As the trend toward knowledge dispersion grows and intensifies, the opportunities for co-located innovation will recede further in favour of a globally integrated approach. Being able to set up and manage global projects to replicate the benefits of co-location while leveraging dispersed knowledge will be paramount to building and maintaining competitive advantage. Readers will learn how to accomplish this goal.
For most of the twentieth century the story of innovation was largely one of co-location – innovation took place in one country, albeit at different locations, but where people shared the same context and culture. But this can no longer remain the case, as the knowledge and skills needed for innovation are becoming increasingly scattered around the world. Today, lead customers, technologies and capabilities are just as likely to be found in emerging markets as they are in Japan, the United States or Western Europe. To remain competitive, companies need to learn how to leverage this dispersed knowledge. In other words, innovation has to become a globally integrated activity.
Despite having dispersed innovation networks, many companies remain steadfastly wed to co-located innovation through transnational, multi-domestic or home base, local adaptation models. Why is this the case, when global projects can deliver significant value and competitive advantage, as well as reduce time to market and cut development costs through parallel development across multiple sites? These global projects are a lever for integration, attracting and deploying knowledge from around the world, and promoting cross-site learning and knowledge sharing.
Our research points to the inherent and little-understood differences between co-located and globally dispersed projects as being the root cause of the reluctance to embrace the opportunities of global innovation. Far too many companies bring co-location mindsets, processes, capabilities and structures to global projects without realising that in a co-located environment, much of what happens in terms of communication, co-ordination and collaboration happens naturally, due to proximity, shared norms, culture and experience. As we will outline below, planning and managing global projects means that the modes of communication, co-ordination and collaboration all need to be approached differently in order to account for the challenges of distance and difference, and to reap the benefits of global innovation.
Preconditions for global innovation projects
Organisational stability is a prerequisite
A common mistake companies make when embarking on a global project armed with only co-location project experience is to underestimate the systemic nature of innovation projects and their resulting vulnerability to organizational change.
Disruptive events under way elsewhere in the organisation can have an adverse impact on the project in two different ways: First, global projects need close and continual senior management attention. Yet during periods of major change such as restructuring, reorganisation or integrating new acquisitions, these managers are likely to be pre-occupied with managing large change programs. Second, when an organisation is in a state of flux, morale is often dented and rumours of job cuts can lead to a lack of focus in project teams or even worse, the loss of a critical mass of team members who “jump before they are pushed.” It’s vital therefore, that global projects are started and completed in a climate of organisational stability.
At the root of a troubled global project at a company we shall refer to as Elecompt lay the fact that the project was launched when new acquisitions were being integrated and a massive reorganisation was in progress. Although the project was of strategic importance, management’s focus was understandably elsewhere. This meant that critical decisions for the project were not made and that mounting problems such as turf battles between sites, product architecture and subcontractors went unnoticed. Fearing the worst outcome, large numbers of staff at one site resigned, leaving a serious gap in the project team, which in turn caused further problems and delays as replacement staff had to be found and brought up to speed.
Build a competence in dispersed working
Most companies can hone deep competencies in co-located innovation as long as the employees involved share the same culture and are located in the same country. Trying to transfer these competencies to a global project environment isn’t feasible, as innovation, personnel and functions that are dispersed throw up unique challenges that require new and different practices and approaches. Dispersed project teams need to learn how to collaborate and communicate over time zones and cultural distances, and build trust in the commitment and capabilities of teams at distant sites.
For teams that are new to global projects, building the necessary competence should begin with small, non-critical collaborations among just two or three geographically dispersed sites. When the Schneider Toshiba Inverter (STI) joint venture was first established, engineers in both companies had little respect for each other and were reluctant to work together. To break down these barriers, STI’s management organised a series of small collaborative projects between the sites in France and Japan with the hope of establishing joint working practices and channels of communication, and to build mutual respect and trust. Even after the first project, each team recognised the value the others brought. By the time STI launched a major, complex global project, a critical mass of the project teams involved had developed a strong competence in dispersed work.
Invest time in defining the innovation and project
In a co-located project it’s not essential to define an optimal product or service architecture at the outset, or even a fully detailed work plan. This is so because during development, interactions between the project team members will lead to the adaptation and improvement of the innovation and adjustments to the work. However, it is unfeasible and impractical to apply this emergent architecture model to global projects, where there is little tolerance for iterative learning.
