Globalization of R&D –
Drivers and success factors
Study
Stuttgart, June 2007
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Content
A.
Management summary
3
B.
Key questions and study approach – Analysis of current practices in globalizing
R&D in different industries
8
C.
Drivers of globalization – Access to markets and technology drives R&D
globalization decisions
D.
Organizational models – Company clusters show distinct patterns of globalizing R&D 29
D.1 Cluster comparison – Commonalities and differences
32
D.2 Cluster focus – Organizational models by cluster
37
E.
Consequences for management – Successful models for globalizing R&D
62
F.
Roland Berger and esb Research Institute – Combining practical insights
and scientific knowledge
79
15
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A. Management summary
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MANAGEMENT SUMMARY
The study examines current practices in globalizing R&D – It
considers the drivers and organizational models in six industries
>
Globalization of value chains has increased significantly in recent years – The focus of
globalization has expanded from manufacturing and assembly to the entire value chain
>
When it comes to R&D, however, the process of globalization is still largely unclear –
Various patterns can be found in practice
>
Roland Berger and the esb Research Institute have conducted an empirical study to
explore the drivers of R&D globalization and the organizational models applied across
six industries: Engineered products, Automotive, Pharmaceuticals, Electronics & IT,
Chemicals, Consumer goods
>
The study especially addresses
– Drivers of R&D globalization
– Criteria for the selection of R&D locations
– Internal organization of R&D networks
– Tools for managing the global R&D process
– Communication in global R&D networks
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MANAGEMENT SUMMARY
The examined companies can be grouped into four clusters based
on the drivers that push the globalization of R&D forward
>
Three main drivers for globalization of R&D were examined
– Access to markets
– Access to technological know-how
– Reduction of R&D cost
>
Main drivers of R&D globalization are market and technology access – The study revealed
that reducing R&D costs is a less important driver
>
Based on the degree of importance of market access and technology access, companies
can be grouped into four clusters
– Globalization leaders view market and technology access as being of high importance
– Global marketers view market access as being more important than technology access
– Technology hunters view access to technology as the main reason for globalization
– Opportunistic players are not driven to globalize R&D systematically but based on
single, concrete business requirements
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MANAGEMENT SUMMARY
Each cluster shows a typical model for globalizing their R&D
>
Globalization leaders create a network of central research and local development centers.
Activities are coordinated throughout the entire global R&D network
>
Global marketers generate basic innovations and product platforms in global research
centers. These are transformed into products for local markets in local development centers
>
Technology hunters focus R&D efforts on a small number of global research centers that
specialize in individual research areas. Local customization of products is limited
>
Opportunistic players drive their R&D efforts mainly out of their home base. Global efforts
are limited and typically driven by individual product, client or production requirements
>
Despite mainly company-specific differences, industries show a tendency towards certain
clusters, e.g. pharmaceutical and electronics companies score high on the technology
dimension, while automotive companies score high on the market dimension
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MANAGEMENT SUMMARY
A set of success factors for the management of global R&D
networks has been identified
>
To develop a successful R&D network, companies need to start from corporate and R&D
strategy – Importance of the drivers technology, market know-how, or opportunistic cost
reduction to be determined first
>
Technological know-how should be concentrated as much as possible to leverage
economies of scale and scope
>
Market know-how should be developed locally, in decentralized units
>
Managing globalization of R&D should never be an end in itself, concrete business reasons
have to drive established structures and applied methods
>
Historically grown structures must be closely scrutinized and adapted to match current
strategic considerations
>
While structures need to be adapted, particularly if grown historically, changes should be
implemented carefully to avoid personnel and know-how loss
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B.
Key questions and study
approach – Analysis of current
practices in globalizing R&D
in different industries
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Globalization has gone beyond mere trade relations – Foreign direct
investment grows stronger than global GDP and exports
GDP, Exports, FDI – World [1985=100]
CAGR
762 FDI
10.7%
324
312 Exports
5.9%
156
164 GDP
2.5%
2000
2005
629
100
1985
1990
1995
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Companies drive the globalization process by relocating all parts of
the value chain to lower-cost countries – Including R&D
Past relocation focus
Functions
R&D
Focus in the past
Procurement
Manufacturing
Assembly
Service
Current relocation focus
Current
focus
> Relocation focus in the
past has been strongly
on manufacturing and
assembly functions
> Focus has shifted
towards globalization of
entire value chain from
R&D to Administration
Administration
Source: RB Study "Global Footprint Design"
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Companies take very different paths when globalizing their R&D
activities – Some typical patterns are emerging
Cost leverage
Global concentration
System engineering remains in Germany –
Detailed engineering is outsourced to India to
leverage cost advantages
Consolidation of research in three locations
worldwide
ThyssenKrupp
Bayer
Centralization
Global decentralization
Focus of R&D activities in Germany because
of availability of experts
180 researchers in two central locations –
1,200 developers in all relevant local markets
German machinery producers
Givaudan
Differentiation
Global coordination
New research centers have been opened in
Shanghai and Singapore to benefit from local
trends and know-how
32 R&D locations in 30 countries coordinated
by one global research center
Novartis
Source: Roland Berger research
3M
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To find out more about the patterns and success factors of R&D
globalization, our study set out to answer five main questions
Guiding questions
1 What drives companies in globalizing
their R&D?
> Are cost savings the main driver?
> How important is access to local markets?
> What role does access to technology play?
2 How do companies pick their
R&D locations?
> Are locations picked for strategic reasons?
> What impact do historically grown structures have?
> How are tasks distributed among locations?
3 How do companies organize their global
R&D network?
> To what extent do different locations collaborate?
> How are external partners included?
> Do patterns differ depending on the type of R&D project?
4 What tools do companies apply to
manage their global R&D process?
> What tools are used to achieve different strategic goals?
> Are there any differentiating tools and methods?
5 How do companies communicate and
exchange know-how globally?
> Do different organizational setups require different means of
communication?
