INSEAD Innovation Breakfast Series
April 26th, 2015
Professor Yves Doz
The Solvay Chaired Professor of Technological
Innovation
Professor of Strategy and Management (emeritus)
INSEAD
(With Keeley Wilson) Senior Research Fellow
Adapted from ‘’Managing Global Innovation’’,
(HBRP, 2012)
© Yves Doz & Keeley Wilson, 2012
Thanks to Booz Allen,
(and to Nokia, Schneider Electric, Solvay, Timken, and Whirlpool)
“Standing on the shoulders of Giants”
Gunnar Hedlund
Sumantra Ghoshal
CK Prahalad
The nature of innovation is changing
Traditional consumer markets
in developed economies
Specialisation between industries
based on distinct knowledge
Brain-power in US, Japan &
developed Europe
Limited external pressures (local
regulations & standards)
R&D and innovation kept largely
in-house or with trusted local
suppliers
Focus on developing and selling
separate products & services
Huge new consumer markets opening
in emerging economies
Increasing knowledge convergence
across industries
Locus of brain-power shifting to
emerging economies
Growing external pressures
(sustainability concerns, ethics, etc.)
Greater move towards offshore
outsourcing and open innovation
across the value chain
Increasing move towards
conceiving and selling broader
‘solutions’
Forces leading to greater knowledge diffusion & diversity
We Found Many Factors That Were Relevant
But Not Decisive Nor Clearly Sustainable
Advantages:
• Good transport and communications infrastructure
• Ease of moving products and people in and out of
Country
• Technical education
• Reliable legal system and IPR protection
• Pro-business government policies
• Efficient public administration
• Good, responsive support from government agencies
• Attractive lifestyle amenities
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
: Milan, Italy
Lead Customers R&D and
Engineering (Seagate,
Western Digital): US (namely
California, Colorado)
Process Technology R&D
in BICMOS (mixed) and
CMOS (digital);
Manufacturing (Front End):
Grenoble, France
Customers’ Manufacturing
Technology:
Far East
Design of ‘packaging’,
testing and final assembly
(Back End) capability:
Malaysia, Singapore
Engineering and
Design skills in
digital servo
controllers - JV with
SSD: Dublin, Ireland
Joint Design center with
Seagate:Scotts Valley, CA
Coordination and
strategic capability:
Geneva, Switzerland
Engineering and
Design skills in fast
micro-.processors:
Bristol, U.K.
JV for new
microprocessor
development with
Siemens, Germany
Competence on R/W
technology - JV with
EXAR, CA
A Global Knowledge Jigsaw: e.g., ST Microelectronics’ HDD controller chips circa 1993
© Doz, Santos, Williamson, INSEAD, 2004
CAN YOUR ORGANIZATION DO THIS ?
Pioneers of a new globally integrated model
Tata Communications (2012)
– Born in India
– Dispersed organisation with no
headquarters
– Distributed top management
team
– CEO based in Singapore
– Head of voice business in
Montreal
– Head of data business in
London
– Head of services business in
New Jersey
– Head of strategy in Mumbai
– In just over a decade has grown
to carry
– 60% global mobile traffic
– 20% international voice
traffic
– 6% global internet traffic
– Owns 25% global submarine
fibre optic cables
India: Bid/pricing &
knowledge
management centre of
excellence
Montreal: Wholesale
voice and roaming
expertise
Singapore: Data racks
and cloud services
centre
London: Hotspot for
large data hungry
corporates
New Jersey: Subsea
engineering expertise India, South Africa &
Russia: Challenging
emerging market
knowledge
Hong Kong:
Network services
knowledge
Not just R&D and innovation, now the whole company
The Development of the Traditional Multinational Corporation:
Projecting Home-base Knowledge and Competitive Advantage
1. Innovating at home
Home base
Porter,
(Marshall)…
2. Riding the product
lifecycle internationally
• Sequential FDI
• Home base as “lead”
Functional Structure
Hymer, Vernon…
3. Balancing integration and
responsiveness
Global Transnational
Multidomestic
Multifocal
Matrix Structure
Hedlund, Doz & Prahalad, Bartlett & Ghoshal
© Yves Doz, INSEAD, 2008
The Traditional
Multinational
Building Global Advantage
Home-Country
Leadership
-Competence
-Cost
-Competition
-Customers
Learning
From the World
-Accessing
-Integrating
-Leveraging
The New
Metanational
© Yves Doz, INSEAD, 2000
The Metanational Process
Sensing Units
Integrating
Leveraging
Accessing
Magnet
Operations
the world
of leadership
the world
of entrepreneurship
the world
of management
idea
opportunity
problem
© Doz, Santos, Williamson, INSEAD, 2001
A manifesto:
2006 Survey. INSEAD & Booz Allen
(Approx. 170 MNCs, $70B of R&D spending)
Three broad strategic findings:
1.High awareness of importance of optimal
global innovation “footprint” and potential
for metanational innovation
2.High investment in globalizing footprint
(China, India, etc.)