Instead, the product or service architecture in a global project has to be thoroughly defined before development is under way. The architecture also has to be made as modular as possible. Interdependencies and interfaces between modules have to be defined and the project goals, process flows, timelines, interfaces and knowledge requirements need to be thoroughly understood by all project teams. When Essilor and its alliance partners launched a project to develop a new range of photochromic lenses, despite having only two years to develop and launch the new products, the project team invested nine months of intense hard work in defining the product architecture and interfaces. The science behind the new product was very complex as were the interfaces between specialist contributions, which came from more than 20 sites around the world. For example, the photochromic coating dyes developed in one location had to be embedded in the surface of the lens (developed elsewhere) without any adverse reactions from the lens core monomer (the chemicals which produce the basic lens). Meticulous planning by experts at each site contributed significantly to a successful project outcome.
The need for capability-based resourcing
Far too many companies see global projects as an opportunity to make the most efficient use of available human resources across their innovation network at any given time. Yet, staffing global projects on the basis of current ‘resource availability’ undermines a fundamental tenet of global innovation – to build competitive advantage by combining the best knowledge and complementary competencies from around the world. Teams therefore need to be selected for the capabilities they bring to the project.
While it might seem expedient to use a resource availability approach to get a project launched quickly, the consequences can be divisive and derail a project. Looking again at the Elecompt project, managers chose to follow the resource-availability model of staffing. This resulted in a team in the U.S. developing a technical module requiring knowledge and competence in areas in which they had no experience. The U.S. team struggled with the development of the module as well as members’ lack of knowledge, which made communication with other teams difficult. It also made it impossible to manage a distant subcontractor who was providing specialist input. The net result was delays, a huge cost overrun and a loss of morale. Ultimately, when a team with the requisite capabilities became available, it took over the work.
In co-located development, when all of the knowledge needed for an innovation is in one place and people work closely together in a common space, continual informal oversight means that adjustment to interfaces and interdependencies takes place almost naturally. This isn’t the case in global project, with its work packages dispersed across locations. To emulate the near seamless integration of co-located projects and capability resourcing, global projects require a small degree of competency overlap between sites. This provides the kernel of critical knowledge that needs to be shared to avoid modules being developed in isolation. Siemens, for example, achieves this by forming virtual cross-geography, cross-disciplinary teams of experts from each of the modules in a project. Weekly meetings between each core module-development team and the virtual oversight group allow potential integration problems to be identified and nipped in the bud.
Managing global innovation projects
The involvement of senior managers
We have alluded to the importance of senior management’s involvement with regard to maintaining organisational stability. But they also have a critical role to play when the project is under way. In co-located projects, senior managers’ role becomes more informal once they have sanctioned an innovation project and its budget. Expert practitioners take over running the project and co-location enables senior managers to be consulted on an ad hoc basis. But in global projects, the underlying knowledge base is fragmented and each team involved brings very different opinions, experience and solutions. Senior managers have to manage this diversity and play a more hands-on role by not only championing the project but also by keeping it together. They are ultimately responsible for the project – ensuring that it’s on track and having the deciding voice in decision-making.
The importance of formal senior management involvement can be seen in Essilor’s photochromic lens project. To keep the project on track, an innovative but potentially risky shortcut to speed up the production process was mooted. A member of Essilor’s executive board had been assigned to oversee the project and was able to assess the technical options against the strategic demands the project addressed. He made the decision to press ahead with the shortcut in order to meet the launch date. But he made it clear that the risk this entailed belonged to the project, and ultimately, the executive committee, not the managers at the production facilities involved. This quick decision meant that there was no disruption in the workflow. Having come from the highest management echelons, the project teams were comfortable with the solution.
Strong project management driven from a lead site
The intrinsic flexibility of co-located projects enables a very light touch when it comes to project management, as co-located teams tend to adjust informally. The same does not hold for global innovation projects, where multiple locations require robust project management structures, tools and processes to juggle all of the pieces of a complex puzzle. Project managers have to recognise when particular teams aren’t coping and find solutions to support them. The managers also have to ensure that everyone involved in the project is connected and aware of what is happening.
When companies first engage in global projects it’s very common to find that the myth of equal partners leads to a consensus-management approach. For companies that have multi-domestic or transnational structures with independent subsidiaries performing local innovations, individual sites are used to operating with high levels of autonomy. In some companies, certain sites hold a disproportionate degree of political power. In either case, the equal-partner approach avoids the undue ruffling of feathers by the imposition of a project lead site. This approach, however, is impractical and untenable for global innovation.
