Global R&D – An Update on the Latest Scenario and the Challenges Facing It

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Presented at the Asia Business Forum R&D Seminar January 21-22 2009

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  • Global R&D – An Update on the Latest Scenario and the Challenges Facing It

    1. 1. A slightly revised version of a presentation made at Asia Business Forum conference on Research & Development, 22 nd January 2009, Park Royal Hotel, Singapore Dr. Christopher Breach Vice President, Wire Bond Strategic Business Unit, Oerlikon Esec Assembly Equipment Pte Ltd, 1 Science Park Road, Singapore Science Park 2, #03-10 Capricorn Building, Singapore 117528 Global R&D – An Update on the Latest Scenario and the Challenges Facing It
    2. 2. <ul><li>Introduction – R&D Evolution </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Starting New R&D Subsidiaries </li></ul>Agenda
    3. 3. The Evolution of R&D / 1 People all over the world, regardless of race or culture have the same fundamental capabilities Many cultures and races have contributed to science over the centuries However, not all societies actively transformed scientific knowledge into something generally useful
    4. 4. The Evolution of R&D / 2 Many countries that are / were 3 rd world economies or are now emerging economies have made great contributions to science Middle East India China Culture and environment play a great role in the development of a society Sometimes over-structuring of a society and the imposition of rigid social hierarchies stagnates creativity Politics and freedom of expression also play a major role
    5. 5. The Evolution of R&D / 3 R&D and the concept of science PhDs began in Europe / US in late 19 th century, driven by industrialization R&D was once the domain of the US, Europe and Japan and is now to be found in many countries throughout the world One of the first research laboratories established by a commercial entity was by Philips in 1914 Concept of exploiting knowledge for developing new products emerged on a much larger scale
    6. 6. The Evolution of R&D / 4 J. Niosi. Fourth Generation R&D: From Linear Models to Flexible Innovation . Journal of Business Research 45 (1999) 111. We are now in the 4 th generation of R&D and these are the models that came before* 1 st generation 1950’s / 1960’s, R&D department is an isolated group that develops materials, products, processes and periodically hands them to manufacturing for refinement / removal of bugs 2 nd generation Recognition in 1960’s that R&D projects need to be managed <ul><li>3 rd generation : </li></ul><ul><li>In the 1970s it was recognized that R&D people are smart but </li></ul><ul><li>They’re not near the consumer involve sales/marketing </li></ul><ul><li>They don’t deal with suitability for mass production involve operations </li></ul><ul><li>They often don’t think about finances bring in finance </li></ul><ul><li>They don’t know everything (even if they think they do) who else can give input? </li></ul>
    7. 7. The Evolution of R&D / 5 Chart from B. Quelin. European Management Journal 18 (2000) 476 Which naturally led to the 4 th generation customer requirements orientation Technology push is not wrong but use sparingly Don’t develop features or things that are not needed It’s wasteful and cost matters R&D is a business like any other and needs to bring in profit
    8. 8. Agenda <ul><li>Introduction – R&D Evolution </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Starting New R&D Subsidiaries </li></ul>
    9. 9. R&D Organization Models <ul><li>Ethnocentric Model </li></ul><ul><li>Geocentric Model </li></ul><ul><li>R&D Hub Model </li></ul><ul><li>Polycentric Model </li></ul><ul><li>Integrated Network Model </li></ul>With each model there is a lesser or greater degree of localization of R&D activities
    10. 10. Ethnocentric / 1 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Structure R&D based in home country Central & tightly controlled R&D organization May tend towards rigid bureaucratic structure Central R&D
    11. 11. Ethnocentric / 2 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Behaviour This organization is inward looking It may believe the home country resources outclass resources available elsewhere The R&D culture is homogeneous Pushes developments to the various markets Examples Microsoft Volvo Toyota Strengths Highly efficient Low R&D costs Short cycle times Easy protection of core technologies Weaknesses Insensitive to local markets Risk of missing external technologies ‘ Not Invented Here’ attitude Tendency towards rigid organization
    12. 12. Geocentric / 1 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Structure R&D is centralized, close cooperation with overseas sites There is no local R&D competence Structure facilitates interaction with international manufacturing sites, sales organizations etc.. Central R&D International Manufacturing Local Logistics Global Sourcing Strategic Alliances Technology Parks International Sales Organization
