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"Countries splinter, regional trading blocks grow, the global economy becomes even more interconnected. " Lester Thurow, The Future o/Capitalism, 1996 Globalization has changed the face of R&D. Local knowledge clusters are not only tapped by multinationals but by small and medium-sized companies as well. Global R&D networks speed up the evolution of technology and ask for new management concepts. The complexity is abundant: Information and communication technology creates the global village, but customers become more fickle and request their own specific produ~ts, well localized, well tuned into their present business. More and more integrated technology is needed to cope with these needs. The danger of over-engineering has never been as great as today. The question is very often not whether some new features are technically feasible but whether customers are willing to accept and pay for it. Most multinationals have just grown with these developments; most R&D organizations are what they are just because of historical reasons. Only now some global R&D patterns are emerging. Customer-focused R&D, virtual teams and dispersed R&D departments have been shaped deliberately by some large compa­ nies, with impressive success.

Table of Contents

Frontmatter

Challenges and Trends

Frontmatter

I.1. Challenges of Organizing International Research & Development

Abstract
Multinational companies (MNCs) have a tremendous impact on global innovation and the structure of the world economy. They:
  • Determine the international division of labor with production, R&D, marketing, and sourcing strategies;
  • Transfer technologies, management capabilities, and financial capital;
  • Control over 80% of the privately owned technological resources (Dunning, 1993);
  • Influence regional restructuring with establishing local offices;
  • Have a high negotiation potential in light of foreign direct investments particularly in smaller economies.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

I.2. Trends and Drivers in R&D Location

Abstract
Knowledge creation processes of technology-based companies have become increasingly global. The pioneers of R&D internationalization are high-tech companies operating in small markets and with little R&D resources in their home country, as it is the case for ABB, Novartis and Hoffmann-La Roche (Switzerland), Philips (Netherlands) or Ericsson (Sweden). These companies increasingly perform R&D in foreign research laboratories abroad. Companies such as General Electric and General Motors in the USA, Toyota and Fujitsu in Japan, and Daimler in Germany with large home markets and a substantial domestic R&D base were less forced to internationalize their R&D activities. Only in recent years, the increased competition from within and outside their industries has forced these companies to source technological knowledge on a global scale.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

I.3. Organizational Concepts: Towards the Integrated R&D Network

Abstract
As we have seen in the previous chapter, the net amount of R&D units outside the parent country has grown considerably during the last 15 years. Local know-how and technology access, as well as proximity to customers and local markets have been the major drivers. Internationalization has taken place mainly by placing designated R&D sites, expansion of R&D capabilities in local subsidiaries, or acquisitions of local companies or companies with local R&D sites.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

I.4. Establishing Overlaying Structures

Abstract
Many companies struggle with obsolete R&D structures when attempting to draw on the potential of global R&D. Traditional R&D organization proves to be insufficient for many new challenges: R&D managers must learn to manage an additional organizational level in order to ensure global R&D efficiency.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

I.5. Organizing Virtual R&D Teams: Towards a Contingency Approach

Abstract
The strong decentralization of R&D and the dispersion of centers-of-excellence in the 1980s and 1990s have led to increased transnational R&D processes. A central dilemma in the organization of dispersed projects is project efficiency versus the effective use of specialized knowledge in dispersed knowledge centers.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

Emerging Patterns

Frontmatter

II.1. The Market as a Challenge for R&D

Abstract
Market orientation is the single most important factor for increasing R&D effectiveness. On the other hand, aligning R&D activities completely with existing customer demands may have negative effects on the role R&D has to fulfill on a corporate level. In particular, there is rising concern about sustained long-term innovativeness when R&D is too early focused on customer demands.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

II.2. Managing the International R-to-D Interface

Abstract
In technology-intensive firms, the two most prominent factors determining the business environment are technology and customers. For the role of R&D, the interplay between the two can be tricky.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

II.3. Transnational R&D Processes

Abstract
The separation of the innovation process into a pre-project and a development phase increases transparency significantly and reduces costs in the main development phase (Albers and Eggers, 1991). What can be planned is to be distinguished from what cannot be planned. A third and often insufficiently considered phase of the innovation process is the introduction of the product in the market. The old Schumpeterian three-way classification is still of good use in international R&D processes.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

II.4. New Information and Communication Technology as an Enabler for Dispersed R&D Projects

Abstract
Frequent informal communication is fundamental to most creative group processes such as industrial R&D. Organizing must therefore take into account an open R&D organization, powerful communication systems, and the need for face-to-face interaction.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

II.5. Managing Knowledge and Human Resources

Abstract
Knowledge and people are irrevocably intertwined. The generation of knowledge, its communication to other people, and the cooperative effort to pull different pieces of knowledge together to create new products, are fundamental issues for organizing and managing global R&D.
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

Best-in-Class: The Pharmaceutical, Chemical and Food Industry

Frontmatter

III.1. DuPont: Gaining the Benefits of Global Networks — from the Science Base to the Market Place