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The study covered a balanced sample of six industries, with a focus
on large companies
Evenly balanced responses
from six industries
Majority of companies with more
than EUR 500 m turnover
By industry
By turnover [EUR m]
Consumer
goods
Chemicals
17
(17%)
17
(17%)
17
(17%)
20
(19%)
15
(15%)
Electronics
and IT
Engineering
products
Automotive
17
(17%)
Pharmaceuticals
I2,000
17
(17%)
1,0001999
41
(40%)
23
(22%)
<500
22
(21%)
500-999
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An overview of current R&D globalization practices was gained
through a quantitative survey – In-depth insight via expert interviews
Applied research methods
METHODOLOGY
QUANTITATIVE SURVEY
EXPERT INTERVIEWS
Research goal
> Empirical description of status quo
of internationalization of R&D
> Deeper understanding of
mechanisms, challenges, and best
practices in internationalizing R&D
Method of data
collection
> Computer Assisted Telephone
Interviews (n = 103)
> Personal interviews
Sample choice
> Germany based multi-nationals
> Selection based on turnover
> By quota per industry
Type of questions
> Highly structured
> Closed questions
> Semi-structured
> Open questions
Time frame
> 3rd/4th quarter 2006
> Until 1st quarter 2007
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C. Drivers of globalization –
Access to markets and
technology drives R&D
globalization decisions
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Drivers for globalization of R&D – Market and technology access are
clearly more important than cost
Drivers for globalization of R&D1)
Rationale
Access to
markets
3.7
Access to
technological
know-how
3.4
> Market and technology access
play the most important role in
decisions to globalize R&D
> Cost considerations play a role in
individual projects, but are
generally less important for
strategic globalization decisions
MAIN DRIVERS
Reduction of
cost
1) Likert scale – importance of driver 1 – low ... 5 – high
2.4
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BACKUP
Drivers of R&D globalization have been checked using a set of
criteria in the study
DRIVER
CRITERIA IN QUESTIONNAIRE
Access to markets
> Access to local market
> Better response to local market requirements
> Fulfillment of local content requirements
> More successful market introductions
Access to
technology
> Technologically more advanced innovations
> Reduction of time-to-market
> Access to qualified R&D staff
> Access to global pools of professional know-how
Reduction of cost
> Reduction of R&D cost
> Access to subsidies
Importance of drivers
assessed based on an
evaluation of each
criterion on the
Likert scale (1-5)
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BACKUP
Market and technological aspects gained higher ratings than cost
savings in all industries examined in the study
Importance of R&D cost reduction vs. most important driver by industry
AUTOMOTIVE
CHEMICALS
4.00
4.19
2.95
Local market
requirements
Reduction of
R&D cost
ELECTRONICS & IT
4.07
Reduction of
time to market
3.36
Reduction of
R&D cost
CONSUMER GOODS
4.12
2.71
Access to
local market
Reduction of
R&D cost
ENGINEERED PRODUCTS
2.25
Local market
requirements
PHARMA INDUSTRY
4.25
3.82
2.67
More
successful
market
introduction
Reduction of
R&D cost
Reduction of
R&D cost
2.56
Access to
global pools of
professional
know-how
Reduction of
R&D cost
Scale: Lickert; range: 1-5
Value 1: not important
Value 5: very important
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Depending on technology and market drivers, the study identified
four R&D globalization clusters
Clusters of R&D globalization
Importance
of technology
drivers
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
Importance of
market drivers
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Companies within each cluster have different competitive reasons
for globalizing R&D
Competitive rationale by cluster
TECHNOLOGY HUNTERS
GLOBALIZATION LEADERS
> Competitive advantage largely based on superior
technology
> Technological advances based on basic innovations
> Access to qualified staff is a key prerequisite for
defending technology leadership
> Local production, customization is
limited
> Competitive position based on leading technology
and adaptation of products to local market needs
> Strong focus on leveraging local developments to
other markets
> Organizational capability to transform
leading technology into locally adapted
products is key
> Companies are rather independent
from global R&D resources
> Technological expertise is readily available at home
base
> Adaptation of products to local market requirements
on a client-/project-specific basis
> Success based on offering products
that perfectly fit local needs
> Need for integrating local trends
and tastes into the R&D process is high
> Fast adaptation to market and customer
requirements is key
OPPORTUNISTIC PLAYERS
GLOBAL MARKETERS
FOUR CLUSTERS
OF GLOBAL R&D
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The companies participating in the study equally cover all four
globalization clusters
Clusters of surveyed companies
IMPORTANCE OF
TECHNOLOGY DRIVERS
5.00
4.50
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
4.00
3.50
3.00
2.50
2.00
1.50
1.00
1.00
2.00
3.00
4.00
5.00 IMPORANCE OF
MARKET DRIVERS
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Different R&D globalization cluster patterns emerge when viewed
from an industry perspective
Drivers for globalization of R&D – Industry patterns
CHEMICALS
ELECTRONICS / IT
AUTOMOTIVE SUPPLIERS
CONSUMER GOODS
PHARMACEUTICALS
ENGINEERED PRODUCTS
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CHEMICALS INDUSTRY
The chemicals industry typically conducts its basic R&D in global
development centers and application engineering locally
Industry-specific drivers for R&D globalization (1/6)
> Generally there is a strong differentiation
between basic engineering and application
engineering
– Basic engineering is conducted in
large R&D centers typically in Germany
and USA, but more and more in India
and China
– Application engineering requires
proximity to markets (for instance in
agriculture and petrochemicals)
TECHNOLOGY
GLOBALIZATION LEADERS
MARKET
> Organical chemistry is generally more
technology oriented, similar to the
pharmaceutical industry as the focus is
often on API development
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ELECTRONICS INDUSTRY
The electronics industry is driven by the need to have access to
leading technology worldwide
Industry-specific drivers for R&D globalization (2/6)
TECHNOLOGY
TECHNOLOGY HUNTERS
MARKET
> Technology is the main driver for the
success of a product
> Customizing products to the needs of
local markets is less important – Products
in this industry are frequently similar
around the globe
> Combinations of various software and
hardware technologies are required to
create a new product
> Access to all relevant technologies for a
product on time is key for keeping pace
with the market
> Presence at global technology centers
(e.g. Bangalore, India) is required to be
part of global technology trends
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AUTOMOTIVE SUPPLIERS
Automotive suppliers typically globalize R&D to provide local
application support to customers
Industry-specific drivers for R&D globalization (3/6)
TECHNOLOGY
GLOBAL MARKETERS
MARKET
> Automotive suppliers typically differentiate
between basic engineering and
application engineering
> Basic engineering is often conducted
centrally in the industry's big technology
clusters (Germany, Japan)
> Application and production engineering
are close to customers and manufacturing
> Since automotive suppliers are already
located in the industry's technology
clusters, globalization decisions are
mainly taken to follow markets
> Cost is expected to play a much stronger
role in the future
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CONSUMER GOODS
In consumer goods market orientation tends to be more important
than technology access for globalizing R&D
Industry-specific drivers for R&D globalization (4/6)
> Market orientation is key, since consumer
products depend strongly upon local tastes
and trends
TECHNOLOGY
> Product development is done for local
markets and centralization of R&D for
other markets is difficult
> Technology orientation is important for
the development of global platforms (e.g.
basic ingredients in the food industry)
> Therefore market orientation tends to
outweigh technology orientation in
globalization of R&D
GLOBAL MARKETERS
MARKET
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PHARMACEUTICALS INDUSTRY
In pharmaceuticals, technology access is a more important driver of
globalization than market access
Industry-specific drivers for R&D globalization (5/6)
> Technology orientation is important to
access know-how in global hot spots
TECHNOLOGY
> Market orientation is particularly important
for development, e.g. for clinical studies,
patient availability and bridging studies
> Know-how is spread globally, while only a
few markets (Western Europe, USA,
