How American Manufacturers Can Tap Russian Innovation

Oct. 3, 2005
Why Russia? The country's science and education systems remain one of the world's best.

Jim Sims is CEO and chairman of the board and Sam Kogan is president of GEN3 Partners Inc., a product innovation consulting firm.

In our first article, we asserted that the only way for American manufacturers to compete successfully against lower-cost global competition is through product innovation. We explained how the most successful product innovators were superior at three core activities: in the way they define innovation (i.e., their criteria for determining whether there is a fundamental need for some new product concept or feature); in the way they assess the demand for innovation (how much of the market has that need and how much it would be worth to solve it); and in how they determine the supply of innovation (how to make a new product concept technically and economically feasible).

In this article, we examine the supply part of the product innovation equation. After determining whether a customer segment would want a new product, managers must answer two questions on the supply side: Can we produce it -- that is, do the technologies and manufacturing processes exist to make the product possible? If so, where can we produce as efficiently and inexpensively as possible? The answer to the second question increasingly is countries like China and India, where labor costs are a fraction of those in the U.S. and Europe. But the answer to the first question can be even more important because if the technologies and manufacturing processes don't exist, the product can't be manufactured anywhere. Answering that question requires understanding not where cheap labor exists but rather where deep scientific, engineering and other technical expertise resides. A growing number of companies are discovering that they reside in a country not known for commercializing innovation: Russia.

Why Russia? The country's science and education systems remain one of the world's best. Until recently, the Russian government had shut off the country's scientific, engineering and mathematical expertise to the outside world. No longer. A number of companies have tapped into that knowledge, Xerox, IBM, and Intel among them. They have used Russian expertise to make new products considered impractical practical, and to create breakthroughs in manufacturing processes that have generated millions of dollars in benefits.

To be sure, Russia doesn't roll off the lips of people thinking about hotbeds of technology innovation. Innovation in Russia? Perhaps innovation in espionage or stifling political dissent, Western skeptics might say. But Russian product innovation? Nyet.

Think again. Russia has an estimated 1 million researchers and scientists working in R&D centers, a number that is unmatched in any other nation. Despite the country's enormous financial problems, its educational system remains one of the best in the world. And that system lends itself to solving seemingly intractable manufacturing and technology problems. The reason: Russian technical education is largely cross-disciplinary. The ability to look for solutions to manufacturing problems from other industries and disciplines is critical to solving them. Lacking state of the art equipment and machinery, Russian manufacturers and product developers have had to rely on "creativity" -- finding and adapting scientific and other proven approaches from other industries.

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Bringing Innovation To The Innovation Process

Of course, until the demise of the Soviet Union, this knowledge hasn't been available to the Western world. But since the opening up of Russia to outside investment, a number of U.S. manufacturers have trekked to the country in search of answers to their thorniest product innovation supply challenges. They include Boeing, IBM, Intel, Xerox and Motorola, all icons of U.S. industrial strength and product innovation.

Take the example of Xerox. One of the company's most profitable businesses is toner cartridges (as it is for Hewlett-Packard, Epson and other makers of computer printers). The $15 billion company was looking to solve a major production bottleneck in its plants that produce toner cartridge: the speed with which cartridges were filled. It found an idea from a Russian engineer to vibrate toner particles with a resonance frequency, which accelerated the flow of toner powder into cartridge. This manufacturing process breakthrough enabled the company to produce toner cartridges eight times faster than before. These scenarios have been playing out in dozens of companies.

But tapping Russian expertise to make Western innovations feasible is not easy. The barriers of language and bureaucracy are enormous for many American manufacturers. But the biggest barrier is finding specific expertise among Russia's 2,000 research centers and 1 million scientists.

But as companies like Xerox, IBM, Intel and others have demonstrated, Russian scientific and engineering expertise can be tapped -- and for substantial financial gain. In a world in which American manufacturers must bring great new products to market to survive and thrive, turning to Russia to solve the "supply" of innovation will become increasingly important.

Jim Sims is CEO and chairman of the board and Sam Kogan is president of GEN3 Partners Inc., a product innovation consulting firm. Based in Boston and St. Petersburg, Russia, GEN3 that helps manufacturers identify their best opportunities for new products and new manufacturing processes and solve the technical barriers to achieving them.

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