Yves Doz, Professor of Strategic Management and Solvay Chaired Professor of Technological Innovation, INSEAD. Professor Doz started working on innovation and multinationals during his doctoral studies at the Harvard Business School, in the 1970s. Together with C.K. Prahalad, a close colleague and friend, he is at the origin of the integration responsiveness (I/R) grid, which became a core framework in international management. Their book, The Multinational Mission, provided a guide to corporate executives in structuring and leading global operations.
As Director of the Management of Technology and Innovation research initiative at INSEAD in the 1990s, Doz focused on various aspects of innovation, in particular collaborative innovation and technology alliances. His interest in global innovation was spurred by a focus on global competitiveness. A decade ago, together with two INSEAD colleagues he published From Global to Metanational, a manifesto for globally distributed innovation. The new book, Managing Global Innovation is a “How to “ examination of further development of these ideas. Over the years his work won numerous academic awards, such as a Distinguished Scholar award from the Academy of Management and an Honorary Doctorate from Aalto University in Finland.
Keeley Wilson is a Senior Research Fellow at INSEAD. She began her career as a management consultant in London for a large US practice before moving to Seoul in the mid 1990s to work for a Korean government-controlled policy bank. On returning to Europe at the end of the decade, she joined INSEAD’s EuroAsia as a senior researcher, focusing on the growth strategies of Asian firms. She then returned to London and joined Gary Hamel’s small research team at the Strategos Institute where she developed and helped implement tools and processes to support business model migration, manage strategic alliances and build a wide range of global innovation capabilities.
She began research related to global innovation with Yves Doz at INSEAD ten years ago and has undertaken numerous research projects looking at innovation strategies across a range of industrial sectors, the challenges of managing global projects, establishing and integrating innovation centres in China and India, optimising innovation footprints and innovation regime change.
* * *
Morris: Before discussing Managing Global Innovation, a few general questions. First, the greatest impact on your professional development? How so?
Doz: As a student at Harvard in the mid 1970s I made strong and lasting professional and personal friendships with Joe Bower and C.K. Prahalad. The three of us worked closely together researching and developing ideas around the management of MNCs. It was such a stimulating and exciting time and had a huge impact in shaping the direction of my research interests ever since.
Wilson: It would be impossible to single out one, or even a handful of events. I feel extremely privileged to see inside and learn about so many different companies in different industries in so many different parts of the world. Each and every one has an impact on my professional development as each offers new perspectives and insights.
Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?
Doz: In my own research, teaching and consulting experience I have to combine lessons from the field in a relatively inductive and open fashion with theoretical frameworks and conceptual arguments. The skills to deal with theory and conceptualization are a direct result of my formal education – reading, learning and conversations with other PhD students.
Wilson: I began my education studying music and then as a post grad moved to computing science. These subjects aren’t as worlds apart as you might think. In both you develop extremely strong analytical skills and a sense of logic as well creative ability. I use these skills in my work every day.
Morris: From which non-business book have you learned the most valuable lessons about business? Please explain.
Wilson: For me, many of the things you learn about life in general are usually applicable to business. And one of the books that have made the most profound impression in recent years is Rohinton Mistry’s A Fine Balance. It’s set in India during the mid-1970s and through the lives of its four main characters, describes the impact and turmoil of coping with and adapting to huge societal change. It’s a story of the triumph of determination and ingenuity over adversity and the importance of friendship, working together and trust. It also describes life in an India which is a million miles away from the growing economic giant we are more used to seeing today. I think for anyone doing business in or with India, this book provides an invaluable recent historical context and insight into the lives of many ordinary Indians.
Doz: I first read The Power Broker, Robert Caro’s biography of Robert Moses as a student in the US. It’s title says it all! It’s not only a wonderful biography but also a fascinating insight into the power and politics in public administration in relation to urban development in New York City. It contains some valuable lessons about how to make things happen in complex contexts with multiple stakeholders and interest groups.
Morris: In Tom Davenport’s latest book, Judgment Calls, he and co-author Brooke Manville offer “an antidote for the Great Man theory of decision making and organizational performance”: organizational judgment. That is, “the collective capacity to make good calls and wise moves when the need for them exceeds the scope of any single leader’s direct control.” What do you think?
Doz: This captures one of the major challenges for modern large-scale organizations – it’s vital to find ways to mobilize the collective brainpower of people in these organizations. To think the opposite is naive – even if the image of the ‘great man leader’ exists the reality doesn’t.
Morris: In your opinion, why do so many C-level executives seem to have such a difficult time delegating work to others?
