Transcript Control Policies - James "Jim" Guzak

Chapter 5:
Creating Worldwide
Innovation and
Learning
Exploiting Cross-Border
Knowledge Management
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Why Transnational Strategy?
•Global companies tend to not be responsive to local needs
and do not foster the ability to gain local for local
innovation. Unable to respond to national competitors or
to sense locally important market info.
•Multinational companies tend to not be able to diffuse
local innovation across the company. Independent
branches could be picked off one by one by coordinated
global companies.
•Transnational companies are an attempt to both take
advantage of local innovation as well as diffuse that
knowledge across the company.
1-2
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
5-3
Worldwide Innovative Capability:
MNC’s Competitive Advantage
S Sensing Capability
R Response Capability
I Implementation Capability
5-4
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
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
5-6
Central Innovation
in Centralized Hub
I
I
I
S-R-I
I
I
I
•
Headquarters senses world-wide opportunities
•
Centralized assets and resources favor unitary global responses
•
Implementing strategy decided centrally and executed locally
5-7
Making Central Innovations Effective:
Lessons from Matsushita (Panasonic)
• 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
5-8
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
5-9
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.
5-10
Making Local Innovations Efficient:
Phillips
•
•
Empower local management
Link local managers to corporate
decision-making processes: At
Phillips many of the best managers spend most
of their careers in national operations—working
for 3-4 years in a series of subsidaries
•
Integrate subsidiary functions:
project team integrates commercial and
technical, product group team coordinates cross
functional, Senior Management Committee
oversees.
5-11
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
5-12
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
5-13
Unilever’s Transformation
Following WWII Unilever managed a strongly
decentralized company in a similar way
across all product lines (packaged foods,
chemicals, detergents)
 Starting in the 1980’s, this company began to
manage more centrally to control costs.
 Finally management began to differentiate by
product, function and geography.

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Locally Leveraged Innovation:
Unilever’s Fabric Softener
Developed in response to a locally sensed opportunity ...
I
I
I
I
I
S-R
I
I
I
I
…then diffused rapidly worldwide under local brands
5-15
From Dependence or Independence to
Interdependence: Ericsson
Develop a configuration of resources that is
neither centralized nor decentralized but is
both dispersed and specialized.
 Build inter-unit integration mechanisms. Interunit cooperation requires good interpersonal
relations among mangers.
 Erricsson will routinely send teams of 50-100
engineers and managers for a year or two to
an overseas assignment.

1-16
Example: Ericsson’s AXE Switch
Diverse market stimuli…...
I
S
R
R
S
I
S
I
I
I
I
I
SR
…linked to create a transnational product
5-17
Organizational Capability
for Worldwide Innovation
• Making transnational innovations possible:
lessons from Ericsson—Locally Leveraged
• 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
5-18
From Uni-dimensional Control to
Differentiated Control

Three Flows are important to the
Transnational:
 Flow
of Goods—Formalized management process
 Flow of Resources—Coordinate by centralization
 Flow of Information and Knowledge—Socialization
In other words the company must have
elements of both centralization and
decentralization.
1-19
Mobilizing Knowledge Through
Socialization
l
Complexity of Market Knowledge
l
Complexity of Technical Knowledge
1-20
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
5-21
Innovation at the Edges
 Give
seed money to subsidiaries
Balance between short term results and freedom to
pursue new ideas
 Use
formal requests for proposals
Treat subsidiaries as freelance contractors
 Encourage
subsidiaries to be
incubators
 Build international networks
Link personnel moves to practical business
initiatives.
1-22