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 / Winter 2012 / Issue 69(originally published by Booz & Company)


Overcoming the Global Innovation Trade-Off

Fortunately, our research at more than 50 global companies over the last few years suggests that it isn’t necessary to remain hostage to that trade-off. Instead, innovation leaders can take a third approach. They can leap to the upper curve of the exhibit: They can redesign their innovation practice to enable far-flung people to work together on complex ideas. This transition can be made by optimizing three different facets of innovation, generally at once. First, build a more compact and agile innovation footprint. Second, develop the capabilities, processes, culture, and structures needed to support rich communication. Third, boost support for collaboration in innovation projects, both internally and with external partners.

Through the experience of a number of companies, general principles are emerging for making each of these facets work.

The innovation footprint. Limit the number of physical sites in an innovation network to those that contribute unique and differentiated knowledge. As more sites are added to a network, the marginal costs increase, because of the greater costs of management, communication, and coordination. The additional value to innovation that these sites might bring is likely to diminish because of duplication and redundancy. The optimal number of sites in an innovation footprint is as many as you need, but as few as you can manage.

The ideal innovation footprint should also be flexible enough to help find and access new sources of market, process, or technical knowledge, and easily disengage from obsolete sources. To extend their compact physical footprint, firms can adopt short-term approaches that might include employing open source intermediaries to fill specific knowledge gaps, collaborating with more geographically dispersed partners, and organizing learning expeditions to access interesting sources of knowledge.

Communication and receptivity. In a typical co-located environment, combining complex knowledge is straightforward. It takes place through an informal, reciprocal, and iterative process of interaction, bolstered by the shared context and norms, as well as the language of a single place. But when innovators are separated by distance, time, and culture, communication becomes a serious challenge. The key to overcoming this challenge is a full array of communication tools, processes, and mechanisms, replicating as closely as possible the richness of in-depth local communication.

This can be achieved in part through information and communications technology–based tools that are part of the everyday workflow — Web meetings, integrated engineering platforms, knowledge-sharing applications, forums, communities of practice, social media platforms, and so on — together with regular periods of temporary co-location to build trust and familiarity among dispersed teams.

Companies can also deploy people with a multicultural background or experience to interpret and translate complex knowledge among different contexts. Many leaders recognize the value of such people, but few companies have put the career structures and rewards in place to develop these critical skills.

In many companies, knowledge hoarding is common. But “not understood here” can be as big an impediment to knowledge sharing as “not invented here.” To overcome these barriers may require a grassroots change in corporate culture. Beginning in 2000, the Xerox Corporation deliberately transformed its secretive, patent-based culture to one of open knowledge sharing across the group. This began with the adoption of an open source platform called CodeX that made code available for reuse across the company. By hosting projects on the platform, engineers experienced the benefits of knowledge sharing. Today, the culture at Xerox embraces an unusually high level of sharing and collaboration; for example, the website invites public scrutiny of its latest innovations.

Collaboration. Many firms have tried to get people working together on global innovation projects. They typically fail when they transfer best practices and skills from a co-located site to a more dispersed environment. Globally dispersed projects require different competencies and processes, plus a strong project management organization and the active involvement of senior management.

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