    13. 13. Geocentric / 2 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Behaviour Overseas sites are a source of local information and may include manufacturing operations, logistics etc.. Unrestricted information flow, no internal conflict because only one R&D site Examples Nissan ATR MTU Strengths Highly efficient, centralized Low R&D costs More sensitive to local market needs Easy protection of core technologies Cost-efficient Weaknesses No systematic approach to local needs Localization performed at central R&D
    14. 14. Polycentric / 1 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Structure R&D is centralized Overseas sites are autonomous and localization of central developments or completely local R&D permitted Little or no co-ordination between R&D units, poor information flow This structure is common after M&A Central R&D R&D Centre 1 R&D Centre 2 R&D Centre 4 R&D Centre 5 R&D Centre 6 R&D Centre 3
    15. 15. Polycentric / 2 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Behaviour Local customization rather than standardization Local efficiency before global efficiency Unwillingness to share Duplication / internal competition Examples Nestlé’s old R&D model Philips old R&D model Strengths Strongly sensitive to local markets Focus on product development High usage of local resources Weaknesses Allows duplication of efforts Costly in time/effort/budget
    16. 16. R&D Hub / 1 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Structure Decentralized R&D tightly controlled by Central R&D Central R&D leads technology strategy and coordinates all R&D Collaboration between R&D centres tightly controlled by Central R&D Central R&D control and allocation of budget Central R&D R&D Centre 1 R&D Centre 2 R&D Centre 4 R&D Centre 5 R&D Centre 6 R&D Centre 3
    17. 17. R&D Hub / 2 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Behaviour Attitude of Central R&D may almost be ethnocentric or at best geocentric Central R&D may feel and /or act as superior in knowledge and capability over subsidiary R&D centres Examples BASF Bosch Daimler Fujitsu Strengths Highly efficient, centralized Low R&D costs High synergy between sites Sensitive to local market needs Avoids duplication of effort Weaknesses High coordination costs Central control may stifle local creativity
    18. 18. Integrated Network / 1 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Structure Each R&D Centre has a core competence that is not duplicated at other sites Any R&D Centre can be the leader of an R&D project that requires each site to develop a specific item R&D Centre 1 R&D Centre 2 R&D Centre 4 R&D Centre 3
    19. 19. Integrated Network / 2 O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231. Organization Behaviour Each site is in effect geocentric Information flows freely between sites Each site views the others as partners and resources for inclusion in projects Examples Nestlé Philips ABB Canon Sophisticated global IT infrastructure needed to share information Strengths Highly efficient Global before local efficiency High synergy between sites Free information flow Weaknesses High coordination costs Complex decision making processes and procedures
    20. 20. Trends <ul><li>The choice of model depends on the company product and market </li></ul><ul><li>The integrated R&D network model is often seen as the preferred way to structure international R&D </li></ul><ul><li>It caters to localization , technology integration & sharing of information (in theory) </li></ul><ul><li>But it’s more complex to manage </li></ul>O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231.
    21. 21. Localization and Integration
    22. 22. Agenda <ul><li>Introduction – R&D Organization Models </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Setting Up Global R&D </li></ul><ul><li>Location </li></ul>
    23. 23. Site – Where to Locate is a Basic Decision <ul><li>Assume a decision has already been made to support R&D abroad </li></ul><ul><li>What attracts companies to establish R&D in a certain location? </li></ul><ul><li>Information & Communications Technology </li></ul><ul><li>Transportation & Accommodation </li></ul><ul><li>Local supply chain </li></ul><ul><li>People </li></ul>
    24. 24. There are other factors that affect location What kind of products are being researched and developed? Localized versions of centrally developed products that are fundamentally the same everywhere? e.g. cars, televisions? Are they products for the specific region only? food related products often require localized R&D Is there an R&D advantage in a particular location? high level expertise available at local universities?
    25. 25. These are the most often cited advantages <ul><li>Market Competitiveness </li></ul><ul><li>Supply Conditions </li></ul><ul><li>Scientific Institutions </li></ul><ul><li>Government Support </li></ul>M. von Zedtwitz, O. Gassmann, R. Boutellier. Organizing global R&D: challenges and dilemmas. Journal of International Management 10 (2004) 21.
