Education | Andragogy » Ranim Helwani - Exploiting Cross Border Knowledge Management

Source: http://www.doksinet     Global  Business  –  2014  –  Ranim  Helwani       Chapter  5  –  Creating  Worldwide  Innovation  and  Learning   Exploiting  Cross-­‐Border  Knowledge  Management     Transnational  innovation  process:  Sensing  an  emerging  consumer  trend  in  one  country,  link  it  to   a  new  technology  or  capability  that  it  has  in  another,  develop  a  creative  new  product  or  service  in  a   third  then  diffuse  that  innovation  rapidly  around  the  world.       Competing  MNEs  are  required  to  build  layers  of  competitive  advantage:  capture  scale  efficiencies,   local  market  responsiveness  and  world  wide  learning  capability.     à

 There  is  a  fast  growing  investment  in  knowledge-­‐based  assets  reflected  in  the  increase  in  value   of  intangible  assets.       Traditionally:  MNEs  regarded  their  stock  of  domestically  accumulated  knowledge  and  expertise  as   an  asset  they  could  sell  into  foreign  markets.  Global  market  seen  to  generate  additional  revenue   Today:  MNEs  collect  world-­‐class  knowledge  by  using  worldwide  presence  to  maintain  and  expand   its  innovative  lead  à  global  market  as  source  of  innovation  and  learning.     à  subsidiaries  take  on  new  roles:  must  become  sensors  of  new  market  trends  or  technological   development,  must  attract  scarce

 talent  and  expertise,  must  exploit  resulting  innovations   worldwide       Problem:  many  modern  companies  are  constructed  in  a  way  that  constrains  and  sometimes  kills   the  natural  human  instinct  of  learning  from  each  other.     How  to  capture,  develop,  leverage  and  exploit  knowledge  to  support  effective  worldwide  innovation   and  learning?         Traditional  Innovation:  Central  and  Local  Models       The  Center-­‐for-­‐Global  Innovation  Model   -­‐ new  opportunity  sensed  in  home  country   -­‐ resources  and  capabilities  of  parent  company  used  to  create  new  product  or  process   -­‐ one  main  R&D  center   -­‐ role  of

 subsidiaries  was  to  introduce  innovation  into  local  markets     à  dominates  in  global  and  international  companies       The  Local-­‐for-­‐Local  Innovation  Model   -­‐ relies  on  subsidiary  based  knowledge  development     -­‐ subsidiaries  respond  to  perceived  local  opportunities   -­‐ use  their  own  resources  and  capabilities  and  create  innovative  responses   à  dominates  in  multinational  companies       à  First  challenge  regardless  of  model  is  how  to  make  cross-­‐border  innovation  effective.   à  both  models  have  limitations  and  their  innovation  processes  were  rarely  sufficient,  esp.  for   companies  in  fast-­‐changing,

 knowledge-­‐intensive  industries  like  electronics,  biotech  etc.   à  Need  for  Transnational  innovation  capability.       Making  Central  Innovations  Effective     -­‐ Japanese  companies  become  champions  of  centralized  innovation  (global  strategy)   -­‐ Greatest  risk  of  that  strategy:  market  insensitivity  and  the  accompanying  resistance  of  local   subsidiary  managers  to  what  they  may  view  as  inappropriate  new  products  and  processes       Source: http://www.doksinet     Global  Business  –  2014  –  Ranim  Helwani       Successful  companies  develop  three  important  capabilities  to  managing  the  center-­‐for-­‐global   process:       1. Gaining  Subsidiary

 Input:  Multiple  Linkages     Problem:  those  at  the  centralized  operations  (headquarter)  may  not  understand  market  needs   and  those  in  the  subsidiaries  may  not  be  committed  to  a  implement  a  central  innovation.     Solution:  build  multiple  linkages  between  headquarters  and  overseas  subsidiaries  à  for  central   managers  better  understanding  of  country-­‐level  needs  and  for  subsidiary  managers  greater   access  to  involvement  in  centralized  decisions  and  tasks       2. Responding  to  National  Needs:  Market  Mechanisms   à  ensuring  that  all  functional  tasks  are  linked  to  market  needs   à  need  to  create  an  integrative  process  to

 ensure  that  headquarter  managers  are  not  sheltered   from  the  constraints  and  demands  felt  my  managers  on  the  front  end.     à  Use  of  “Internal  Market  Mechanisms”:  directs  and  regulates  central  activities.     -­‐ ie.  holding  meetings  with  all  overseas  subsidiaries  where  they  negotiate  for  features  and  prices   of  products  for  the  upcoming  year.     à  Internal  market  connects  consumer  demand  to  technological  Innovation.       3. Managing  Responsibility  Transfer:  Personnel  Flow     à  need  to  integrate  value  chain  functions  by  managing  the  transfer  of  responsibilities  across   development,  production  and  marketing  .     à