3.Limited returns (at best reverse innovation)
Changing Drivers of R&D Internationalisation
2000s
Legacy
11%
Close
To HQ
7%
Proximity
Production
13%
Market &
Customer
Insight 19%
Skills
Capabilities 22%
Subsidies
incentives 14%
Low
Cost skills 9%
1970s
Legacy 29%
Skills
Capabilities 16%
Proximity to
Production 18%
Close to
HQ 14%
Market
Customer
10%
Subsidies
incentives
9%
1980s, 1990s
Legacy 17%
Skills
Capabilities 16%
Close to
HQ
10%
Proximity
Production 17%
Market &
Customer
Insight 19%
Low
Cost skills
2%
Subsidies
incentives
13%
© Yves Doz & Keeley Wilson, INSEAD, 2006
Source: ‘Innovation: Is Global the Way Forward?’ INSEAD & Booz Allen Hamilton, 2006
“A French mathematician does not think in
the same way as a German, a Russian or a
Japanese one, they all share the same
universal language, but they have different
ways to approach it.”
Cedric Villani.
Fields Medalist, 2010
“All knowledge is complex”
Haridimos Tsoukas
This is a problem!
2006-2010:Fifty focused theoretically sampled
case studies:
• GSK
• Novartis
• Hewlett Packard
• Intel
• General Electric
• Infosys
• Tata Comm
• General Motors
• Samsung Electronics
• Safran/SNECMA
• Safaricom/Vodafone
Xerox
Rio Tinto
Schneider Electric
EADS
Citibank
Disney
Siemens
Telefonica
Cisco
IBM
MultiDimensional Imaging
Tata Consulting
L’Oreal
SEB/Moulinex
Embraer
PSA
and
many others!
Co-located Dispersed
Complex
Knowledge
Explicit
knowledge
How to transcend the knowledge complexity and
dispersion trade-off ?
Knowledge
Complexity
Knowledge
Dispersion
.
.
© Yves Doz, INSEAD. Adapted from Y.Doz & K.Wilson, Managing Global Innovation, HBRP, 2012
What is your innovation footprint actually?
Organizing Global Innovation
PART 1 : Optimizing the Innovation “Footprint” ?
The Optimized Innovation Footprint: Why?
Go to locations
for new knowledge &
experimentation
Discovery
Access & integrate diverse local
knowledge, capabilities & partners to
complete an innovation jigsaw
Complementarity
Lower costs via
increased
productivity
Substitution
Proportions of value
diamond change for
different firms as
nature of innovation
differs across
industries
© Yves Doz, INSEAD. Adapted from Y.Doz & K.Wilson, Managing Global Innovation, HBRP, 2012
The optimised innovation footprint: How?
Complex
Typ
e o
f K
no
wle
dg
e
Explicit
Embedded
Full
Immersion
Distance
Mode of Access
Experiencing
Foraying
Attracting
Brick and mortar investments may not be needed
Optimizing the Innovation Footprint: Where?