Japan) are really important
TECHNOLOGY HUNTERS
> Technology outweighs market orientation
MARKET
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ENGINEERED PRODUCTS
In engineered products, some companies focus on central R&D,
while others globalize for better market access
Industry-specific drivers for R&D globalization (6/6)
> Two trends can be distinguished
TECHNOLOGY
– Companies focus on a central R&D
network, e.g. export-oriented machinery
producers in Germany
OPPORTUNISTIC
PLAYERS/
GLOBAL MARKETERS
– Companies globalize R&D for better
market access, e.g. to provide local
application support or local design
> Technology access does not play a vital
role as it is readily available in existing
locations
MARKET
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D. Organizational models –
Company clusters show distinct
patterns of globalizing R&D
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For each R&D globalization cluster, a typical organizational model
has been identified
Organizational models for globalizing R&D
TECHNOLOGY HUNTERS
Coordination
GLOBALIZATION LEADERS
> R&D concentrated in global
centers of excellence
> Network of central research and
local development
> R&D locations focused on
individual research areas
> Strong coordination among central
and local units
> Research efforts centrally
coordinated
> Significant development/
customization for local markets
> R&D mainly in central locations in
home countries
> Basic innovation and leverage of
scale effects in global research
centers
> International locations managed
independently
> Globalization efforts focused on
specific product/production support
OPPORTUNISTIC PLAYERS
> Development of concrete products
in local development centers
> Focal point of R&D in local
development centers
GLOBAL MARKETERS
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The organizational models are compared by cluster and analyzed
along the lines of four design criteria
Analysis of organizational models
•
•
•
•
Clusters
D.1
Globalization leaders
Global marketers
Technology hunters
Opportunistic players
Design criteria • Global R&D network design
• Organization of R&D network
• Management methods
• Communication tools
Cluster comparison –
Comparison by design criteria
D.2
GLOBAL R&D NETWORK DESIGN
Cluster details –
Details of design criteria by cluster
I
GLOBALIZATION LEADERS
The interplay of central and local units differs depending on the
reasons for globalizing R&D
Globalization leaders leverage global R&D to maximize both market
and technological know-how
Comparison of network design by cluster
NETWORK
I GLOBALIZATION
LEADERS
II GLOBAL
MARKETERS
III TECHNOLOGY
HUNTERS
IV OPPORTUNISTIC
PLAYERS
Top 3
criteria
for network
design
1. Qualified personnel
2. Proximity to
customers
3. Access to markets
1. Proximity to
customers
2. Access to markets
3. Qualified personnel
1. Qualified personnel
2. Legal conditions
3. Proximity to
production
1. Qualified personnel
2. Proximity to
customers
3. Personnel costs
Dominating
roles of
locations
Global research and
local development
centers
Global research and
local development
centers
Activities largely
centralized in single
R&D center
R&D in independent
locations, both
centralized and local
Rationale
> Pooling of know-how
in central R&D
locations
> R&D centers in locations with favorable
research conditions
> Adaptation of common
technologies/platforms
in local markets
> Local development
centers are the
dominating structure
> Central research
activities to leverage
scale effects across
markets
> Centralized research
and product
development
> Only little local
adaptation of
products is needed
> Favorable research
conditions drive
location decisions
> Globalization of R&D
for pragmatic reasons
(customer requirements, cost reduction,
production support)
> Globalization not a
core driver of R&D
strategy
Study Globalization of R&D.ppt
ORGANIZATION
> Network of central research
and local development
> Strong coordination of centralized and decentralized units
> Significant development/
customization for local markets
> Strengths of local and global
teams systematically combined
> Global teams share technological
know-how, local teams address
local market needs
> Extensive collaboration with
external partners
Global
Local
External
GLOBALIZATION LEADERS
High
> Focus on establishing close
personal communication across
locations and functions
> Formal communication has
become standard
Low
COMMUNICATION
33
High
Low
> Extensive use of management
methods
> Utilization of standard processes
and structures is common practice
> Best companies use more
advanced methods
METHODS
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D.1 Cluster comparison –
Commonalities and differences
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GLOBAL R&D NETWORK DESIGN
The interplay of central and local units differs depending on the
reasons for globalizing R&D
Comparison of network design by cluster
I GLOBALIZATION
LEADERS
II GLOBAL
MARKETERS
III TECHNOLOGY
HUNTERS
IV OPPORTUNISTIC
PLAYERS
Top 3
criteria
for network
design
1. Qualified personnel
2. Proximity to
customers
3. Access to markets
1. Proximity to
customers
2. Access to markets
3. Qualified personnel
1. Qualified personnel
2. Legal conditions
3. Proximity to
production
1. Qualified personnel
2. Proximity to
customers
3. Personnel costs
Dominating
roles of
locations
Global research and
local development
centers
Global research and
local development
centers
Activities largely
centralized in single
R&D center
R&D in independent
locations, both
centralized and local
Rationale
> Pooling of know-how
in central R&D
locations
> R&D centers in locations with favorable
research conditions
> Adaptation of common
technologies/platforms
in local markets
> Local development
centers are the
dominating structure
> Central research
activities to leverage
scale effects across
markets
> Centralized research
and product
development
> Only little local
adaptation of
products is needed
> Favorable research
conditions drive
location decisions
> Globalization of R&D
for pragmatic reasons
(customer requirements, cost reduction,
production support)
> Globalization not a
core driver of R&D
strategy
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ORGANIZATION OF R&D NETWORK
The internal organization of global R&D networks is adapted to fit
the requirements of centralized and decentralized locations
Comparison of network organization by cluster
I
GLOBALIZATION
LEADERS
II GLOBAL
MARKETERS
III TECHNOLOGY
HUNTERS
IV OPPORTUNISTIC
PLAYERS
Dominating
internal
organization
Dual model – 27%1) of
companies with global,
35% with local teams
40% of companies
38% of companies use
> No preferred
structure visible
Major form
of external
collaboration
50% project-specific
36% largest share of
33% largest share of
38% largest share of
Rationale
> Company-specific global > Research driven by
> Internal organization
and local structures to
local markets
supports know-how
combine know- how and > Consolidation and
concentration
market needs
leverage of scale
> External know-how is
> External collaboration
effects through global
integrated into the
focused on concrete
platform teams
organization on a
projects and products
long-term basis
collaboration with
customers and partners
from other industries
1) Share of respondents per cluster
with global platform
teams
strategic alliances with
customers and
suppliers
locally centralized
teams
strategic alliances with
research providers
uncoordinated
collaboration
> Organizational
structures follow
considerations other
than R&D strategy
> External know-how
only used
opportunistically
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MANAGEMENT METHODS
Systematic management seems beneficial in most cases – Global
marketers however require local freedom
Comparison of management methods by cluster
GLOBALIZATION
LEADERS
I
Methods1)
Companies
with
+ high
– low
achievement
of R&D goals
Rationale
+
4.10
3.81
–
+
3.90
3.14
–
GLOBAL
MARKETERS
II
+
4.15
3.85
–
Process Personnel Control
–
3.14
–
3.00
2.83
+
2.75
+
TECHNOLOGY
HUNTERS
III
–
3.50
3.00
+
Process Personnel Control
+
3.86
2.83
–
+
3.56
2.81
–
OPPORTUNISTIC
PLAYERS
IV
+
3.58
3.33
–
Process Personnel Control
+
3.30
2.96
–
+
2.91
2.43
–
+
3.50
3.27
–
Process Personnel Control
> Highest tool utilization
> Best companies use
fewer coordination tools
> Comparatively low tool
usage overall
> Lowest use of personnelfocused tools
> Tools particularly
important to successfully
combine central
technology development
and local market knowhow
> Freedom required to
enable local
development centers to
adapt to local market
needs
> High degree of
geographical
concentration makes
managing R&D
processes easier –
Fewer tools required
> Focus is on controlling
global R&D activities
> Strategic use of global
R&D is of secondary
importance
1) Likert scale – importance of method 1 – low ... 5 – high
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COMMUNICATION TOOLS
Formal communication still dominates inter-personal methods –
Globalization leaders communicate most intensively
