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Chapter 5: Creating & Leveraging Knowledge

Chapter 5: Creating & Leveraging Knowledge. The Worldwide Learning Challenge. Worldwide Innovation: The New Competitive Battleground. Competitors achieving parity in scale and responsiveness Competitive battles shifting to innovation area Three key capabilities: Sensing Responding

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Chapter 5: Creating & Leveraging Knowledge

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  1. Chapter 5: Creating & Leveraging Knowledge The Worldwide Learning Challenge

  2. Worldwide Innovation: The New Competitive Battleground • Competitors achieving parity in scale and responsiveness • Competitive battles shifting to innovation area • Three key capabilities: • Sensing • Responding • Implementing 5-2

  3. Worldwide Innovative Capability: MNC’s Competitive Advantage S Sensing Capability R Response Capability I Implementation Capability 5-3

  4. Example: Ericsson’s AXE Switch Diverse market stimuli…... R S I S S I R I I I I I S R …linked to create a transnational product 5-4

  5. Central, Local & Transnational Innovation • Two classic processes • Center-for-global: new opportunity sensed in home country, centralized resources brought to bear, implemented globally • Local-for-local: subsidiary-based knowledge development, used primarily in local market 5-5

  6. Central, Local & Transnational Innovation • Two emerging processes • Locally leveraged: Local opportunity sensed by subsidiary then leveraged on a worldwide basis • Sara Lee: Sanex and Ambi-Pur came from Spain • Globally linked: Resources and capabilities of many operations pooled to jointly create and manage new activity • Volkswagen’s New Beetle involved US, Germany and Mexico operations 5-6

  7. Problems Associated with Each Model • Center-for-global innovation • Risk of market insensitivity, imperialism • Local-for-local innovation • Risk of duplication, reinventing wheel • Locally leveraged innovation • Threatened by not-invented-here • Globally linked innovation • High coordination costs 5-7

  8. Central Innovation in Centralized Hub I I I I S-R-I I I • Headquarters senses world-wide opportunities • Centralized assets and resources favor unitary global responses • Implementing strategy decided centrally and executed locally 5-8

  9. Making Central Innovations Effective:Lessons from Matsushita • Gain subsidiary input • Through multiple personal linkages • Respond to different national needs • Give subsidiary units resources to influence how central R&D money is spent • Manage responsibility transfer (from research to manufacturing to marketing) • Move people with specific projects 5-9

  10. Making Local Innovations Efficient • Empower local management • Link local managers to corporate decision-making processes • Integrate subsidiary functions 5-11

  11. Transnational Innovation Processes: Two Examples • Locally leveraged innovations • Unilever fabric softener • Globally linked innovations • P&G liquid laundry detergent 5-12

  12. S - R I Locally Leveraged Innovation:Unilever’s Fabric Softener Developed in response to a locally sensed opportunity ... I I I I I I I I …then diffused rapidly worldwide under local brands 5-14

  13. Locally Leveraged Innovation: Unilever’s Fabric Softener I S-R-I I I I I 5-13

  14. S - R I S - R I S - R I Globally Linked Innovation:P&G’s World Liquid Detergent Linking diverse stimuli... …with dispersedresources andcapabilities... …to create transnational innovations 5-16

  15. Globally Linked Innovation: P &G Liquid Laundry Project S-R I S-r-I S-r-I S-R-I S-r-I s-R-I S-R-I 5-15

  16. Local Innovation in Decentralized Federation S-R-I S-R-I S-R-I S-R-I S-R-I S-R-I S-R-I • National units sense local needs • Distributed assets and resources allow local response • Local-for-local implementation 5-10

  17. Make Transnational Processes Feasible • Three simplifying assumptions have blocked progress with transnational processes: • Assumption that subsidiaries are symmetrical (”the United Nations syndrome”) • Assumption that HQ-subsidiary relationship is based on pattern of dependence / independence • Assumption that corporate management exercises control uniformly 5-17

  18. Beyond the Simplifying Assumptions • From Symmetry to Differentiation • Each unit has own distinct role • From Dependence or Independence to Interdependence • Through inter-unit integration mechanisms • From Uni-dimensional Control to Differentiated Control • Make better use of social control mechanism 5-18

  19. Organizational Capability for Worldwide Innovation • Making transnational innovations possible: lessons from Ericsson • Interdependence of resources and responsibilities: Maintaining balance through constant adjustment • Inter-unit integrating devices: Operating systems, people-linking processes, joint decision forums • National competence, worldwide perspective: Managers who can think globally and act locally 5-19

  20. New Cross-Unit Interdependencies:New Coordinative Mechanisms Multiple cross-unit flows... …Need multiple coordinative mechanisms 5-20

  21. Linking & Leveraging Resources Decentralized Federation Centralized Hub • Locally Leveraged • Innovation • - Breaking down the “NIH” syndrome • Globally Linked • Innovation • - Building up collaborative • interdependence The Integrated Network Coordinated Federation 5-21

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