 more  difficult  for  the  central  than  for  the  local-­‐for-­‐local  innovation  process,  as     integration  and  cross-­‐functional  coordination  is  facilitated  by  smaller  size  and  proximity     Integrative  systems:  rely  heavily  on  the  transfer  of  people   -­‐ ie  moving  engineers  to  line  management  positions;  ensuring  knowledge  about  project  moves   with  individual.   -­‐ Or  other  way  round:  injecting  direct  production  expertise  into  development  team  à   additionally  facilitates  the  transfer  of  the  project  after  its  design  is  completed.         Making  Local  Innovations  Efficient       à  local-­‐for-­‐local  innovations  often  suffer  from

 needless  differentiation  and  “reinvention  of  the   wheel”  –  caused  by  resource-­‐rich  subsidiaries  trying  to  protect  their  independence       Successful  companies  developed  three  abilities  to  be  more  efficient:     1. Empowering  Local  Management   à  prerequisites  for  local  innovation  is  the  dispersal  of  organizational  assets  and  resources  and   the  delegation  of  authority  to  the  subsidiary  in  order  to  take  initiative  in  creating  new   processes.  à  decentralizing   à  Need  to  transfer  assets  and  resources  and  empower  their  subsidiary  operations  to  make   them  creative  and  entrepreneurial     2. Linking  Local  Managers  to  Corporate

 Decision-­‐Making  Processes   à  need  to  make  linkages  to  corporate  decision-­‐making  processes  to  make  the  local-­‐for-­‐local   tasks  effective  for  the  company  as  a  whole.     i.e:  Career  assignment  patterns  of  entrepreneurial  expatriates;  assigning  them  to  national   operations  to  create  organizational  relationships,  shared  identity  and  a  strong  bond   à  should  not  see  themselves  as  parent-­‐company  executives  temporarily  on  assignment  in   foreign  company.         Source: http://www.doksinet     Global  Business  –  2014  –  Ranim  Helwani         3. Integrating  Subsidiary  Functions     à  local  innovativeness  and  decentralized

 federation  is  enhanced  when  strong  cross-­‐functional   integration  within  each  national  operation  exist.     -­‐ ie.  Phillips:  Integration  at  three  levels:   o “article  team”:  create  product  policies,  annual  sales  plans  and  budgets     o product  level  –  meeting  of  representatives  to  review  results     § retaining  control  and  conflict  resolution  to  facilitate  rapid  responses  to   initiatives  and  ideas  generated  at  local  level     o subsidiary-­‐level  coordination  forum  –  senior  management  committee  (SMC)   § local  board,  ensure  autonomy  and  responsibility  for  own  strategies  of   national  operation     Transnational  Innovation:  Locally  Leveraged,

 Globally  Linked       à  Traditional  models  have  evolved  into  two  new  processes:  Transnational  innovation  models  that   are  locally  leveraged  and  globally  linked.     Locally  Leveraged  innovation:  ensuring  that  special  resources  and  capabilities  of  each  national   subsidiary  are  available  not  only  to  that  entity  but  also  to  other  MNE  units  worldwide.     Globally  linked  innovation:  pools  resources  and  capabilities  of  many  different  units,  both  parent   and  subsidiary  level  to  create  and  manage  an  activity  jointly.  Allows  taking  market  intelligence   developed  in  one  part,  link  it  to  a  specialized  expertise  in  another  part  and

 to  a  scarce  resource  in  a   third  and  then  eventually  diffuse  new  product  worldwide.       à  They  are  seen  as  supplements  not  replacements  to  the  traditional  innovation  processes.   Challenge  today:  organization  needs  to  facilitate  all  four  processes  of  cross-­‐border  innovation  and   learning  simultaneously  –  under  stand  power  and  limitations  of  each.         Making  Transnational  Processes  Feasible       Need  to  overcome  two  problems  in  order  to  build  portfolio  of  innovative  processes  to  drive   worldwide  learning:   1. Avoid  pitfalls  associated  with  each  processes   2. Overcome  the  organizational  contradictions  among  them    