    26. 26. These are believed to be the most important <ul><li>Market Competitiveness </li></ul><ul><li>Supply Conditions </li></ul><ul><li>Scientific Institutions </li></ul><ul><li>Government Support </li></ul>M. von Zedtwitz, O. Gassmann, R. Boutellier. Organizing global R&D: challenges and dilemmas. Journal of International Management 10 (2004) 21. Universities Research Institutes Human Resources The development of outstanding universities and institutes may often be due to strong government support e.g. Singapore
    27. 27. Agenda <ul><li>Introduction – R&D Organization Models </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Setting Up Global R&D </li></ul><ul><li>Communication Barriers </li></ul>
    28. 28. Communication Barriers <ul><li>R&D Organizations with the exception of ethnocentric model depend strongly on communication between sites </li></ul><ul><li>A common language is needed, regardless </li></ul><ul><li>Access to skilled staff with the necessary language skills is essential </li></ul><ul><li>Cultural sensitivity is essential but often ignored </li></ul><ul><li>Interpersonal skills </li></ul>
    29. 29. Communication Barriers <ul><li>The fundamental challenges </li></ul><ul><li>Language </li></ul><ul><li>Distance </li></ul><ul><li>Communication style of parent company </li></ul>
    30. 30. Communication Barriers <ul><li>Language skills may affect management style of the parent company towards subsidiaries and the choice of R&D organization </li></ul><ul><li>The greater the common language skills the easier it is to communicate and understand product requirements </li></ul><ul><li>The greater the common language skills the greater the freedom of expression and accuracy of descriptions </li></ul><ul><li>R&D subsidiaries in regions with poorer language skills may be managed in more authoritarian way </li></ul><ul><li>Those more fluent may find greater autonomy </li></ul>
    31. 31. Communication Barriers <ul><li>Language skills can also lead to greater recognition within an organization </li></ul><ul><li>For example, technical paper presentations reflect better on a company and the presenter when the presenter is fluent in the language and clearly understood </li></ul>
    32. 32. Agenda <ul><li>Introduction – R&D Organization Models </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Setting Up Global R&D </li></ul><ul><li>Cultural Differences </li></ul>
    33. 33. Cultural differences are critical <ul><li>Culture of the Home Base </li></ul><ul><li>Company culture and the R&D Organization Model </li></ul><ul><li>Culture of the country where the subsidiary is located </li></ul><ul><li>Differences between home base and local culture - misunderstanding </li></ul><ul><li>People are basically the same everywhere in capability but </li></ul><ul><li>Cultural values and standards affect the way we behave in private and public and some cultures have a strict social hierarchy </li></ul>
    34. 34. People Culture: US / Europe <ul><li>All educational levels – questioning and challenging encouraged </li></ul><ul><li>‘ Experts’ admit not to know everything but bring creative thought and experience to tackle a new problem </li></ul><ul><li>People often have strong opinions and will assume they are right, but open to see other viewpoints </li></ul><ul><li>Workplace – individual opinions expected , some confrontation </li></ul><ul><li>Mistakes – learning experience </li></ul>
    35. 35. People Culture : Asia (SE and North East) <ul><li>Less confrontational criticism, calm discussion </li></ul><ul><li>Persons recognized as experts tend to feel they must know everything in their field </li></ul><ul><li>A tendency to focus on the positive aspects of the work of others rather than the negative </li></ul><ul><li>Strong opinions or disagreement may not be expressed in a larger group, preference for 1 to 1 discussion </li></ul><ul><li>Often difficult to disagree with someone perceived as a ‘senior’ person or the boss </li></ul>
    36. 36. R&D Characteristics – Culture Free <ul><li>R&D is creative and innovative and requires creative individuals at all levels </li></ul><ul><li>Individual talent is extremely important </li></ul><ul><li>Synergy is only achieved from teamwork </li></ul><ul><li>Teams need to engage in creative and open discussion and sharing </li></ul><ul><li>Social culture and R&D culture may need to be quite different </li></ul>Page
    37. 37. Agenda <ul><li>Introduction – R&D Organization Models </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Setting Up Global R&D </li></ul><ul><li>Staff Training & Development </li></ul>
    38. 38. Standardization of Processes <ul><li>Standard practices in R&D must be adopted company wide </li></ul><ul><li>Everyone needs to do certain things the same way </li></ul><ul><li>Standard product development procedures (PDP) </li></ul><ul><li>R&D quality </li></ul><ul><li>Hands – on face to face training is required for all processes </li></ul><ul><li>‘ Read it by yourself’ attitude is not acceptable </li></ul><ul><li>Before anything else company wide practices need to be established and followed </li></ul>
    39. 39. Staff Training <ul><li>Codified Knowledge Transfer </li></ul><ul><li>Easily transferred over long distances with minimum cost </li></ul><ul><li>Tacit Knowledge Transfer </li></ul><ul><li>Knowledge that is acquired through experience </li></ul><ul><li>Transfer requires the learner to undergo the experiences of the person transferring knowledge </li></ul><ul><li>Takes time </li></ul><ul><li>Requires face to face training </li></ul>