Comparison of communication tools by cluster
I
Use of communication
tools1)
GLOBALIZATION
LEADERS
80%
Formal
Rationale
II
GLOBAL
MARKETERS
75%
78%
Interpersonal
Formal
TECHNOLOGY
HUNTERS
69%
75%
Interpersonal
Formal
> Most extensive use of
communication tools
DECREASE IN UTILIZATION
> Communication tools are
key to share know-how
between research centers
and local development
> Extensive communication
to provide central
platform know-how to
local product
development
1) Share of respondents per cluster
III
IV
OPPORTUNISTIC
PLAYERS
65%
69%
66%
Interpersonal
Formal
Interpersonal
> Lowest use of
communication tools
> Local concentration of
R&D supports informal
communication
> Comparatively few tools
required
> Communication focused
on controlling international
R&D activities
> Few tools required
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D.2 Cluster details –
Organizational models by
cluster
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I
GLOBALIZATION LEADERS
Globalization leaders leverage global R&D to maximize both market
and technological know-how
NETWORK
ORGANIZATION
> Network of central research
and local development
> Strong coordination of centralized and decentralized units
> Significant development/
customization for local markets
> Strengths of local and global
teams systematically combined
> Global teams share technological
know-how, local teams address
local market needs
> Extensive collaboration with
external partners
Global
Local
External
GLOBALIZATION LEADERS
High
> Focus on establishing close
personal communication across
locations and functions
> Formal communication has
become standard
Low
COMMUNICATION
High
Low
> Extensive use of management
methods
> Utilization of standard processes
and structures is common practice
> Best companies use more
advanced methods
METHODS
Study Globalization of R&D_Long Version
38
I
GLOBALIZATION LEADERS
Location decisions are determined by both technology and market
considerations
Global R&D network design
CRITERIA FOR LOCATION SELECTION
ROLES OF LOCATIONS
[Importance of criteria 1...5]
Availability of qualified
personnel
Proximity to customer
locations
Access to local markets
4.26
3.97
3.76
Legal conditions
3.46
Proximity to existing
production facilities
Proximity to research
partners
Local content
requirements
3.39
Personnel costs
Subsidies
3.37
3.21
2.84
> Research activities are concentrated in global
competence centers – Preferably located in
global centers of excellence
> Research centers are often co-located with local
development centers in key markets to facilitate
project transition from research to development
> Global research centers develop technological
solutions – Transformation into concrete
products completed in local development units
> Independent locations are rarely found in
either home country or abroad
2.39
Study Globalization of R&D_Long Version
39
I
GLOBALIZATION LEADERS
Global and local teams are combined to leverage both central
technology and local market know-how
Organization of R&D network – Internal structures
TEAM STRUCTURE
TEAM TASKS
[No. of responses in %]
Global teams
Regional teams
30
15
Local teams
33
30
15
21
21
32
39
Global lead
locations
20
17
15
Separate
organizational units
3
6
3
Research project
Platform development
> Research projects combine the most advanced
available know-how – If concentrated in single
locations in local teams, if distributed across
multiple locations in global teams
> For platform development, global technology
and local market experts collaborate to ensure
an effective transfer of know-how
> The alternative structure for platform development
are global lead locations which are not widely
used
> Incremental development is mainly undertaken
in local teams to incorporate local market
know-how
Incremental improvement
Study Globalization of R&D_Long Version
40
GLOBALIZATION LEADERS
I
Collaboration occurs with universities and research institutions for
know-how, and with customers to understand market requirements
Organization of R&D network – External linkages
COLLABORATION WITH EXTERNAL PARTNERS
NATURE OF COLLABORATION
[No. of responses in %]
Universities
Research institutions
21
16
Partners from other
industries
Customers
Suppliers
Competitors
Uncoordinated
exchange of experience
53
29
11
45
37
13
21
32
42
37
3 89
13 13
Coordinated single
R&D projects
> All respondents include universities in their R&D
network
> Generally high level of collaboration with
external partners
87
> Less attention spent on collaboration with
governmental institutions
13 5 84
37
16
13 5 100
18
55
24
Governmental
institutions
R&D service providers
61
82
> Focus on single project R&D collaboration
3 71
> Reluctance to form strong ties with research
partners through joint ventures and strategic
alliances
8 66
3 66
Strategic
alliances
JV
Study Globalization of R&D_Long Version
41
I
GLOBALIZATION LEADERS
Innovation tools and methodologies are intensively used by
globalization leaders – Focus on standardized processes
Management methods
Globalization
leaders
3.76
Standardized R&D
processes
Application of stage
gate processes
R&D cycles/
design freeze
Global
marketers
3.30
Cross functional
teams
Modularization of
project team
Globalization
followers
Technology
hunters
3.22
Project
sponsor
Formalized project
controlling
3.21
4.05
4.24
3.47
3.94
3.23
3.53
3.92
Use of supporting
IT platform
3.74
Portfolio
management
3.70
PROCESS
[Importance of criteria 1...5]
PERSONNEL
[Importance of criteria 1...5]
CONTROL
Methods compared to other clusters
Importance of tools and methodologies for
globalization leaders
PURPOSE OF
METHODS
> Globalization leaders
apply tools most
intensively
> The best globalization
leaders focus more
than others on actively
managing the R&D
process
> Complex process of
collecting know-how
globally and transforming it into marketspecific products
requires advanced
management tools
Study Globalization of R&D_Long Version
42
I
GLOBALIZATION LEADERS
Globalization leaders use a comprehensive set of methods to
communicate
Communication tools
FORMAL
INTER-PERSONAL
[No. of responses in %]
[No. of responses in %]
Formal documentation
(reports, issue papers)
Public events
(seminars, fairs)
IT platforms
88%
94%
Liaison officers
79%
71%
Staff exchange programs
82%
Ø 80%
> Formal tools widely used as basis for
communication
Meetings/seminars/
workshops
Cross-functional R&D
programs
74%
53%
Ø 75%
> Inter-personal know-how sharing supported through
multiple methods
> Cross-functional communication lags behind
Study Globalization of R&D_Long Version
43
II
GLOBAL MARKETERS
Global marketers distribute centrally developed know-how to local
markets for customization
NETWORK
ORGANIZATION
> Product development driven by
local development centers
> Global research centers used
to drive basic innovation and
to leverage scale effects
through global platforms
> Central and local activities
combined through teams
> External collaboration on a longterm basis with customers (and
suppliers) – extensive collaboration
with research institutions on a
project-to-project basis
Global
Local
External
GLOBAL MARKETERS
High
Low
> Formal communication used to
support day-to-day work
> Inter-personal means to ensure
effective transfer of know-how
between central locations and
local units
COMMUNICATION
High
Low
> Simple methods sufficient to
manage local adaptations of
centrally developed products
> Controlling focused on timely
completion and conformity with
local market requirements
METHODS
Study Globalization of R&D_Long Version
44
II
GLOBAL MARKETERS
Locations are chosen based on market considerations – R&D
locations led by central units for basic development
Global R&D network design
ROLES OF LOCATIONS
CRITERIA FOR LOCATION SELECTION
[Importance of criteria 1...5]
Proximity to customer
location
4.32
Access to local markets
3.93
Availability of qualified
personnel
Proximity to existing
production facilities
Local content
requirements
3.89
Legal conditions
Personnel costs
3.46
3.46
3.30
2.89
Proximity to research
partners (university …)
2.75
Subsidies
2.67
> Product development driven out of local
development units
> Research centers serve as technical
competence centers and serve all markets
> Majority of R&D budget is spent on adaptations
of individual products in local development
centers
> In cases where the adaptation to local needs
dominates technology considerations,
independent local R&D locations are also
possible
Study Globalization of R&D_Long Version
45
II
GLOBAL MARKETERS
Basic research and incremental development mainly take place in
single locations – Platform development aids global consolidation
Organization of R&D network – Internal structures
TEAM STRUCTURE
TEAM TASKS
[No. of responses in %]
Global teams
22
Regional teams
16
Local teams
38
19
> Local teams dominate the execution of research
projects in central research units
23
24
> Knowledge is consolidated globally through the
development of platforms in global teams
18
26
> Incremental development is done mostly in
regional or local teams
21
> In accordance with the high relevance of local