Doz: We know that there is a difficult transition in management from being the knowledgeable expert and the problem solver to becoming a process architect. The importance of good process in organizations is undervalued and people seldom get credited for putting good processes in place. It makes sense therefore that C-level executives don’t want to delegate expertise and problem solving tasks which help them to “shine” and attract widespread recognition.
Morris: The greatest leaders throughout history (with rare exception) were great storytellers. What do you make of that?
Wilson: It makes perfect sense. To be a great leader you need to get people to understand and buy into your vision. Most people have difficulty processing complex and abstract ideas – they can be difficult to relate to and tricky to remember. In contrast, good story telling weaves those ideas into a context that people can relate to. It fires the imagination, enables orthodoxies and beliefs to be questioned and lessons to be learnt. Stories can be easily adapted and passed on so a shared understanding emerges across different cultures and locations.
It’s no coincidence that the case study is such a powerful teaching tool. By embedding the challenges and solutions in a story about a particular company or industry, the lessons are much more easily absorbed than if they came from a theoretical textbook. Students can transpose themselves into that situation and ask, “What would I do and why?” And they can see the repercussions of the real-life decisions that were made. Throughout our book, we have included story telling in the form of 18 short case studies that illustrate and bring our arguments to life by describing both the things some companies have done really well and also the mistakes some have made. If readers don’t remember the detail of our arguments, I’m sure they will recall the stories in each of the cases!
Morris: Looking ahead (let’s say) 3-5 years, what do you think will be the greatest challenge that CEOs will face? Any Advice?
Wilson: We start our book with a powerful quote from Sam Palmisano, the recently retired CEO of IBM in which he argues that corporate models that we know and have known are not suitable for meeting the challenges of global integration and innovation. We used this quote because we agree that this is one of the biggest challenges facing companies today: Building a networked (globally integrated) organization in which corporate culture rather than control measures encourage individual contributions and global collaboration. And how to achieve this is what our book is about.
Morris: Now please shift your attention to Managing Global Innovation. When and why did you decide to write it?
Doz: We have to go back some time to explore the origins of Managing Global Innovation. Back in 2001, I published a book with two colleagues called From Global to Metanational which was basically a manifesto for a new form of highly dispersed innovation. The feedback to this book was that while the arguments were compelling, i.e. the ‘what’ part, it didn’t explain how companies could achieve this. And to be honest, at that point, we didn’t understand the breadth of the challenge – what structures, mechanisms and processes were needed for dispersed innovation.
The following year Keeley joined us to organize a research symposium for senior executives to look at the challenges to dispersed innovation their firms faced. This event exposed an enormous array of different challenges and we used this to direct our early field research. The more research we conducted, the more issues we unearthed and the more we were able to focus on the critical challenges. A couple of years later, we joined forces with the consulting firm, Booz and Company in a joint research program to study innovation footprints, while our other research was ongoing.
Throughout our research we brought together executives from global companies in various symposia to discuss and test our ideas and findings and focus our research agenda – this external critique and validation process meant we knew when the time came to draw together all of our research streams and write the book.
Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?
Wilson: Coming out of the initial 2002 symposium, we had an idea to write a book of case studies based on the experiences of the companies that had attended. But we quickly realized once the initial phase of research was underway that the problem facing companies was far more pressing and was so critical to their competitive survival that nothing short of an integrative framework to guide companies through the strategies and processes needed to build a global innovation capability would do.
Morris: What are the nature and extent of “the innovation challenge”?
Wilson: That’s a big question but let me try and distill my answer to a couple of key points. First, innovations are created by combining different knowledge – technologies, market, processes and competencies. A confluence of changes (including the emergence of new markets, demographic shifts, increasing technological complexity and industry convergence) are resulting in this knowledge being more dispersed around the world. And so to innovate, companies now need to find, access and integrate that knowledge.
Second, most companies can manage dispersed innovation when the knowledge they need is codified but when innovations call for more complex knowledge, firms have traditionally relied on co-location. They now need to learn how to innovate globally with complex knowledge and this throws up a whole set of challenges that require new strategies, approaches, tools, systems and capabilities. A good example of the impact of knowledge dispersion on innovation can be seen in GE’s very low cost portable medical devices. The market need and algorithms came from India, telematics skills from Norway, user interface from France, manufacturing process knowledge from China and systems integration from the US. No one country alone had the knowledge needed to successfully deliver these innovative products.
Morris: You note that costs of “footprint dispersion” are increasing but that the benefits are not. Why not?
Doz: Let’s start with looking at the increased costs. Data show that for a variety of reasons including M&A activity, legacy and growth into emerging markets, the size of most firms’ innovation footprints or networks is increasing. Obviously, the bigger the network, the greater the management, co-ordination and running costs.