(Value-Cost)
D (optimal)
D (Degree of Dispersion = “footprint”)
Cost
Value
© Doz,Santos, Williamson, INSEAD, 2004
Assessing Value and Cost Trade offs
as a Function of Knowledge Dispersion
V
c
€
V-C
D
Geographical Knowledge Dispersion (e.g., high-speed drug lead screening vs. flat panel displays)
•STRONGLY
CO-LOCATED
EXCELLENCE
•DISPERSED
COMPLEMENTARY
SOURCES OF EXCELLENCE A CONTINUUM OF SITUATIONS
V
C
€
V-C
D
The nature and mobility of needed knowledge (e.g., perfumes vs. software code)
Strategic choices (e.g., Intel vs. STMicroelectronics)
Heritage and competence trajectory (e.g., Toyota vs. GM )
Distributed entrepreneurship and serendipity (e.g., HP Singapore, Fuji Xerox, Glaxo-
Japan Tobacco) © Doz,Santos, Williamson, INSEAD, 2004
The value approach at Novartis
Siena, Italy
Not-for-profit
Vaccine
development
Cambridge, MA
Hub accessing
external partners
(MIT, hospitals)
Complementarity
Discovery
Basel, Switzerland
Hub -traditional
CoE drug discovery Singapore
Infectious diseases,
New b-model
La Jolla, CA
Genomics Changshu, China
Manufacturing &
process technology
Shanghai, China
Hepatitis
Horsham, UK
Gastrointestinal
diseases
San Francisco, CA
Discovery
chemistry
Tsukuba, Japan
Technical R&D
Hyderabad, India
Biometrics,
Electronic data
management
East Hanover, NJ
Drug discovery
Fort Worth, TX
Ophthalmology
Getting the best of both:High value, low cost?
So as to minimize ’distance’:
Access to other knowledge
pieces:
• Geographic distance
• Cultural/contextual distance
• Knowledge complexity
Maximize Minimize
Value of…. Cost of….
‘Rooted’
Co-located
Knowledge
Sources
© Yves Doz, INSEAD. Adapted from Y.Doz & K.Wilson, Managing Global Innovation, HBRP, 2012
Development
Manufacturing
3 M Du
Pont
Nomadic vs. Rooted Footprints:
A Tale of Two Products
Printers ‘Cartridges’
(2002) (2002)
SGP
China
Malaysia
Thailand
U.S
U.S
Manufacturing Research,
Product creation
Design for
Manufacturing
U.S
SGP
Puerto
Rico
Ireland
Research,
Product creation
EQT
suppliers
Bayer
© Yves Doz, INSEAD, 2006
GM’s Global Innovation Network (c. 2006)
Australia
USA
Mexico
Brazil
China
Japan (Suzuki,
Isuzu, Fuji)
Italy (FIAT)
United
Kingdom
Germany
Sweden
India
Global
Management
Group Canada
Being There?
Linking and
Leveraging?
© Yves Doz, INSEAD, 2006
The Perils of open/collaborative Innovation:
Pixtech’s Alliances
Distribution
Sumitomo
Research
F.E.D. Alliances
Futaba Motorola
Raytheon
TI
LETI
Research & Development
PixTech
Manufacturing
Unipac
Materials Tech.
Rhone-Poulenc
Nichia
SAES Getters
Capital
US Financial
Market
© Yves Doz, INSEAD, 2006
Emergency Medical
monitoring
Military Vehicle & aircraft
On board communications,
avionics
In-flight entertainment
Car navigation/ GPS mapping
Intelligent Appliances,
domotics
Computer CRTs
Hi-speed video games,
interactive TV
Credibility
Vacuum
technologies
Semiconductor manufacturing process skills
Specialised Application know- how, contracting
& bidding
Low cost mass
manufacturing
Very high quality/ reliability design & manufacturing
CO
MP
ET
EN
CE
AC
CE
SS
AN
D A
CC
UM
UL
AT
ION
MARKET DEVELOPMENT APPLICATION MIGRATION
PixTech’s Strategic Development Plan
Laptop
Mitsubishi,
Micron
Futaba
Motorola
Raython
Texas
Instruments
PixTech
United
Microelectronics
© Yves Doz, INSEAD, 2006
Organizing Global Innovation
PART 1 : Optimizing the Innovation “Footprint” ?
