agrate, (near Milano), Italy

Process technology R&D in Bipolar and BCD; Design competence on analog and mixed chips: Castelletto and Agrate, (near Milano), Italy

Process technology R&D in BICMOS (mixed) and CMOS (digital); Manufacturing (Front End): Grenoble, France

Process technology R&D in BICMOS (mixed) and CMOS (digital); Manufacturing (Front End): Grenoble, France

Customers’ manufacturing:Singapore, and other Far East loc

Design of ‘packaging’, testing and final assembly (Back End) capability: Malaysia, Singapore

Design of ‘packaging’, testing and final assembly (Back End) capability: Malaysia, Singapore

Engineering and design skills in digital servo controllers: (JV) SSD - Dublin, Ir.

Engineering and design skills in digital servo controllers: (JV) SSD - Dublin, Ir.

Joint design center with Seagate:Scotts Valley, CA

Joint design center with Seagate:Scotts Valley, CA

Coordination and strategic capability: Geneva, Switzerland

Coordination and strategic capability: Geneva, Switzerland

Engineering and design skills in fast microprocessors: Bristol, U.K.

Engineering and design skills in fast microprocessors: Bristol, U.K.

Microprocessor development:(JV) Siemens, Germany

Microprocessor development:(JV) Siemens, Germany

Competence on R/W technology:(JV) EXAR, CA

Competence on R/W technology:(JV) EXAR, CA

Source: Doz, Santos, Williamson

Lead Customers R&D and Engineering: Seagate, Western Digital (California,Colorado, ...)

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“Creep into the Mind” (Tacit and Context Dependent)• Learning by doing and discovering• JIT and TQC in Japan, • Cultural assumptions (Fashion, Music, Arts)• Joint teams approach

“See through the Eyes” (Codified and Context Dependent)• Learning by seeing• Long term secondments• Apprenticeship

“Jump into the Shoes”( Tacit and General)• Learning by studying• Practices and skills• Cases studies• Short term secondments

“Take a Picture” ( Codified and General)• Learning by reading• Technical blueprints• Patents

Explicit Knowledge

Endemic Knowledge

Simple “See & Study”

Experiential Knowledge

“Experience & Practice”

“Study and Live”

Existential Knowledge

“Feel and Live”Complex

Knowledge Complexity is a combination of Tacitness and Embeddedness (Context-Dependant)

Source J. Santos

Knowlege Creation

Source: Santos

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Location

Diversity ofKnowledge

Sources

Low

High

Same Distant

Virtual co-locationKnowledge creation, sharing in several

places but with expatriate managers coming from the same “intellectual” mold.

Classic role of expatriate managers

C & CCo-Location and Congruent

Classic Co-location Teams.Knowledge creation, sharingin one place and possibly

transferred later.

“Centre of Excellences”

D & CDispersion and Congruent

C & DCo-Location and Diversity

The tower of BabelKnowledge creation and sharing

in one place with the participation of managers detached from dispersed business units. The secondment practice.

D & DDispersion and Diversity

The virtual teamKnowledge creation, sharing in several placeswith the ability for

the company to create the conditions for effective sharing of tacit knowledge.

Source: J Santos

The Diaspora Team

Tapping on the Global Diversity of Competencies Knowlege Creation

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COMPLEXITY of TECHNOLOGICAL KNOWLEDGE

COMPLEXITY of MARKET

KNOWLEDGE

HIGH

HIGH

LOW

LOW

Move informationabout the technology to where the market

knowledge is

Exchange information( Digital etc..)

Move informationabout the market

to where the technological knowledge is

Move informationby rotating people

and bytemporaryco-location

Knowledge Transfer

Source: Doz

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• Causal Ambiguity makes it difficult to have a precise modelling of the cause and effects relationships. Causal ambiguity exists when tacit knowledge is at the core of the functioning of the practice.