Compare the approaches taken by STI and Elecompt. Even though each site involved in the STI project was a global leader in its own field, one site that had been heavily involved in driving the pre-project marketing activities was designated as the lead, responsible for liaising with senior management, co-ordinating the project management team and delivering the project. The lead site provided oversight and clarity – problems were rapidly identified and dealt with, and the complex project was delivered on time and on budget.
At Elecompt, in contrast, each of the sites distributed across the U.S., France and Germany had a high degree of autonomy and exercised equal weight in decision-making. Every decision and aspect of co-operation had to be negotiated. As tensions rose and personality clashes came to the fore, these negotiations often ended in stalemates, with teams defending their own contributions without thinking about what was best for the overall project. With the project running over budget, extremely late and on the brink of collapse, an external project management-consulting group was brought in to act as a de facto lead – introducing processes, systems, a global work schedule and a steering committee responsible for conflict resolution.
Build plenty of communication into the project
In co-located projects, communication comes naturally. A shared context and familiarity make it easy to discuss complex ideas and solve problems through impromptu conversations. The challenge in global projects is to create the structures and processes necessary to replicate this ease and richness of communication.
While technology has revolutionised the way we work and communicate, an over-reliance on ICT in global innovation projects is counterproductive. Although they have a role to play, virtual engineering environments, video-conferencing, web meetings, forums, social media and other ICTs can lull people into a false sense of believing that the sender shares the same context as himself or herself. Nuance is lost and misinterpretation is common.
To compensate for distance and differences, global projects have to rely on what might seem an onerous level and intensity of communication channels. In addition to an array of ICTs, generous travel budgets are needed for the face-to-face site visits, secondments and project team meetings. In addition, a dense web of cross-site project reporting lines will give individuals a sense of belonging to the global activity rather than their local site and this will keep sites plugged in to the details of what is happening at other sites.
With a plethora of ICTs at its fingertips, global telecoms firm Tata Communications recognises the importance of a more comprehensive approach to communication. As a highly dispersed organisation, its culture is reinforced by cross-location accountability and reporting, while travel for face-to-face meetings is an everyday part of life for project teams and managers alike.
Identify and use multicultural managers
Pivotal to communicating complex, tacit knowledge in global projects are bi- or multicultural people who act as bridges for interpreting and transferring complex knowledge between different contexts, such as countries, cultures and business groups, and preventing misunderstandings from escalating into conflicts. These people have the ability to see things from different perspectives and are less likely to fall victim to miscommunication and misinterpretation between locations.
When HP Labs established a new innovation centre in Bangalore, India, multicultural managers played a key role in driving innovation projects. A Bangalore-based American HP veteran who had lived and worked in Northeast Asia for many years and had worked with an Indian director of the lab long-based in California, provided the critical bridges to translate the opportunities unearthed in India into a context that made sense to HP’s business groups and headquarters. Without these two managers it is unlikely that much of the new knowledge from India would have been successfully integrated into global innovations.
Limit subcontractors to reduce the management burden
Even in co-located projects, outsourcing work to subcontractors requires additional management time and focus. In global projects, the extra burden of managing subcontractors can be highly disruptive. As a result, it makes sense to keep their numbers as low as possible, select trusted partners who know your products, development and integration processes, and work with those who are physically and culturally close to your own network. The role of managing each subcontractor should be given to someone on the project team who understands the interdependencies between modules in the innovation. This is essential to maintaining a dialogue and the quick resolution of any problems that might arise.
In its development of the Dreamliner, Boeing experienced first hand the problems caused by having too many distant partners. Effective oversight of the 50 partners working on different subsections all around the world was difficult and integration was beset by problems. This was a far cry from the highly co-located development of earlier decades when most of the expertise Boeing required was in-house, with staff working in open-plan hangars and freely sharing knowledge and ideas. Boeing had to return to this model and co-locate its partners for six months to resolve the many problems the Dreamliner project encountered. The aircraft was finally delivered almost three years late, suffered serious teething troubles, and as a result, lost orders to the Airbus A350.
As the trend toward knowledge dispersion grows and intensifies, the opportunities for co-located innovation will recede further in favour of a globally integrated approach. Being able to effectively set up and manage global projects to both replicate the benefits of co-location while leveraging dispersed knowledge will be paramount to building and maintaining competitive advantage.