    40. 40. Tacit Knowledge Transfer <ul><li>R&D HQ </li></ul><ul><li>Identify suitable local staff </li></ul><ul><li>Initial training at company R&D HQ </li></ul><ul><li>Expatriate Staff </li></ul><ul><li>Station at subsidiary </li></ul><ul><li>Fixed period of time </li></ul><ul><li>Role is to transfer knowledge to local R&D </li></ul><ul><li>Can be expensive </li></ul>Staff Training
    41. 41. Tacit Knowledge Transfer - Challenges <ul><li>Expatriate Staff </li></ul><ul><li>What motivates the expatriate expert to transfer knowledge? </li></ul><ul><li>Will all the knowledge be transferred? </li></ul><ul><li>Or will something be held back? </li></ul><ul><li>The challenge is to ensure that the knowledge transfer is complete </li></ul>Staff Training
    42. 42. Staff Development <ul><li>Postgraduate degree sponsorship </li></ul><ul><li>Masters / PhD </li></ul><ul><li>Areas of direct mid –long term interest to the company </li></ul><ul><li>Generation of useful data </li></ul><ul><li>Source of potential R&D Staff </li></ul><ul><li>2-3 years period allows company to evaluate ‘fit’ of postgraduate students with company culture </li></ul><ul><li>i.e. really get to know them well </li></ul><ul><li>Fund PhD study of existing staff </li></ul><ul><li>Strong motivator </li></ul><ul><li>Enables staff retention </li></ul>
    43. 43. Staff Development <ul><li>Encourage public displays of technical competence </li></ul><ul><li>Technical Conference Papers </li></ul><ul><li>Journal Articles </li></ul><ul><li>Biweekly internal Friday afternoon presentations </li></ul><ul><li>Annual Awards by R&D Centre </li></ul><ul><li>Individual </li></ul><ul><li>Group </li></ul>
    44. 44. Agenda <ul><li>Introduction – R&D Organization Models </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Setting Up Global R&D </li></ul><ul><li>Management of University & Industrial Alliances </li></ul>
    45. 45. University & Industrial Alliances Industrial R&D – short to mid term, clear objectives High time pressure Structured Academic R&D - mid to long term, broader objectives Low time pressure More fluid boundaries of investigation Research Institutes Often industry oriented Staffing may be very academic
    46. 46. Agenda <ul><li>Introduction – R&D Organization Models </li></ul><ul><li>R&D Organization Models </li></ul><ul><li>Challenges of Setting Up Global R&D </li></ul><ul><li>Management of Projects Dispersed between R&D Centres </li></ul>
    47. 47. Management of Dispersed Projects Geocentric R&D Hub Integrated Network Three models take advantage of competence & skills at other sites The R&D Hub and Integrated Network models have the most to contribute because they have local R&D competence Diagrams from O. Gassmann, M von Zedtwitz. New concepts and trends in international R&D organization. Research Policy 29 (1999) 231.
    48. 48. Dispersed R&D centres contribute Contribute products / knowledge for local markets that is shared with other R&D centres Develop products / knowledge that integrates into a larger cross – R&D project run by another R&D centre Contributions of Dispersed R&D Groups R&D – 2 Component A R&D – 1 Component B R&D – 3 Component C R&D – 4 Leader, Integrator
    49. 49. Challenges of Dispersed Projects <ul><li>There may be internal competition to be the centre of excellence for a particular market that may be viable in more than one location </li></ul><ul><li>Information is not wholly shared - fear that what others know can be taken and used to give another site an advantage </li></ul><ul><li>In cross – site projects, not all information may be shared </li></ul><ul><li>Understanding of requirements is more critical in cross – site projects, small misunderstandings can be costly during integration </li></ul><ul><li>These types of behaviour cause many companies to be biased towards central control, regardless of the R&D organization model </li></ul>
    50. 50. Challenges in Global R&D Teams <ul><li>Gaining mutual respect across borders </li></ul><ul><li>Achieving a common understanding of the project goals </li></ul><ul><li>Sharing completely all information relating to the project development </li></ul><ul><li>Interdependence of projects results – clear understanding of how each R&D centre’s work integrates </li></ul><ul><li>Distance – it is difficult to explain many things but easy to show in person </li></ul>
    51. 51. Overcoming Challenges in Global R&D Teams <ul><li>Project Start – face to face meetings facilitates easier explanation / demonstration of what is needed </li></ul><ul><li>Project execution – more remote interaction </li></ul><ul><li>Project end / close out – face to face meetings </li></ul>
    52. 52. Summary The capability of people to perform R&D is the same everywhere The company setting up overseas R&D will often face an issue of ‘letting go’, of having confidence in the local R&D centre to perform. This may arise from cultural misconceptions and cultural understanding is vital to the success of a global R&D centre Overcoming cultural differences and misperceptions may therefore be one of the most important activities in successful globalization of R&D

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