Simplifying  assumptions   Successful  transnational  innovations   -­‐ treating  all  businesses,  functions  and   -­‐ systematically  differentiates  tasks  and   subsidiaries  in  the  same  way,   responsibilities   assuming  they  should  be  uniform  and     symmetrical     -­‐ seeking  organizational  clarity  by   -­‐ build  interdependence  among  the   assuming  headquarters-­‐subsidiary   different  units  of  the  companies   relationships  to  be  based  on  clear  and     unambiguous  patterns  of  dependence   and  independence     -­‐ assuming  that  corporate  management   -­‐ search  for  complex  mechanisms  to   has  a  responsibility  to  exercise  decision   coordinate  and  coopt  the  differentiated  

making  and  control  uniformly   and  interdependent  organizational     units  into  sharing  a  visions  of  the   Source: http://www.doksinet     Global  Business  –  2014  –  Ranim  Helwani       company’s  strengths       From  Symmetry  to  Differentiation     -­‐ recognition  that  different  businesses  faced  different  demands  for  integration  and   responsiveness.     -­‐ Differences  in  local  tastes  and  national  cultures  impede  the  degree  of  standardization,   coordination  and  integration  for  each  subsidiary  unit.     -­‐ Decentralization  became  difficult  to  support:  national  subsidiaries  chose  to  develop,   manage  and  market  the  products  that  they  thought

 appropriate  à  inefficient     à  Need  to  differentiate  the  way  they  managed  businesses  and  functions,  as  well  as   management  of  diverse  geographic  operations.  Have  differing  external  environments  and   internal  constraints   à  Symmetric  treatment  could  constrain  strategic  capabilities     à  move  from  uniformly  decentralized  federation  to  much  more  differentiated  one:  by   product,  then  by  function  and  finally  by  geography.         From  Dependence  of  Independence  to  Interdependence       Decentralized  federation:  subsidiary  independent   Centralized  hub  federation:  strongly  dependent  on  parent  company  for  resources  &  capabilities   à

 need  to  develop  transnational  innovation  requires  to  build  interdependent  relationships   àadding  layers  of  administrative  mechanisms  to  foster  cooperation  were  disappointing     Two  requirements  for  an  effective  interdependent  organization  to  exist:     1. Develop  the  integrated  network  (CH4):  the  interdependent  configuration  of  dispersed  and   specialized  resources    à  frames  new  roles  and  responsibilities:  all  subsidiary  companies   will  take  sensing  and  scanning  roles  to  detect  consumer  trends,  technological  advances  and   competitive  activities  that  may  trigger  a  new  opportunity  or  threat.     2. Build  interunit  integration  mechanisms  to  ensure  that

 task  interdependencies  lead  to  the   benefits  of  synergy  rather  than  the  paralysis  of  conflict.   à  requires  good  interpersonal  relationships  among  managers  of  different  units   -­‐ movement  of  people  strongest  mechanism  to  breaking  local  dogmas  –  both  learn  and   provide  expertise   -­‐ exchange  often-­‐divergent  objectives  in  national  company’s  board  meetings.       From  Simple  Control  to  Flexible  Coordination       à  simplifying  assumptions  of  organizational  symmetry  and  dependence/independence  allowed   management  processes  to  be  simple   à  growing  differentiation  and    interdependence  lead  to  explosion  of  issues  that  had  to  be

 linked   and  integrated  à  need  to  supplement  existing  processes  with  more  subtle  and  sophisticated  ones.       Need  to  coordinate  three  different  flows  among  the  interdependent  organizational  units       Type  of  Flow     Management  Process   Flow  of  Goods   à  Best  achieved  through  formalization     -­‐ sourcing  raw  materials  and  other   -­‐  managed  effectively  at  lover  levels  of   supplies   organizations  through  clear  procedures  and   -­‐ linking  and  distributing   strong  systems;  standardize  as  much  as   possible   Flow  of  financial,  human  and  technological   à  Best  achieved  through  centralization   resources   Best  controlled  at

 corporate  level  to  get  a  good   Source: http://www.doksinet     Global  Business  –  2014  –  Ranim  Helwani         Flow  of  information  and  knowledge   -­‐ raw  data  to  analyzed  information,   expertise         overview  of  total  situation  to  make  critical   decisions   à  Best  achieved  through  socialization     most  difficult  task,  tacit  knowledge   impossible  to  be  controlled  through  formal   systems  or  centralized  controls     à  sensitize  local  managers  to  broader   corporate  objectives  and  priorities,  ensuring   they  are  exposed  to  the  relevant  knowledge   through  frequent  contacts;  organizational   forums;  foster  free  exchange  of

 information  and   cross-­‐unit  learning             à  companies  use  a  variety  of  coordinative  mechanisms     à  best  way  to  capture  innovation  is  sometimes  to  move  people  and  sometimes  to  move  or   exchange  information.     à  one-­‐size-­‐fits-­‐all  strategy  will  not  work  on  large  MNE     à  no  single  right  way  of  managing  innovation  process  in  an  MNE:  Each  company  has  unique   administrative  heritage  that  it  cannot  and  should  not  give  up.  But  there  are  principles   (differentiation  of  roles,  interdependence  and  modes  of  control)  that  underpin  the  development  of   an  effective  transnational  organization.