Our colleagues over at the Global Value Network blog had a nice recent piece on global R&D. The basic takeaway, which draws from research from CEB's Research & Techology Executive Council (RTEC): companies with high performing R&D organizations are those that freely change their organizational structure, and those who freely make those changes are most likely to do it to get closer to their key innovation partners around the world. By transitive clause then, high performing R&D organizations work really hard to put R&D as close as they can to where the innovation and talent are, no matter where that is in the world. This links well with recent Booz & Co. research that found that:
- companies that deploy 60% + of their R&D outside their home countries outperform peers, and
- companies that invest more than 10% of their global R&D spend in low cost countries like China and India do better than others.
What Booz also finds, though, is that there needs to be some concentration, or focus, to global R&D activities. Companies with too widely dispersed R&D tend to underperform others. Our RTEC findings agree here, and take things a step further by noting that high performing R&D organizations focus heavily on knowledge exchange across locations, and avoid extensive decentralization, particularly during growth slowdowns.
So how do we globalize to capture innovation where-ever it is, but ensure we're effectively sharing information across locations and staying in line with our larger strategies? Three things our research has found companies need to be doing here:
1. Optimize Global R&D Location Strategies: Remember, global, but not overly dispersed. Of course, locations will be company-specific. Our conversations with members find that global R&D presence tends to evolve, beginning with basic support operations in countries where the company already has a sales presence. As manufacturing moves in-country, R&D support builds out a bit more, and then begins considering getting bigger in-country. But for many companies, manufacturing in-country is a pre-requisite for "big" R&D there, followed by an assessment of the local market demand for innovation. What we think companies have been considering less, but what RTEC demonstrates is important, is how local innovations can drive growth outside emerging markets themselves. That's the next generation opportunity.
2. Communicate Better Across Sites: R&D teams, and all teams really, need to get better at allowing globally dispersed staff to share knowledge across sites. Our members are innovating by building tools for communities to self-organize, with flexible access rights to protect IP but still share information, classification guidelines to allow for better-organized information, and senior-level accountability for monitoring activity.
3. Increase the Effectiveness of Global Managers: Global managers need a new set of skills to be effective: cultural adaptability, global strategic thinking and team building skills, new market savvy, government-relations capabilities, and others. Successful companies are customizing their manager development programs to transition them from technically-skilled project managers, to global team-builders.
RTEC members can access the Council's Globaly R&D Management Handbook at this link.