• Lack of Absorbent Capacity by the recipient unit who is not capable of interpreting the knowledge transfer and to apply it. Here again, tacitness may constitute a barrier to knowledge transfer when the recipient unit has not the inside resources to “crack” the implicit, non-verbal elements of the practices.

• Arduous Relationships that exist when tacit knowledge requires multiple interactions between individuals, particularly when geographical and cultural distance are present.

Source : G. Szulanski

Sources of "Stickiness" in Knowledge Transfer

Knowlege Transfer

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Business units and team leaders trained and experienced in D& D practices: Open, multicultural alert, intuitive communicators Socialisation before team work implying “non productive” social interfaces

Transitional encounters (conferences, seminar, workshops..) with loose agenda to allow for tacit knowledge to be shared.

Make teams aware of contexts through visits, education

Strong, accessible, open, user-friendly knowledge management platforms (Electronic libraries, case studies, chat rooms,..)

Deadlines for project completion

Yellow pages (who is who for what?)

Facilitating Knowledge Transfer in Global Firms

Source : G. Szulanski

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Organisational architecture for a global R&D network

Structure

Systems

People

Values

• Small central staff• Specialised local centres• Profit centres? Optimal size

(20-300)

• Planning involving operations• Intense communciation• Systematic diffusion• Documentation• Information system network• Meetings, conferencing• “Free budget”

• Role of project managers

• Temporary assignments• Training• Language policy• Intense travelling

• Learning culture• Shared values• Network culture

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BASIC

APPLIED

DEVELOPMENT

Main central research laboratory

Divisional R & D units

Specialised R & D units(Closely integrated in thewhole corporate researchsystem, e.g. toxicologyunit)

Technical developmentsupportlaboratory

Corporate headquarters

Divisional headquarters

R & D unitR & D units attached to manufacturing plantsLocation of R & D in a large corporation: A model

Organisational architecture for a global R&D network

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Do you know those brands????

Intellectual Property Infringement

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Intellectual Property Infringement and examplePatents Reverse engineering

Straight copyEx: Drugs, chemicals, mechanical and electronics products, auto parts

Trademarks Straight copyImitation (with minor change)Ex: all branded products

Copyrights Rights of creatorsEx: Texts, software, video, movies training packages

Industrial Design Original concept and designEx: Fashion, auto parts, electronics, appliances

Trade Secrets Employees poaching, espionage for:List of clients, marketing and strategic plans, financial information, industrial and management processes

Genetic codes Copy , employees poaching, Ex: Bio engineering

Intellectual Property Infringement

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Types of international product forgeryPRODUCT

TRADEMARK

PIRACY

REVERSE ENGINEERING

IMITATION

COUNTERFEITING

Don’t change product Modify product

Don’t changetrademark

Modifytrademark

Source: Jack Kaikati

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European Statistics on Counterfeit Goods Seized by Customs

Source: European Commission Report, 2010

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According to the International Federation of Pharmaceutical Manufacturers Associations (IFPMA), 7% of all drugs being sold around the world are already counterfeits.

The value of this trade is more than 50 billion DEM.

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Software Piracy

Source: BSA ,2002, Trends in Software Piracy

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• Restrict disclosure of IP to selected employees• Require key employees to sign individual secrecy agreements• Establish a strict catalogue of level of confidentiality • Keep IP in secure location• Educate employees on the rationale and the consequences of

infringement• Regular interviews of employees • Prepare a handbook giving the list of items to be protected what to do

in case of leakage suspicion; give recommendation about best practices.

IPR Protection Approaches

Employees

• Non disclosure agreements• Establish rules about what can be disclosed and what cannot be• Education about benefits/risks in IP protection/enfrigment

• Be specific in the Joint Venture Contact• Use “black box “ approach when technically feasible• Screen partners' employees

• Formal agreements not to use/ resale copies/ pirated products

• Education about benefits/risks in IP protection/enfringment

• Lobby governments• Use diplomatic channels to support actions• Engage in legal action as soon as possible, even if the legal context is

unfavourable

Suppliers

Distributors/ Users

Joint Venture Partners

Legal

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