Innovation in a Global Environment

A key challenge in the current environment is that the stage on which the innovation game is played out has expanded enormously. Whereas technological development was confined to a few nations in the early twentieth century it has expanded to the point where it is generated and used globally and where the challenges are those of being a global player. This has always been the theme of innovation strategy in multinational corporations, but it now becomes the issue for small enterprises. Even a local firm is no longer insulated increasingly large firms are looking to source components handle administrative process and manage distribution on a global basis. For example, in the automobile industry components for a car made in Germany may be sourced from as far a field as Brazil or South Africa, whilst in the airline business most of the data processing required to handle reservations and billing is done in the West Indies, Software production for Citigroup is handled by a software factory in Bangalore, India. This forces a reappraisal of positioning in global economic terms whether at the level of individual enterprises within global value chains or at the national economy level. For example, a recent report by Michael Porter and colleagues for the UK government concluded that

The UK currently faces a transition to a new phase of economic development. We find that the competitiveness agenda facing UK leaders in government and business reflects the challenges of moving from a location competing on relatively low costs of doing business to a location competing on unique value and innovation. This transition requires investments in different elements of the business environment upgrading of company strategies and the creation and strengthening of new types of institutions.

One of the key enablers of this distribution is information and communications technology (ICT) which – as we saw above – radical changes the balance of richness and reach involved in all kinds of information based businesses. In the case of design, for example, a firm like IBM can now work on 24 hours a day by mobilizing design teams in the UK, the USA and Japan with each team handing over after its shifts to the next time zone where the work will be continued. This has two effects – first it radically compresses the time in which the design of new components or equipment tales place, and second it brings to bear different and complementary knowledge sets. But in order to make such systems work a new form of network / global management is required one which addresses some of the underlying national cultural characteristics as well as the departmental or functional ones.

The production of knowledge has become far more global although R&D is still a heavy investment item in major industrialized countries, there is an acceleration across the newly industrializing world. Similarly the number of scientists and engineers is increasing faster in Asia than elsewhere and this is likely to fuel further innovation led growth in that region. For example the number of engineering degrees awarded in 1998 in Europe was 159000, in the USA 62000 and in Asia around 280000.

Consequently the major challenge to innovation management is one of managing the same basic principles but on a much bigger stage. With trade liberalization and the opening of markets has become a massive upsurge in overall activity and the number of players in the game; (it is estimated for example, that the entire volume of world trade which took place during 1950 is now transacted in a single day)! Competition has intensified and much of it is being driven by innovation in products, services and processes. The responses of successful firms are increasingly likely to involve some measure of networking and collaboration.

Source: Managing Innovation