Learning Global Organization

Worldwide Innovation: The New

Competitive Battleground
Competitors achieving parity in scale and
responsiveness
Competitive battles shifting to innovation
area
Three key capabilities:
Sensing -S
Responding - R
Implementing - I

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

Central, Local & Transnational

Innovation
Two modifications
Locally leveraged innovation- moving a locally
successful idea to other subsidiaries
Globally linked innovation HQ identifies the potential
new ideas from subsidiaries and make it global

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

Central Innovation
in Centralized Hub
I

S-R-I

Headquarters senses world-wide opportunities

Centralized assets and resources favor unitary global responses

Implementing strategy decided centrally and executed locally

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

Local for Local Innovation

Each market effectively innovates and responds to local needs.

S-R
I

with dispersed
S - R resources and
S-R
capabilities...
I
I

but fails to create transnational

innovations.

Making Local Innovations Efficient:

Phillips
Empower local management
Link local managers to corporate decisionmaking processes: At Phillips many of the best managers spend
most of their careers in national operationsworking for 3-4 years in a
series of subsidiaries

Integrate subsidiary functions:

project team integrates

commercial and technical, product group team coordinates cross functional,
Senior Management Committee oversees.

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

Beyond the Simplifying Assumptions

From Symmetry to Differentiation
(Unilever)
Each unit has own distinct role

From Dependence or Independence to

Interdependence (Ericsson)
Through inter-unit integration mechanisms

From Uni-dimensional Control to

Differentiated Control
Make better use of social control mechanism

From Uni-dimensional Control to

Differentiated Control
Three Flows are important to the
Transnational:
Flow of GoodsFormalized management process
Flow of ResourcesCoordinate by centralization
Flow of Information and KnowledgeSocialization
In other words the company must have elements of
both centralization and decentralization.

Mobilizing Knowledge Through

Socialization
Complexity of Market Knowledge
Complexity of Technical Knowledge

Linking & Leveraging Resources

Decentralized
Federation

Centralized
Hub

Locally
Leveraged
Innovation

The Integrated Network

Globally Linked
Innovation
- Building up
collaborative
interdependence

- Breaking down
the NIH
syndrome

Coordinated Federation