markets, business units are core decision
makers
40
Global lead
locations
16
18
Separate
organizational units
9
3
Research project
Platform development
10
Incremental improvement
Study Globalization of R&D_Long Version
46
GLOBAL MARKETERS
II
Strategic alliances with customers and suppliers are plentiful –
Extensive project-specific collaboration with research institutions
Organization of R&D network – External partners
COLLABORATION WITH EXTERNAL PARTNERS
NATURE OF COLLABORATION
[No. of responses in %]
Universities
18
61
11
4 93
Research institutions
14
71
7
4 96
R&D service providers
Customers
Suppliers
Uncoordinated
exchange of experience
39
39
14
11 7
64
39
Coordinated single
R&D projects
96
> Other organizations are only used in an
uncoordinated fashion for R&D purposes
4 85
14 7 86
25
50
> Collaboration with universities and research
institutions is also high, but mainly for individual
projects
93
32
43
21
Competitors
Partners from other
industries
Governmental
institutions
7 82
50
25
> Collaboration with customers is comparatively
important and takes place both on a project-byproject basis and in strategic alliances
25
75
Strategic
alliances
JV
Study Globalization of R&D_Long Version
47
II
GLOBAL MARKETERS
Mix of easy-to-implement management methods is used to steer
global R&D – Freedom for local development seems preferable
Management methods
UTILIZATION OF METHODS
PURPOSE OF METHODS
CONTROL
PERSONNEL
PROCESS
[Importance of criteria 1...5]
Standardized R&D
processes
3.93
Application of stage
gates
R&D cycles/ design
freezes
3.24
2.91
3.93
Cross-functional teams
Modularization of
project team
Selection of project
sponsors
Formalized project
controlling
Use of supporting IT
platforms
Portfolio management
2.74
2.52
3.50
3.61
3.30
> Global marketers apply only basic processes,
personal and formal methods to drive the global
R&D process
> Most widely used are
– IT platforms
– Cross-functional teams
– Standardized R&D processes
> Best companies put less emphasis on the
application of management methods. Rules and
procedures do not seem to support the
performance of locations in a distributed
network – these are typically managed in a
decentralized manner
Study Globalization of R&D_Long Version
48
II
GLOBAL MARKETERS
To communicate effectively, global marketers focus on means to
communicate central R&D results to local units
Communication tools
FORMAL
INTER-PERSONAL
[No. of responses in %]
[No. of responses in %]
Formal documentation
(reports, issue papers)
Public events
(fairs, conferences)
89%
Meetings/seminars/
workshops
93%
Liaison officers
93%
63%
Staff exchange programs
IT platforms
81%
Ø 78%
> Focus on formal tools for collaboration in a global
network
Cross-functional R&D
programs
70%
22%
Ø 69%
> High focus on information dissemination
> General exchange of know-how (e.g. through crossfunctional programs) of lower importance
Study Globalization of R&D_Long Version
49
III
TECHNOLOGY HUNTERS
Technology hunters focus their R&D efforts on a few locations –
Support through systematic management and communication
NETWORK
ORGANIZATION
> R&D locations in global
centers of excellence
> R&D locations focused on
individual research areas
> Research efforts centrally
coordinated
Coordination
> Large share of research done in
local teams in few central locations
> Extensive collaboration with
external research institutions
> Some global coordination of R&D
activities
Global
Local
External
TECHNOLOGY HUNTERS
High
> Formal communication has
become standard
> Best companies establish close
personal communication across
locations and functions
Low
COMMUNICATION
High
> Mainly application of management
tools to coordinate activities in
single location
> Focus is on easy-to-implement
methods
Low
METHODS
Study Globalization of R&D_Long Version
50
III
TECHNOLOGY HUNTERS
Technology hunters select locations based on the available knowhow – Structures are chiefly centralized
Global R&D network design
CRITERIA FOR LOCATION SELECTION
ROLES OF LOCATIONS
[Importance of criteria 1...5]
Availability of qualified
personnel
4.50
3.42
Legal conditions
Proximity to existing
production facilities
Proximity to research
partners
3.17
3.08
Personnel costs
3.00
Proximity to customer
locations
2.67
Access to local markets
2.58
Fulfillment of local content
requirements
2.33
Subsidies
2.33
> Main R&D activities take place in research
locations which are focused on individual
research areas
> Research centers can be distributed globally
or located in the home country
> Local R&D centers located close to pools of
qualified personnel
> R&D activities are coordinated globally –
Networks of independent R&D locations in which
knowledge is not actively managed are rarely
found
Study Globalization of R&D_Long Version
51
III
TECHNOLOGY HUNTERS
Local teams are the main structure for research, platform
development and incremental improvement
Organization of R&D network – Internal structures
TEAM STRUCTURE
TEAM TASKS
[No. of responses in %]
Global teams
Regional teams
28
17
Local teams
33
Global lead
locations
Separate
organizational units
Research project
22
0
24
21
> Research and platform development projects
mainly through local teams
24
21
> Global teams set-up if combination of know-how
is necessary for specific projects
29
50
18
7
6
0
Platform development
> Regional teams used less frequently – Mainly
for platform development
Incremental improvement
Study Globalization of R&D_Long Version
52
TECHNOLOGY HUNTERS
III
Extensive coordinated collaboration with external research
organizations – Strategic alliances with R&D service providers
Organization of R&D network – External linkages
COLLABORATION WITH EXTERNAL PARTNERS
NATURE OF COLLABORATION
[No. of responses in %]
Universities
25
Research institutions
25
R&D service providers
Suppliers
Governmental
institutions
Customers
58
Uncoordinated
exchange of experience
33
33
17
8
33
83
> Comparatively high share of longer-term
collaboration through strategic alliances with
selected R&D service providers, customers and
suppliers for joint business development
> Project-specific collaboration with universities,
research and governmental institutions to acquire
specialized know-how
84
33
74
8 8 66
50
33
> Extensive collaboration with external partners
83
42
42
83
83
25
33
25
Competitors
Partners from
other industries
8 8
42
17
Coordinated single
R&D projects
8 8 66
Strategic
alliances
JV
Study Globalization of R&D_Long Version
53
III
TECHNOLOGY HUNTERS
Technology hunters prefer a mix of easy-to-implement management
methods to steer global R&D
Management methods
UTILIZATION OF METHODS
PURPOSE OF METHODS
CONTROL
PERSONNEL
PROCESS
[Importance of criteria 1...5]
Standardized R&D
processes
3.58
Application of stage
gates
R&D cycles/ design
freezes
3.33
2.75
3.64
Cross-functional teams
Modularization of
project team
Selection of project
sponsors
3.08
2.45
Formalized project
controlling
Use of supporting IT
platforms
Portfolio management
3.67
> Technology hunters apply processes, personal
as well as formal management methods to drive
the global R&D process
> Most widely used are easy-to-implement
methods
– Standardized R&D processes
– Cross-functional teams
– Formalized project controlling
> Best companies pay greater attention to the
application of tools than the worst performers
3.42
3.00
Study Globalization of R&D_Long Version
54
III
TECHNOLOGY HUNTERS
Technology hunters focus on formal communication tools as
know-how sharing across locations is less critical
Communication tools
FORMAL
INTER-PERSONAL
[No. of responses in %]
[No. of responses in %]
Formal documentation
(reports, issue papers)
Public events
(fairs, conferences)
83%
Meetings/seminars/
workshops
75%
Liaison officers
67%
Staff exchange programs
IT platforms
92%
75%
Ø 75%
> Formal communication tools as basis for managing
the global R&D network
Cross-functional R&D
programs
33%
58%
Ø 65%
> Comparatively low importance of inter-personal
tools – Know-how exchange already supported by
high degree of centralization
> High level of exchange across disciplines
Study Globalization of R&D_Long Version
55
IV
OPPORTUNISTIC PLAYERS
The organizational models of opportunistic players vary according
to the specific purpose of R&D globalization
NETWORK
ORGANIZATION
> R&D mainly in centralized,
historically grown R&D
locations
> International locations
managed independently
> Globalization not actively
pursued
> No dominating structures in
location selection and external
collaboration
Global
Local
External
OPPORTUNISTIC PLAYERS
High
> Mainly easy-to-use means of
communication applied
Low
COMMUNICATION
High
> Focus on monitoring tools and
formal management methods
> Control of foreign locations as
main purpose
Low
METHODS
Study Globalization of R&D_Long Version
56
IV
OPPORTUNISTIC PLAYERS
Global R&D locations are selected by opportunistic players largely
based on concrete, project-specific considerations
Global R&D network design
CRITERIA FOR LOCATION SELECTION
ROLES OF LOCATIONS
[Importance of criteria 1...5]
Availability of qualified
personnel
Proximity in existing
production facilities