I recall a conversation with the CEO of large electrical equipment MNC in which he began by asking me to guess how many innovation centres his firm had around the world. My guess was nowhere near the 160 that turned out to be the answer. Not surprisingly this CEO recognized that his firm’s ability to innovate was being hampered by the huge size of their footprint which brought few benefits as it was inefficient, there was duplication across sites and competition between them. In this and most other cases, the costs of the expanded footprint outweigh the benefits.
Morris: What are the defining characteristics of the “optimized footprint”?
Wilson: The optimized footprint has to be flexible and agile and this means breaking free of the orthodoxy of innovation centres being purely about having a long-term physical presence. As new sources of knowledge emerge in different places around the world, accessing that knowledge is all but impossible if your innovation footprint is physical and doesn’t include a site in the ‘hot new location’. Instead, you need to free up resources for greater flexibility to access new critical knowledge no matter where and when it surfaces. This means adopting a portfolio of three different approaches, experiencing, foraying and attracting, to access different types of knowledge.
First, when the knowledge is complex and locally rooted and so difficult to move without losing its value or meaning, then the familiar ‘bricks and mortar’ innovation centre will be needed – a physical presence that allows you to ‘experience’ the knowledge through being there. Second, if you require technical or process knowledge that is embedded in a specific location to adapt and replicate elsewhere, then instead of a costly innovation centre, an approach we call ‘foraying’ enables you to access that knowledge by sending groups of people on exploratory missions to find the knowledge and translate it for use elsewhere. Finally, when the knowledge is codified and usually part of a sub-component, then you can stay at home and ‘attract’ that knowledge to come to you either via posting requests for the knowledge with open source intermediary companies or directly on your own website.
Morris: You suggest that an innovation footprint delivers value at three levels. Please explain.
Doz: If we step back a bit, one of things which we found as an impediment to footprint optimization was that few companies have really assessed the individual sites in their innovation network in terms of the value they contribute to the overall innovation effort. Not only does this mean that some sites can survive for years without making a valuable contribution, but that the value others are making may not be recognized. Understanding what the nature of a site’s contribution is supposed to be will help manage and monitor that site as part of an innovation network
If you are going to approach innovation in a global and integrated way, the role of each site and what is expected of it, have to be clear. We identified three different types of value a site can create. First is ‘substitution’ – this is where the costs of innovation can be lowered through increased productivity. Conducting clinical trials in Singapore is an example of this. Even though wages are high, favorable regulations, good hospitals and a world class scientific research base increase the productivity of this type of research.
We called the second type of value “complementarity.” Here a site contributes a unique and complementary to the innovation process. An example of this can been seen in Novartis’ innovation network where a major lab in Cambridge MA has access to MIT and the Boston are research hospitals, a centre in Singapore specializes in tropical diseases, La Jolla CA contributes genomics knowledge and so on.
Finally, a small number of sites should contribute ‘discovery value’ that leads to radical innovations. This involves looking for new opportunities and experimenting with different ideas, approaches and partners. .
Morris: You identify four major barriers to knowledge integration. One of the least familiar is transferring and integrating complex knowledge. Can you explain how best to avoid or overcome this.
Wilson: I think the best way to explain this is to look at an example of complex knowledge. This is the sort of knowledge based on norms, values and behavior. So when HP Labs opened a new site in India to create products and services aimed at developing markets, the local knowledge it sought about customer needs and the challenges posed by living and working in a huge, largely rural and poor country was rooted and complex. It was impossible for HP staff in the US to grasp this knowledge because to understand it, you had to experience it.
You might think the obvious solution to overcoming this problem of transferring complex knowledge would be to simply send some people to visit the location of the new knowledge. But this isn’t enough. You need ‘bi-cultural’ people to do the translation of knowledge from one context to another – i.e. they have to have a deep understanding of more than one culture. HP Labs achieved this by having a director of the Indian lab based in HP’s headquarters in California who was Indian. Then in India, there was an American senior manager who had spent a long time living in Asia and an Indian director who had a great deal of international experience. These people were the bridges between the new local complex knowledge and the rest of HP. They understood both contexts and could therefore translate the knowledge they acquired in India into opportunities that made sense throughout HP.
Morris: Why do so many globally dispersed projects fail?
Doz: That’s a very good and a very big question! The simple answer is that companies tend not to recognize that the way global projects have to be organized and run is fundamentally different from how co-located projects are managed. Everything is different in global projects from the need for organizational stability, a shared strategic context driving the project, the building of a competence in dispersed working, greater focus on planning the project to the need for trust between sites. Yet, most firms merely transfer their co-located best practice to a global arena. This will inevitably result in problems, delays and cost overruns.