PART 2 : Optimizing Knowledge Mobility ?
The advantages of Co-Location
(“here, together, now”)
random encounters
“down-the-corridor” search
frequent interaction, instant feedback
shared physical context
very high bandwidth communication
effective non-verbal language
efficient mutual adjustment
dealing with “tacitness”
Sharing through Socialization, Melding by Working Together
© Doz,Santos, Williamson, INSEAD, 2001
The advantages of Confluence
(“being in-tune & in-sync”)
shared language
shared stock of knowledge
shared system of meaning / learning style
high probability of unequivocal understanding
effective verbal language
efficient alignment
dealing with “embeddedness”
Ease of dialogue
Sharing by Externalization, Melding by Combination
© Doz,Santos, Williamson, INSEAD, 2001
Knowledge Complexity
“Tacitness” (Only revealed in action)
“Embeddedness” (Context-dependency)
‘Scale’ (Individual vs. Organisational)
‘Speed’ (Time compression)
Knowledge complexity How easy to find? How messy? How sticky?
© Doz,Santos, Williamson, INSEAD, 2001
Not all Knowledge is equally easy to move
“Creep into the Mind, feel the Heart” • Movements/ quality in Japan, environment in Germany
• Cultural assumptions (Fashion, Music, Arts)
• R&D approach
“See through the Eyes” • Vision statements
• Management processes
• Customer Service Manuals
• Consumer Behavior Reports
“Jump into the Shoes” • Practices and skills
• Simple procedural routines
“Take a Picture” • Technical blueprints
• Patents
Explicit Knowledge
Endemic Knowledge
Simple
“See & Study”
Experiential Knowledge
“Experience & Practice”
“Study and Live”
Existential Knowledge
“Feel and Live”
Complex
© Doz,Santos, Williamson, INSEAD, 2001
Endemic Knowledge
Universal Knowledge
The Mobility Challenge
Knowledge Channels
Tacit collective context-dependent knowledge is
hard to:
• Bound
• Move
Y1
Y2
Y3
X
It will be ‘changed’ when brought to a new context
• Re-interpreted
• Made to interface with other knowledge
?
Y2
Y1’
X’
The Knowledge Mobility Paradox :
The most valuable knowledge is the hardest to share and integrate
© Doz & Santos, INSEAD working paper, 1997
Knowledge flows?
Knowledge does not flow ...
…‘Carriers’/ ‘Packages’ of knowledge flow
‘Packages’ of Knowledge
Data, information, ... models, components, tools, machines, ..., people
Knowledge re-creation by the ‘receiver’ De-contextualization (‘sender’) and Re-contextualization (‘receiver’)
Knowledge ‘transfer’ as a dialogue ...
… about contexts and the object of knowledge
Understanding the NIH Syndrome!
Knowledge sharing: Aim before you shoot! • How complex is the piece of knowledge?
• How tacit?
• How context-dependent?
• What is the context of the ‘receiver’?
• How close / familiar? How may knowledge fit in the ‘receiver’s context?
• Can we “de-contextualize” the piece of knowledge?
• What “carrier” to select and prepare?
• Information, Manual ...Tool, Machine, Plant ... Simulator ... People
• How much knowledge on your context to share with the ‘receiver’?
• Then, send the carrier of knowledge.
Building Global Innovation
PART 1 : Optimizing the “Innovation Footprint” ?
PART 2 : Optimizing Knowledge Mobility ?
PART 3 : Optimizing Communication and Co-operation
Without Knowledge Integration,
Access does not create value
And we observed Knowledge Integration faces
significant barriers:
– Inadequate connection mechanisms
– Lack of understanding between different contexts
– Inherent difficulties in transferring & integrating
complex knowledge
– Lack of receptivity, collaboration & openness
Inadequate connection mechanisms?