Personnel costs
3.79
3.68
3.40
Proximity to research
partners
Proximity to customer
locations
2.96
Access to local market
2.88
Legal conditions
2.80
Local content
requirements
Subsidies
> Criteria for selecting global R&D locations follow
no clear pattern
> Locations in different countries mostly managed
as independent units
> Global collaboration only as an exception
2.96
2.64
2.43
Study Globalization of R&D_Long Version
57
IV
OPPORTUNISTIC PLAYERS
Local teams dominate among opportunistic players – Activities are
less frequently spread across different locations
Organization of R&D network – Internal structures
TEAM STRUCTURE
TEAM TASKS
[No. of responses in %]
Global teams
Regional teams
Local teams
20
13
20
Global lead
locations
Separate
organizational units
Research project
33
13
21
19
21
19
28
21
10
Platform development
> Research projects are driven from one single
research center – Other locations are only
included as needed
39
13
> Incremental development is mainly a local
activity
> Strong guidance from central locations –
Impact mainly in research projects
10
Incremental improvement
Study Globalization of R&D_Long Version
58
OPPORTUNISTIC PLAYERS
IV
Collaboration with external partners is often ad-hoc – Coordinated
activities with R&D service providers are used to fill know-how gaps
Organization of R&D network – External linkages
COLLABORATION WITH EXTERNAL PARTNERS
NATURE OF COLLABORATION
[No. of responses in %]
Universities
44
40
12 4 100
Research institutions
44
44
8 96
56
4 96
R&D service providers
36
Customers
28
40
24
92
Suppliers
24
44
24
4 96
Partners from other
industries
Governmental
institutions
Uncoordinated
exchange of experience
24
44
28
> Also significant R&D together with customers
and suppliers
> Collaboration often project-specific
> Relatively high share of joint ventures with
customers and suppliers
8 8 68
52
Competitors
24
Coordinated single
R&D projects
> Main share of external collaboration with
universities and research institutions
4 4 76
52
Strategic
alliances
JV
Study Globalization of R&D_Long Version
59
IV
OPPORTUNISTIC PLAYERS
Opportunistic players largely manage their global R&D activities
using control methods
Management methods
UTILIZATION OF METHODS
PURPOSE OF METHODS
CONTROL
PERSONNEL
PROCESS
[Importance of criteria 1...5]
Standardized R&D
processes
Application of stage
gates
R&D cycles/ design
freezes
3.50
3.18
3.78
Modularization of
project team
Selection of project
sponsors
Formalized project
controlling
Use of supporting IT
platforms
Portfolio management
> R&D processes are mainly standardized –
More advanced process management rarely used
3.16
Cross-functional teams
> Focus of global R&D management on formal
methods
2.86
> Very little use of personnel-related methods –
Only cross-functional teams with relevant score
2.10
3.70
3.48
3.25
Study Globalization of R&D_Long Version
60
IV
OPPORTUNISTIC PLAYERS
Opportunistic players mainly use formal communication tools –
Inter-personal channels used only for support purposes
Communication tools
FORMAL
INTER-PERSONAL
[No. of responses in %]
[No. of responses in %]
Formal documentation
(reports, issue papers)
Public events
(fairs, conferences)
83%
Meetings/Seminars/
Workshops
75%
Liaison officers
50%
Staff exchange programs
75%
IT platforms
96%
Ø 69%
> Formal communication tools as basis for managing
the global R&D network
Cross-functional R&D
programs
42%
50%
Ø 66%
> Inter-personal channels used to transfer know-how
to locations outside of R&D center
> Personal contacts used to verify information from
formal channels (reports etc.)
Study Globalization of R&D_Long Version
61
E.
Consequences for
management – Successful
models for globalizing R&D
Study Globalization of R&D_Long Version
62
For a R&D network to be world class, it has to fit a company's
business and R&D strategy
Derivation of R&D network design
Business Strategy
> Product portfolio
> Target markets
> Value proposition
> Strategic positioning
R&D Network Design
R&D Strategy
> Core technologies
> Technology roadmap
> R&D project portfolio
> R&D locations
> Internal organization
> Collaboration with external partners
> Management and communication tools
Study Globalization of R&D_Long Version
63
Six common success factors were identified for developing a global
R&D network
1
Start from corporate and R&D strategy – Determine first whether it is technology, market know-how,
or opportunistic cost reduction that drives global R&D
2
Concentrate technological know-how as much as possible – Leveraging the available know-how is
most effective if it can be bundled in one place
3
Develop market know-how in decentralized units – Local knowledge requires autonomy, central
influence should be limited to monitoring and general guidelines
4
Be pragmatic in applying R&D management methods – Standard tools are required for any global
R&D – Advanced methods need to be tailored to their specific purpose to be effective
5
Manage historical growth – Do not let R&D structures develop without a clear strategy and direction,
but instead actively manage the development
6
Implement organizational changes carefully – Manage change and transition processes to avoid a
loss of key personnel and know-how
Study Globalization of R&D_Long Version
64
Organizational models and success factors can be described in
more detail cluster by cluster
Translation of study results into cluster-specific recommendations
GLOBALIZATION LEADERS
I
Globalization leaders should establish a R&D network that covers all
main regions and markets – Systematic management is key
Recommended organizational model
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
GLOBALIZATION
LEADERS
SUCCESS FACTORS
ORGANIZATIONAL MODEL
Cluster-specific success factors
> Develop strong research centers in global centers of excellence
(NA, Europe, India, East/South East Asia)
> Establish development centers in all key markets (Americas,
Europe, Asia) and collaborate often with research centers
> Establish global research teams to promote sharing of market
and technological know-how across locations globally
> Leverage external relations in R&D centers to gain access to
local pools of knowledge
> Implement strong communication channels – Foster particularly
inter-personal communication for effective know-how sharing
> Systematically manage global R&D activities – Project
performance, individual performance, market fit
1
Fund R&D projects through BUs –
Prevent technology centers from
becoming the sole driver of innovation
2
Provide attractive working conditions –
Retain key staff in locations and avoid loss
of know-how due to personnel turnover
3
Manage cultural integration –
Overcome social hurdles to gain effective
collaboration on a global level
4
Reward collaboration – Avoid incentive
schemes that place too much emphasis
on the performance of own unit
Study Globalization of R&D.ppt
I
1
GLOBALIZATION LEADERS
3M has R&D
locations in
30 countries supported by a central
I
GLOBALIZATION
LEADERS
research center at corporate headquarters in St. Paul, USA
Example –3M
3M develops products
in close co-operation with customers and
shares the technology with the whole GLOBAL
company
R&D NETWORK
> Central basic research in St. Paul USA
> Further corporate research centers in
Example – 3M
Cluster-specific examples
BUSINESS CHALLENGES
BENEFITS
R&D ORGANIZATION Japan and China
Japan
> Large diversity of products
and services (over 50,000
different products)
Highly decentralized
organization
> Different customer needs
in local markets
> 32 R&D locations worldwide in 30
> Integration
of customer
countries affiliated
to BUs
Corporate research center
know how in R&D process
> R&D strategy definition
> Leverage of know-how
China
COMPANY PROFILE
> Basic technology development
across markets and BUs
> Coordination of development
> diversified
Creation of a strong global
> Industry: Highly
activities across R&D locations
conglomerate innovation culture
> Headquarters:>St.Strong
Paul, Minnesota
recognition of 3M as
Business unit R&D USA
innovation leader
locations
> Sales (2006): USD 22.9 bn
Key success factors:
> Regional product development
> R&D (2006): USD 1.5 bn (7%)
> Customized
product
Basic research
Laboratories
affiliated with BUs with close customer interaction
"The product belongs to the
development in local
division, the technology to the
> Strong focus on know-how
markets and transfer of
Globalization of R&D.ppt
67
wholeStudy
company"
sharing facilitated by extensive
know-how across
staff exchange across BUs
BUs/markets
Basic research in
St. Paul Minnesota USA
>
(about 600 researchers)
Study Globalization of R&D.ppt
68
Study Globalization of R&D_Long Version
65
I
GLOBALIZATION LEADERS
Globalization leaders should establish a R&D network that covers all
main regions and markets – Systematic management is key
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
GLOBALIZATION
LEADERS
SUCCESS FACTORS
ORGANIZATIONAL MODEL
> Develop strong research centers in global centers of excellence
(NA, Europe, India, East/South East Asia)
> Establish development centers in all key markets (Americas,
