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 / Winter 2008 /Issue 53(originally published by Booz & Company)


Beyond Borders: The Global Innovation 1000

That degree of diversification arose in great part as a result of the industry’s quest for talented scientists and skilled engineers — wherever they can be found. Consider the research footprint of HP Laboratories, the corporate research arm of Hewlett-Packard Company. Despite its longtime connection to Silicon Valley, HP Labs spends just 20 percent of its budget in the U.S.; the rest is spread among facilities in the U.K., Israel, India, Russia, China, and Japan.

Says Prith Banerjee, director of HP Labs and senior vice president for research, “HP Labs is really all about people. Wherever the best researchers are, we need to tap into those brightest minds. And the best researchers happen to be located in regions that have very strong universities that are producing top-quality Ph.D.s.” HP Labs’ commitment to open innovation extends beyond siting research facilities. In May, HP’s open innovation office issued a call for research proposals and received more than 450, from 200 universities in 28 countries; in August, it announced plans to fund 41 of those proposals at 34 universities in 14 countries.

HP has also moved to concentrate its 600 researchers on five “high-impact” areas, including “dynamic cloud services” and “intelligent infrastructure,” and to place bigger bets on fewer projects. That demands a portfolio-based approach to its research efforts, in which projects are divided into three areas — pure research, applied research, and research designed to feed directly into product development. The goal: to boost the transfer of the most promising new technol­ogy from the research phase to the development phase.

IBM, the third-largest spender on R&D in the C&E group ($6.2 billion in 2007), has a similarly globalized, if not highly diversified, R&D footprint, with well-established facilities in Japan, Germany, Switzerland, and Israel. The company’s early move into India, for instance, was primarily a cost play, notes Subramanian Iyer, distinguished engineer and chief technologist at IBM’s Semiconductor R&D Center, where he is charged with defining R&D strategy for IBM Microelectronics. Yet that motivation has changed significantly as researchers and engineers there have be­come more sophisticated.

IBM’s chip design begins in facilities in the U.S., where the chips are designed and the prototypes are tested. As IBM’s Indian employees become more skilled, more and more analysis of the design and testing data is being performed in India, says Iyer. The work gets turned around rapidly — sometimes even overnight — a kind of real-time processing that Iyer cites as one of the many significant advantages of global R&D. The design and testing process is so costly that any time saved is valuable.

Local demand does motivate part of the footprint strategy at both HP and IBM. Banerjee points to HP’s facility in Bangalore, India, whose theme is “innovation for the next billion customers.” “It is difficult,” he points out, “for researchers in Palo Alto or Cupertino to imagine a need for a keyboard for India’s 23 different languages. So we’ve moved much of our work on gesture-based keyboards to India, to work on the best user interface for accommodating all those languages, in part because we believe our researchers there are best suited to work on these problems.”

And at IBM, Iyer cites India, which lacks widespread broadband but boasts a strong mobile phone network that can connect people to the Internet. Unfortunately, the phones themselves lack Internet capabilities, so IBM is working on a technology called VoiceWeb that allows people to surf the Web using voice rather than typing. “We see the tremendous potential for coming up with products that are very, very specific to local conditions,” says Iyer. Indeed, as he points out, IBM’s revenues in India have grown at 25 to 35 percent each year for the past three years.

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  1. Vinay Couto and Arie Y. Lewin, Next Generation Offshoring: The Globalization of Innovation (Duke Center for International Business Education and Research, 2007): Examines trends in global offshoring practices and analyzes why and how companies go about globalizing innovation and seeking talent globally, and what challenges they face.
  2. Vinay Couto, Arie Lewin, Mahadeva Mani, and Vikas Sehgal, “Offshoring the Brains as Well as the Brawn,” Booz & Company/Duke Center for International Business Education and Research, July 2008: Shows how providers of outsourcing services are increasingly performing innovation work, such as new product development and R&D.
  3. Kevin Dehoff and Vikas Sehgal, “Innovators without Borders,” s+b, Autumn 2006: Provides comprehensive insight into the market for offshored engineering and technical services.
  4. Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First Century (Farrar, Straus and Giroux, 2005): Bestseller analyzing the progress of globalization with an emphasis on geo-economic trends.
  5. Thomas Goldbrunner, Yves Doz, Keeley Wilson, and Steven Veldhoen, “The Well-Designed Global R&D Network,” s+b Resilience Report, 05/15/06: A study of cross-boundary innovation networks worldwide showing low-cost, high-value ways they can be designed.
  6. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: The 2007 study, identifying two primary success factors in innovation strategy: aligning the innovation model to corporate strategy and listening to customers every step of the way.
  7. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Smart Spenders: The Global Innovation 1000,” s+b, Winter 2006: The 2006 study, uncovering a small group of high-leverage innovators who outperform their industries.
  8. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Money Isn’t Everything: The Global Innovation 1000,” s+b, Winter 2005: The 2005 study, revealing the value of an innovation dollar — and the basics of a better strategy.
  9. For more articles on innovation, sign up for s+b’s RSS feed.
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