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Published: October 15, 2002

 
 

Yves Doz: The Thought Leader Interview

s+b: Even before the September 11 attacks, some multinationals were finding that local companies, whether in South America, South Africa, or Asia, were far tougher competitors than they had anticipated, and that many of their presumed advantages did not pan out in these markets. Is this the limitation of the projection model?

DOZ: Yes, and there is one point that you picked up on earlier, which is that if your market intelligence and your market understanding is overly dependent on the home base, then it becomes very difficult to be sensitive to market differences. I would argue that it is not just a matter of tough local competitors, but that there may be very contextual knowledge involved, rich knowledge that can be acquired only by the experience of investing in a company.

SAB, South African Breweries, has been expanding in all kinds of lesser-developed markets quite successfully because it has acquired local expertise by dealing with underdeveloped infrastructures in South Africa and adjacent markets. Most Western beer suppliers, except perhaps Heineken, with its rich experience in the Congo, have had a tough time competing against SAB in developing country markets. That is a kind of expertise that most breweries, except perhaps companies like Heineken, don’t really have. There is a lot of latent expertise, passive knowledge, that is embedded there.

We’re touching here on one of the limitations of the projection model. Companies that are too deep in a projection mode just leave aside, and ignore, too much available knowledge from peripheral locations. Some of that knowledge involves ideas for new products, some of that knowledge refers to new kinds of competencies, some of it is awareness and understanding of process features.

These are all arguments that say, “Don’t overrely on the home base, and don’t ignore all the pockets of knowledge that are available around the world, just because they may be a little more difficult to access than what is next door to you.” The weakness of the projection model is not just facing tough local competitors — it is leaving pockets of knowledge under-exploited, when in fact you could access them on a relatively inexpensive basis and probably extract a lot of value from them. To the metanational companies, the world is a canvas dotted with pockets of expertise that are waiting to be brought together.

Future of Clusters

s+b: As someone who grew up, literally, in Silicon Valley, I find some of your assertions about the sources of innovation difficult to accept. Will not such clusters, with their rich academic ties, venture capital, and the virtuous cycle of concentrated and highly mobile talent, remain vital sources of innovation for decades to come?

DOZ: We are certainly not making the point that we are going to see the demise of Silicon Valley or the demise of geographical capability clusters. The point we are making is we are going to see the multiplication of such clusters with perhaps more original, more differentiated capabilities. In other words, more narrow, but more intense capabilities, as you see now with software in India, as you see around biotechnology in Cambridge in the U.K. In a sense you don’t have the same richness and the same diversity as you get in Silicon Valley, but you get actually quite a lot of expertise, and probably more depth and greater focus. So our argument is not to say that clusters are about to disappear.

Our argument is really twofold: Clusters are about to multiply, and they will develop and emerge, or in some cases be created by government policies or encouraged by government policies, in more diverse locations around the world.

 
 
 
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