Europe, Asia) and collaborate often with research centers
> Establish global research teams to promote sharing of market
and technological know-how across locations globally
> Leverage external relations in R&D centers to gain access to
local pools of knowledge
> Implement strong communication channels – Foster particularly
inter-personal communication for effective know-how sharing
> Systematically manage global R&D activities – Project
performance, individual performance, market fit
1
Fund R&D projects through BUs –
Prevent technology centers from
becoming the sole driver of innovation
2
Provide attractive working conditions –
Retain key staff in locations and avoid loss
of know-how due to personnel turnover
3
Manage cultural integration –
Overcome social hurdles to gain effective
collaboration on a global level
4
Reward collaboration – Avoid incentive
schemes that place too much emphasis
on the performance of own unit
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I
GLOBALIZATION LEADERS
3M has R&D locations in 30 countries supported by a central
research center at corporate headquarters in St. Paul, USA
Example – 3M
GLOBAL R&D NETWORK
> Central basic research in St. Paul USA
Japan
Basic research in
St. Paul Minnesota USA
(about 600 researchers)
Basic research
Source: Roland Berger research
China
> Further corporate research centers in
Japan and China
> 32 R&D locations worldwide in 30
countries affiliated to BUs
COMPANY PROFILE
> Industry: Highly diversified
conglomerate
> Headquarters: St. Paul, Minnesota
USA
> Sales (2006): USD 22.9 bn
Laboratories affiliated with BUs
> R&D (2006): USD 1.5 bn (7%)
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I
GLOBALIZATION LEADERS
3M develops products in close co-operation with customers and
shares the technology with the whole company
Example – 3M
BUSINESS CHALLENGES
R&D ORGANIZATION
BENEFITS
> Large diversity of products
and services (over 50,000
different products)
> Highly decentralized
organization
> Different customer needs
in local markets
Corporate research center
> R&D strategy definition
> Basic technology development
> Coordination of development
activities across R&D locations
> Integration of customer
know how in R&D process
> Leverage of know-how
across markets and BUs
> Creation of a strong global
innovation culture
> Strong recognition of 3M as
innovation leader
Key success factors:
> Customized product
development in local
markets and transfer of
know-how across
BUs/markets
Source: Roland Berger research
Business unit R&D
locations
> Regional product development
with close customer interaction
> Strong focus on know-how
sharing facilitated by extensive
staff exchange across BUs
"The product belongs to the
division, the technology to the
whole company"
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II
GLOBAL MARKETERS
Global marketers need to drive product development in local
markets – Central units are needed to realize economies of scale
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
GLOBAL
MARKETERS
SUCCESS FACTORS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
1
Limit central management of
development activities – Provide
sufficient discretion to local business units
2
Actively manage the backflow of
information from local markets to the
center – Input required for new platform
development
3
Avoid uncontrolled growth in number
of R&D locations – Manage historical
growth, especially after acquisitions
ORGANIZATIONAL MODEL
> Drive R&D through local development centers – Move close
to customers to adapt centrally developed platforms into
concrete products tailored to customer needs
> Centralize basic research – Combine all necessary know-how
in a small number of locations
> Use research centers for platform development – Leverage
know-how to develop technologically advanced solutions
> Foster personal communication – Support sharing of knowhow between central research units and local development
centers
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II
GLOBAL MARKETERS
Givaudan has a market-oriented global R&D network – Centers for
basic research support local development
Example - Givaudan
GLOBAL R&D NETWORK
> One research center for flavors and
two research centers for fragrances
> Around 20 development sites
> 180 R&D staff in basic research and
1200 developers in marketplaces
worldwide
COMPANY PROFILE
> Industry: Flavors and fragrances
> Headquarters: Vernier, CH
> Sales (2006): CHF 2.9 bn
> R&D expenses: 7 – 10%
Basic research
Source: Roland Berger research
Creation centers (Flavor and fragrance)
Creative centers (Fragrance)
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II
GLOBAL MARKETERS
Discerning local trends and designing unique products is the key to
success for Givaudan
Example – Givaudan
BUSINESS CHALLENGES
> Large regional and local
differences in tastes
> Rapidly changing consumer
behavior leads to short
product life cycles
Key success factors:
> High level of consumer
understanding
> Ability to sense trends and
to find unique flavors
Source: Roland Berger research
R&D ORGANIZATION
Central research center
> Basic flavor research
> Expeditions of developer
teams to explore new flavors
> Set-up of mini-labs on site
("in the jungle, on farms")
and extraction of samples
> R&D support to regional
laboratories and coordination
of global projects
BENEFITS
> Proximity to local markets –
Know-how of local flavors and
trends
> Ability to serve global
customers with local variants
> Fast innovation cycle for the
development of unique
aromas
Creation centers
> Custom flavors creation in
regional laboratories
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III
TECHNOLOGY HUNTERS
Technology hunters should leverage scope and scale of a few global
R&D centers – Global activities need to be coordinated
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
TECHNOLOGY
HUNTERS
SUCCESS FACTORS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
ORGANIZATIONAL MODEL
> Develop strong R&D centers in global centers of excellence
(NA, Europe, India, East/South East Asia)
> Specialize R&D centers by products and combine all relevant
disciplines in one place
> Collaborate with external research partners – Complement own
know-how portfolio with cutting-edge knowledge from outside
> Foster communication inside of research centers – Focus mainly
on inter-personal channels
> Apply advanced R&D processes and manage complexity in
large projects and programs
1 Fund R&D mainly through business
units – Avoid research that does not
take market considerations into account
2 Provide attractive working conditions
– Retain key staff in locations with
attractive alternatives
3 Protect intellectual property – Apply
multiple defense strategies against
diffusion of know-how
4 Coordinate global activities – Prevent
strong R&D centers from turning into
autonomous "kingdoms"
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III
TECHNOLOGY HUNTERS
Novartis' research institutes are located in international biomedical
hubs, giving them access to world-class researchers
Example – Novartis
New Jersey
Oncology
Arthritis
Functional genomics
La Joila
GNF
Functional
Genomics
Source: Roland Berger research
Cambridge Boston
Infectious diseases
Diabetes
Cardiovascular
Oncology
Basel
FMI
Nervous system
Transplantation
Oncology
Arthritis/bone
Functional genomics
Ophthalmics
London
Resp. diseases
Chronic pain
GLOBAL R&D NETWORK
Japan
Oncology
Arthritis
Diabetes
Cardiovascular
Singapore
Tropical
diseases
Vienna
Dermatology
> Nine research centers within the
"Novartis Institutes for BioMedical
Research" organization
> Centers located in international
knowledge hubs for know-how access
> Presence close to universities and
other biotech companies
COMPANY PROFILE
Shanghai
Local
diseases
(Asia, China)
Oncology
> Industry: Pharmaceutical
> Headquarters: Basel, CH
> Sales (2006): USD 37.0 bn
> R&D (2006): USD 5.4 bn (14.5%)
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III
TECHNOLOGY HUNTERS
Novartis leverages knowledge from own worldwide research
facilities, which is complemented with external partners' discoveries
Example – Novartis
BUSINESS CHALLENGES
R&D ORGANIZATION
> Business success depends
on break-through
innovations
Novartis Institutes for
BioMedical Research
> Long research and
development cycles and
significant first mover
advantages
> High risk of project failure
Key success factors:
> Availability of most talented
researchers and access to
state-of-the-art know-how
Source: Roland Berger research
> Coordinated global research
organization
> Institutes focus on specific
disease areas
> Locations in major global
biotechnology research hubs
> Coordination via R&D nodes
in Basel and Cambridge
> Extensive collaboration with
external research institutions
BENEFITS
> Attraction of highly qualified
personnel globally
> Access to best available
know-how worldwide
> Critical mass in research
hubs to effectively drive new
drug development
> Strong know-how leverage
from collaboration with
external institutions
(universities, independent
research institutes, etc.)
