There's a "seismic shift" taking place in terms of how and where companies innovate, according to Yvez Doz and Keeley Wilson, and firms that fail to embrace it do so at their own peril.

"The familiar model of innovation that has proven so resilient for so long is woefully inadequate for current reality," assert Doz and Wilson in their new book "Managing Global Innovation: Frameworks for Integrating Capabilities Around the World."

See Also: Manufacturing Innovation & Product Development Strategy

Today's reality, Doz and Wilson explain, is one "in which the critical knowledge for innovation is increasingly dispersed across a wide geographic canvas; firms must respond to the rapid growth of new global competitors; and the deepening financial and economic crisis in the West calls for effective and efficient innovation in all sectors."

The bottom line for global manufacturers is that firms no longer can get away with innovating in their home markets and simply cascading those ideas across other markets.

"The starting point of our argument is you need to have innovation where the unique critical knowledge is," Wilson, a senior research fellow at the Insead business school, tells IndustryWeek. "So instead of innovation happening at home and then going out into markets where it's adapted locally," companies need to capture the "valuable knowledge" found in international markets and "feed it into the innovation process."

Doz, the Solvay chaired professor of technological innovation at Insead, adds that manufacturers need to shift "from learning at the center and projecting that knowledge to the periphery" to being open to "new markets, new contexts and new business-development possibilities rather than just implementers of a global strategy."

In the book, Doz and Wilson distill it to this essence: "As with sales and manufacturing, innovation must become global."

For the past decade, Doz and Wilson have been studying companies around the world -- an effort that included field research at IBM Corp. (IW 1000/29), Siemens AG (IW 1000/34), Xerox Corp. (IW 1000/194) and several dozen other firms -- to codify the structures and processes needed to establish effective global innovation networks.

They came up with a "managed global innovation" framework, which has three major elements:

  • Optimizing the innovation footprint -- Being selective in the location and number of sites where companies house their innovation activities.
  • Improving communication and receptivity -- Implementing the tools and processes "to support the internal knowledge sharing and integration essential for a dispersed innovation network."
  • External and internal collaboration -- Innovating with partners and managing global innovation projects.

Doz and Wilson offer a number of examples of companies that are getting it right.

In terms of site selection, they point to Novartis AG (IW 1000/61), which in 2002 established its global pharmaceutical R&D headquarters in Cambridge, Mass., as part of a reorganization of its innovation functions. Prior to that, Novartis had its main U.S. innovation center in New Jersey.

The location in the global biotechnology hub of Cambridge provides clear strategic advantages for Novartis, as it enables the Swiss company to "access world-class talent, tap leading-edge research from neighboring MIT" and collaborate with Boston-area research hospitals and biotech firms, Doz and Wilson point out in the book.

In 2004, the company set up an R&D center in Singapore to focus on new medicines for infectious tropical diseases. The company, Wilson explains, chose the location because of Singapore's proximity to countries that are hard-hit by these diseases, as well as its burgeoning life-sciences sector and high-quality housing, education and health care, which made it more attractive for expatriates.

"Among all the companies that we studied, [Novartis] probably has been the most explicitly strategic about these choices," Doz tells IndustryWeek.

Among other firms praised by the authors for successful global innovation strategies is Xerox Inc., which encourages collaboration and knowledge sharing through an open-source tool called CodeX.

The intranet-hosted platform "supports code sharing, documentation management, website hosting, discussion forums and bug tackling within an environment that provides a unified architecture across Xerox with common toolkits and project-administration tools," Doz and Wilson explain.

Since Xerox launched CodeX in 2000, the company has evolved from a culture of "secrecy and knowledge hoarding" to one of "collaboration and openness," the authors note.