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
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. Locally Leveraged Innovation: Unilever’s Fabric Softener
Developed in response to a locally sensed opportunity ...
S - R I 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
S-R-I I I I I
5-13

14. Globally Linked Innovation: P&G’s World Liquid Detergent
Linking diverse stimuli...
S - R I
…with dispersed resources and capabilities...
S - R I
S - R I
…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
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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
5-21
Coordinated Federation