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IV
OPPORTUNISTIC PLAYERS
Opportunistic players should limit their global R&D activities – New
locations should only be set-up if there are good business reasons
TECHNOLOGY
HUNTERS
GLOBALIZATION
LEADERS
OPPORTUNISTIC
PLAYERS
SUCCESS FACTORS
OPPORTUNISTIC
PLAYERS
GLOBAL
MARKETERS
Organizational model
> Concentrate research as well as development activities in a
small number of locations – Bundle R&D know-how to
leverage scale and scope
> Establish globally distributed locations only when required –
Support production or fulfill customer requirements where
needed
> Tightly control international R&D activities and avoid
diffusion of know-how – Keep lean structures at the same time
1 Ensure sufficient personal contact in
setting up and managing remote R&D
locations – Avoid autonomous activities
particularly at small locations
2 Limit tasks given to remote locations
– Control IP diffusion and reduce risk of
know-how loss
3 Resist temptation to grow remote
locations without concrete reasons –
Adverse effects will erase potential
savings
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IV
OPPORTUNISTIC PLAYERS
Sartorius is a "global company with German roots" – Majority of
R&D activities is concentrated in Germany
Example – Sartorius
GLOBAL R&D NETWORK
> "Global company with German roots"
> Main R&D center in Göttingen (in the
"Measurement valley")
> Definition of Technology Competence
Centers worldwide
> Focus on core competencies at each
site
COMPANY PROFILE
> Industry: Laboratory and process
technology
> Headquarters: Germany, DE
> Sales (2006): EUR 521.1 m
Main R&D center
Source: Roland Berger research
Technology competence centers
> R&D (2006): EUR 35.5 m (7%)
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IV
OPPORTUNISTIC PLAYERS
Core technology developed in home country as platform – Variants
are created locally
Example – Sartorius
BUSINESS CHALLENGES
> Market-specific customer
needs
> Strong competition from
Asian competitors
> Price pressure
Key success factors:
> Efficiency of innovation
process and concentration
of know-how in Germany
R&D NETWORK
Home base R&D location
> Development of core
technologies: mechatronics
> Weighing system as platform
Worldwide R&D locations
> High autonomy of local
organizations and own
development
> Localization of products based
on a common platform
BENEFITS
> Better access to local
customers – Enabled by
knowledge of local customer
requirements
> Shorter time to market –
Postponement strategy
> R&D cost reduction by
relocation of low-end product
development to low-cost
countries and centralized
R&D footprint for platforms
> Technology differentiation
Source: Roland Berger research
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The performance of an existing R&D network can be improved in
four steps
Performance improvement R&D network
1 Identify drivers of
globalization
> Assess importance of
market drivers
> Assess importance of
technology drivers
Locate company in
driver portfolio
2 Define ideal R&D
network
> Assess current status
and future development
of external drivers
> Analyze current R&D
network regarding
activities, know how,
people, locations, cost,
organizational
structures
Define ideal R&D network
3 Develop realistic
scenarios
> Develop 3-4 realistic
scenarios based on
ideal network and
status quo
> Assess each scenario
based on cost, market
potential, know how
protection, flexibility and
risks
Select scenario
4 Plan transition
> Take a long-term
approach
> Carefully plan transfer
of know how
> Actively manage
increase, relocation and
decrease of (key)
personnel
> Allow sufficient flexibility to adapt to changes
in the marketplace
Implement
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F.
Roland Berger and esb
Research Institute –
Combining practical insights
and scientific knowledge
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Roland Berger Strategy Consultants is one of the leading strategy
consultancies worldwide
Our worldwide offices
34 offices in 23 countries, 1,700 staff
76% multi-country projects
International teams with experts from 14 practice groups
Amsterdam I Bahrain I Barcelona I Beijing I Berlin I Brussels I Bucharest I Budapest I Detroit I Düsseldorf I Frankfurt I Hamburg I Hongkong I Kiev I
Lisbon I London I Madrid I Milan I Moscow I Munich I New York I Paris I Prague I Ryadh I I Riga I Rom I São Paulo I Shanghai I Stuttgart I Tokyo I
Vienna I Warsaw I Zagreb I Zurich
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Research and Development is one of the focuses of Roland Berger
Strategy Consultants in its Operations Strategy competence center
Share of operations strategy projects worldwide, 2006 [%]
Some of our recent projects
Production
13%
> R&D realignment – Pharmaceutical
company
33%
Supply chain
management
24%
Purchasing
> Benchmarking of R&D structure in
Europe – Japanese automotive
supplier
> Global product planning process –
Commercial vehicle manufacturer
30%
Research &
Development
> Decentralization of electronics
engineering – Car manufacturer
> R&D management of central lab –
Electronic machinery producer
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ESB RI is the research institute of one of the leading business
schools in Germany
> ESB-RI is the research institute of the European
School of Business (ESB) at Reutlingen
University, one of the leading Business-Schools in
Germany
> The ESB Research Institute accommodates the
scientific resources of the ESB Reutlingen and
its European partner universities in a worldwide,
dynamic research network
> The ESB-RI cooperates closely with companies,
agencies, national and European institutions – Its
focus is on projects of applied research
The services of the ESB-RI
embrace:
> Technology- and knowledge
transfer
> Consultancy
> Evaluation studies
> Support of international projects
> Innovation networks
> Promotion/advancement of
scientific enquiry
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Research on the process of globalization is a focus of the ESB RI
KNOWLEDGE
SOCIETY
INNOVATION
ADVANCEMENT
> Support of public & private
innovation networks
N
O
I
AT
V
NO
N
I
> Advancement of founder
activities (NewBizCup)
> Promotion programmes
> Involvement of students in
research projects
N
IO
OT
OM
PR
PHD PROGRAMME
> Modern knowledge transfer
E
DG
LE
OW
KN
> Development of strategies for
innovation Management
BA
O
GL
N
O
I
AT
S
I
L
> Learning organisation
> Regional network formation
PROCESS OF
GLOBALISATION
> Intercultural Management
> Globalisation R&D
> Technology Transfer
In its areas of competence the ESB-RI sees itself as praxis-oriented Think-Tank.
Projects are often carried out with renowned companies
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If you have further questions, please don't hesitate to contact us
Contact
Robert Ohmayer
Partner
CC Operations Strategy
Volker Heidtmann
Senior Project Manager
CC Operations Strategy
Thomas Kohr
Senior Consultant
CC Operations Strategy
Löffelstrasse. 46
70597 Stuttgart
Tel.: +49/711/3275-7328
Fax: +49/711/3275-7102
Mobile: +49/160-744-7328
robert_ohmayer@de.rolandberger.com
Löffelstrasse 46
70597 Stuttgart
Tel.: +49/711/3275-7130
Fax: +49/711/3275-7102
Mobile: +49/160-744-7130
volker_heidtmann@de.rolandberger.com
Löffelstrasse 46
70597 Stuttgart
Tel.: +49/711/3275-7351
Fax: +49/711/3275-7102
Mobile: +49/160-744-7351
thomas_kohr@de.rolandberger.com
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If you have further questions, please don't hesitate to contact us
Research
Partner
Dr. Hans-Peter Baumeister
Director
Matthias Kramer
Research Assistant
Gerhard-Kindler-Str. 8
72770 Reutlingen
Tel.: +49/7121/579209
Fax: +49/7121/579362
Mobile: +49-170-2914159
baumeister@esb-research.org
Gerhard-Kindler-Str. 8
72770 Reutlingen
Tel.: +49/7121/579209
Fax: +49/7121/579362
Mobile: +49/17624103656
kramer@esb-research.org
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