Getting global innovation projects right is really important as they create competitive advantage two ways. When the knowledge for an innovation is from different sites around the world, it’s very much more difficult for competitors to copy these innovation – they’d have to access the same knowledge from the same places. Secondly, costs and time to market can be significantly reduced leading to first mover advantage through parallel development in global projects.
Morris: For those who have not as yet read Managing Global Innovation, what are the three phases of global projects and which seems to be the most difficult to complete? Why?
Wilson: Over the course of our research looking at successful and failed global projects, we identified three distinct phases of a project lifecycle. First is ‘identification’ which is about engaging with multiple sites in your innovation network to define opportunities or product and service concepts. Following this is the ‘definition’ phase. Here, the details of the project are set out including project goals, reporting structures, communication and collaboration channels, product architecture, allocation of work packages, budgets and so on. In the final ‘delivery’ phase focus is on running the project. This requires strong project management from a lead site, high levels of communication, visible and engaged senior management involvement and transparent decision-making.
All three phases are potentially difficult for companies to get right if they try and make short-cuts. For example, in the identification phase, there can be a temptation to skip the collaborative aspects and merely define the innovation from the home base. In the delivery phase communication and collaboration can be very difficult for very different sites which are used to working alone. Perhaps the biggest danger comes from truncating the definition phase. Because of the complexity of having development split across different locations, time zones and culture, every aspect of the project and innovation (such as interfaces and interdependencies between modules) need to specified up front. Failing to do this can result in small problems becoming major barriers to the project’s success.
The importance of spending time on getting the definition right can be seen in a project to develop a new type of photochromic lens by an alliance of Essilor, PPG and Transitions. This was a huge project involving 20 sites around the world and to stay ahead of its competitors, the new product had to get to market within 18 months. Despite this short time-frame, the partners spent nine months defining every aspect of the product and project before launching into the delivery phase. The new lenses were developed and launched globally on target without any major problems. Considering the complexity of the project and product, that’s quite something.
Morris: Let’s say that a CEO has read and then (hopefully) re-read Managing Global Innovation and wants to integrate the organization’s capabilities globally. Where to begin?
Doz: Implementing any major changes to the way companies operate requires time and determination and the shift to globally integrated innovation is no exception – it calls for new capabilities to be built, changes in the structure of the innovation organization, new systems, processes and mindsets. The scope and scale of this task shouldn’t prevent executives from starting down the path of change as the systemic nature of innovation activities means that every single element of change that’s brought about will make a difference. For example, improving communication between sites will help build trust, support global innovation projects and enable effective knowledge transfer.
We used the final chapter of the book to lay out an action plan across all three areas critical to global innovation: optimizing the footprint, communication and collaboration. This should give executives some tangible guidance. But what we propose in Managing Global Innovation isn’t a linear process and so managers can begin implementing the changes and frameworks we propose in whatever area they feel is right for their own firm. This could be the low hanging fruit or the areas in which they are weakest.
Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in Managing Global Innovation, which do you think will be of greatest value to leaders in small companies? Please explain.
Wilson: I think so many of the opportunities we outlined in the book afforded by global innovation are just as relevant to small companies as they are to MNCs. But because small companies are such a varied and wide ranging group it’s impossible to know what they would feel has the most value, as this is likely to vary from firm to firm.
Having said that, there are a number of aspects of global innovation we describe which, if adopted will give SMEs much greater latitude from resource constraints to compete globally. One of these areas is footprint optimization. Small companies can just as easily ‘foray’ and ‘attract’ knowledge from around the world as large ones. In fact their size, lesser bureaucratic constraints and natural agility may well give them an added advantage in accessing critical emerging technical or market knowledge from all over the world to feed into their innovation pipeline. The importance of having bi-cultural managers as bridges for transferring complex knowledge is another mechanism which will be crucial for small companies. And here again, perhaps small companies will have an advantage over large ones, as the process of recruiting and developing these managers in smaller numbers will be much faster. Also, the chapter on collaborative innovation is highly relevant to small companies, as complex innovations require the specialist inputs and involvement of more and more firms.
Doz: During the process of researching and writing the book we were without bias in terms of the size and geographic origins of the companies we aimed to help. Our research took us from a national wine producer in Chile to some of the world’s largest companies – and everything in between. We studied firms from developed economies and emerging ones and covered a wide spectrum of industries. This was necessary because the future of innovation we describe is a truly global phenomenon and consequently our the lessons in our book are just as important for a large firm as a small one and a US firm as an Indian one.
* * *
Yves and Keeley cordially invite you to check out the resources at these websites:
Yves’s INSEAD faculty page
Their strategy+business article
His strategy+business Thought Leader interview
His Amazon.com page