ICT systems for
sharing codified
knowledge
IT systems to
connect
complex
knowledge
holders
Networks
connecting sites
& teams
• Incompatible IT
systems
• Large database
repositories
Barriers
• Isolated experts
• Reinventing wheel
• Extreme localism –
lack of connections
Solutions
• IT systems: ubiquitous &
integrated into workflow, with
obvious benefits to users
• Leverage rich infrastructure to
connect dispersed groups/people
e.g., communities of practice
• Use as problem solving tool
(obvious benefits to users)
• Dense webs of cross-site
reporting & communication
• Relays between sites
Sharing complex knowledge?
•Difficult to transfer & integrate as rooted and diffuse (e.g., Disney
Europe) and home centric projection
•NUH – “Not Understood Here”
•Critical role of multicultural managers:
– Multicultural people with experience of living or working in different
countries, often since early childhood
– Deep appreciation for and understanding of the subtleties of
different social norms, behaviour and beliefs
– They act as bridges between various contexts
•Survey showed most companies recognised people with multi-
cultural experience were better at interpreting, absorbing & using
new knowledge from very different places
•However, very few companies are actively trying to build a cadre of
multicultural managers through career structures and rewards
4
9
Teams in Multinational Organizations
Building Global Innovation
PART 1 : Optimizing the Innovation “Footprint” ?
PART 2 : Optimizing Knowledge Mobility ?
PART 3 : Optimizing Communication and Co-operation
PART 4 : Optimizing Absorptive Capacity
Implications for strategy and policy of:
• Internationalising companies
• National and Regional development
authorities
• Subsidiaries of multinational companies
Implications for Internationalising companies
What resources do I bring? How well can I trade
them for Knowledge?
How can I extract valuable knowledge from
existing relationships (distributors, customers,
partners, etc…)?
What critical elements of value adding activities
do I need to master to remain essential to value
creation?
How do I make myself a partner of choice for
MNCs?
Implications for strategy and policy of:
• Internationalising companies
• States and Regional Development Authorities
• Subsidiaries of multinational companies
Implications for national and regional
development:
• Competing on cost only is a self-defeating proposition unless one is willing to stay poor.
• Raw materials’ abundance buys time, of course…
• But over the medium term, knowledge hubs are needed…to attract higher value added MNC activities…and allow the international development of national firms…
Singapore has logistics, commercialisation, health care…
India has software, car components…
• Integrity (vs. patchy and spread out too thin or too narrow)
• Collective Learning and Dynamic Capability Building (shadow of a shared local future).
• Active and purposive linking to other knowledge cores
• Knowledge cores are also sociological entities which create a shared mindset and path dependency, hence the risk of inertia and the innovative value of connecting clusters.
• Co-location advantage and Linked advantage discrimination • vs. Fully self-sufficient local clusters and dispersed networks
• Smart discrimination between co-location and linkage as a function of knowledge network structure of industry/product.
What makes for a robust “knowledge core”?
What needs or not be co-located:
The Semiconductor Knowledge Network
Process
Design
Circuit
Design
Product
design
Modelling
Wafer fab
Assembly
Test
Packaging
Design
Design
Tools
Packaging
Devt
Equipment
Maintenance
Application
Engrg
Serving the
Customer
Modelling
Software
CAD
Photomask
CAM
Fab Mfg
Tech Devt
Mat Devt
Mfg
Planning
Equipment
Design
© Doz,Santos, Williamson, INSEAD, Economic Development Board of Singapore, 2012
Implications for strategy and policy of:
• Internationalising companies
• States and Regional Development Authorities
• Subsidiaries of Multinational Companies
Be Entrepreneurial, don’t wait!
• What unique resources and skills can I contribute to the
company, beyond what I need to operate successfully
here?
• How can I “root” my activities in local knowledge and
capabilities? (Avoiding the “long thin arm” syndrome)?
• How do I gain “voice” in corporate choices? How do I
effectively represent and communicate what my country
has to offer?
• How do I grow the contribution of my subsidiary to global
knowledge creation over time?
“Think Local, Act Global”
One last observation: