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The emergence of global innovation network is a new approach adopted at the organizational level to manage the company wide research and development programs. The traditional model of innovation comprising of an ad-hoc structure and centralized R&D wing is gradually being replaced by a network of extranet partners and offshore sites which could be collectively termed as a global Innovation network. The reasons for such a transformation in the R&D strategy could be attributed to

The huge investments that the companies are forced to make to be innovative

The complexity embodied in the process of innovation

A sharp increase in the demand for products/services that could cater the needs of local population

The rapid growth & substantial availability of expertise in certain developing countries i.e. China, India…

The key trends and attitudes that symbolize the formulation of a global innovation network are

The customer demand for customized & innovative products has increased exponentially over the past few years, prompting the service providers to adopt newer policies of innovation, in spite of such an adoption being a costly affair. To sustain the ever-changing market demand trends the organizations are being forced to adopt a strategy that is customer-centric and efficient than the existing one. To bring about

efficiency in the business strategy the companies are trying to disintegrate their R&D functions worldwide, which has prompted the formulation of global innovation networks.

The availability of high-quality work force, presence of pro-active IP enforcement laws, best combination of cost & quality in certain geographic locations have prompted the global service/product giants to outsource their R&D activities or establish off-shore development centers in such locations.

The companies have identified that the process of R&D outsourcing & off-shoring can be used to reduce the time-to-market and provide for value maximization.

The companies in order to be innovative have adopted the strategy of letting the idea flow out of the place of origination and being handled in various geographic locations, so that there could be versatility in the manner in which the ideas would be materialized.

The process of idea outsourcing & off-shoring has also streamlined the process of idea transformation, has also brought down the cost involved in the innovation process, and has succeeded in making the process of innovation an inexpensive, flexible and value adding expedition.

The companies in response to the above mentioned trends, attitudes have started drifting away from the standard R&D practices which involved setting up and collaboration with an in-house R&D department to a distribution of

Your Inno-IP magazine August 2010

imagine

Global Innovation Network

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R&D activities across multiple partners & geographic locations. Apart from the fact that an ad-hoc R&D structure might not be able to sustain the process of innovation for long, the global harmonization of business practices, breakdown of traditional customer categories and convergence of previously separate industries have prompted the companies to adopt an R&D strategy that is more systematic, efficient, flexible & diversified. The evolving industries are concentrating on increasing the levels of innovation to adopt new business models that could sustain the demand for customized products/services and efficiency. But the matured industries wherein the business practices have hit a plateau are concentrating on improving the existing business models/practices so as to minimize costs, bring about greater levels of efficiency, reduce the manufacturing time & cost, Reducing the time to market etc. The strategy adopted by a German automobile giant in order to minimize the manufacturing cost and time was to manufacture two different models of automobiles through a single assembly serves as a benchmark to characterize the approach of matured industries towards innovation. The emergence of global innovation network can be attributed to the migration from technology push to consumer pull, wherein the service providers are concentrating more on manufacturing customized products, being customer-centric to avoid R&D wastage, catering to the needs of customers rather than going in search of customers to whom they could sell their product/service. The phenomenon of global innovation network has restrained the companies from adopting over-research, over-prototyping, designing something that is far beyond the need of the consumer. The phenomenon of globalization of R&D approach has led to the bout of the innovation funnel being widened and the spout being narrowed. As a result of such a scenario the companies are required to invest more on the ideas while they are in an initial stage to ensure that they get

through the bout of the innovation tunnel and reduce their investment levels once the idea has passed through the funnel. A key characteristic of global innovation network is that it has reduced the monopoly of the R&D department in utilizing the intellectual capacity .The global innovation network has brought about a new phenomenon termed as ‘open innovation’ wherein the ideas are allowed flow out of their point of emergence ,to wherever they can be most effectively utilized and handled. The result of open innovation is some ideas might flow back to the place of origination to be scaled up & marketed, some may turn into joint ventures and some may get licensed. However the phenomenon of open innovation ensures that the ideas reach the market quickly & efficiently. Open innovation also nurtures the possibility of industry –institution partnership wherein the universities could be roped in to carry out research works resulting in the emergence of a business model which is cost-effective and efficient. The global innovation networks have brought along with them certain challenges that include

Possibility of intellectual property theft by the technology partners

Loss of control over the outsourced R&D activities

With the network spanning across continents , effective communication might also be a challenge

Lack of coordination across the network

Deciding on how risks & rewards would be shared with the partners is also a challenge

The unrealistic estimation of IP value by the universities incase of them being a partner in innovation

The ‘not invented here (In-house)’ phenomenon needs to be countered.

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