Abstract
DuPont is one of the world’s leading chemical companies, and a major producer of oil, gasoline, and natural gas. As a manufacturing and industrial marketing company based on technologies derived from the chemical, material, and biological sciences DuPont applies these to the development of high performance materials, specialty chemicals, pharmaceuticals and biotechnology-based products (Fig. III.1.1). The company operates some 17 strategic business units from Agricultural Products, Automotive Products, and Conoco, to Nylon, „Dacron“, non-wovens, Specialty Chemicals and White Pigments with a portfolio of more than 2000 registered brands and trademarks (such as Teflon, Silverstone, Lycra, Stainmaster, Kevlar, Tyvek, Conoco, and Corian to name but a few).With 97,000 employees the company operates in every major market of the world. Sales in 1996 were US$43 billion; net income was more than US$3.6 billion. Market capitalization Is now in excess of US$60 billion and is expected to be US$80 billion by 2002 — the two hundredth anniversary of the founding of DuPont as a gunpowder and explosives company on the banks of the Brandywine Creek in Wilmington Delaware.
A. Miller, Parry M. Norling

III.2. Hoffmann-La Roche: Global Differentiation between R and D

Abstract
Roche develops, manufactures and markets high-quality products and services in the field of health care. The activities of the group’s four divisions — pharmaceuticals, diagnostics, vitamins and fine chemicals, fragrances and flavors — focus on the prevention, diagnosis and treatment of disease and on the promotion of general well-being.
Peter Borgulya

III.3. Schering: Synchronised Drug Development

Abstract
In the early 90s, Schering divested of two non-pharmaceutical divisions and entered a third division, its plant protection business, into an independent jointventure firm with Hoechst AG/Germany.
Bernd Müller

III.4. Ciba: International Research Laboratories in Japan: Practical Validation of a Strategic Concept

Abstract
At the beginning of the 1980s, the top management of Ciba-Geigy declared “We have looked into the future, and it lies in Japan and South-East Asia.” However, until then Ciba did not have a clue how to get at results of Japanese basic research. Though Japan’s universities have long been open, most scientific papers were published in Japanese and thus difficult to access by foreign readers. Japanese technology tended not to be up for sale as much as western expertise was. The Japanese were often reluctant to licence out what they considered valuable as a long term asset.
Urs Burckhardt, Rudolf H. Andreatta, Daniel Bellus

III.5. Nestlé: Interaction of R&D and Intelligence Management

Abstract
Through more than 130 years of history, Nestlé has grown from a two-product company focusing essentially on infant nutrition to one of the largest food companies worldwide. The Nestlé portfolio consists of 56 brands worldwide, over 15,000 products sold across the five continents and manufactured in more than 60 countries. Sales amounted to approximately 40 billion Swiss francs in 1996 and represent a 1.5% share of the world market. They are distributed across three geographical areas: Europe, America, Asia, and five categories of products: beverages, dairy, ready meals, confectionery and pharmaceutical products.
Daniel Rouach, Yannick Poivey

III.6. Kao: Localizing R&D Resources

Abstract
Kao’s corporate mission is to contribute to the wholehearted satisfaction and the enrichment of the lives of customers and employees throughout the world. We will accomplish this by drawing on our creative and innovative strengths to develop products of excellent value and outstanding performance. Fully committed to this mission, all members of Kao companies are working together as a single corporate force to win the loyalty and trust of their customers. Based on our corporate mission, Kao’s activities are as follows:
1.
Ensure customers’ wholehearted satisfaction worldwide;
 
2.
Create innovative products based on original ideas and technologies;
 
3.
Sustain profitable growth and respond to the trust of stakeholders;
 
4.
Leverage the abilities of individuals into a powerful corporate force;
 
5.
Encourage close harmony with the environment and the community.
 
Kenji Hara

Best-in-Class: The Electronics and Software Industry

Frontmatter

IV.1. Xerox: The Global Market and Technology Innovator

Abstract
The Document Company, Xerox, will be the leader in the global document market, providing document solutions that enhance business productivity.
Mark B. Myers, Kim W. Smith

IV.2. Canon: R&D as the Motivating Force for Continuous Growth and Diversification

Abstract
Guided by the company’s “Kyosei” philosophy, i.e. living and working together for the common good, Canon has been in operation since its foundation in 1937. In 1997 Canon is celebrating its 60th anniversary with its more than 75,000 employees worldwide.
Yasuo Kozato

IV.3. Hewlett-Packard: Planet-Wide Patterns in the Company’s Technology Tapestry

Abstract
“The character of our company is basically set by the character of its R&D work.” (Bill Hewlett). William Hewlett and David Packard founded HP in 1939 while working out of a one-car garage behind 367 Addison Avenue — today a California State Historical landmark and a Silicon Valley cornerstone. The company’s first product, an electronic test instrument known as an audio oscillator, was built in a Palo Alto garage. The oscillator improved upon existing audio oscillators in size, price and performance. One of HP’s first customers, Walt Disney Studios, purchased eight oscillators to develop and test an innovative sound system for the classic movie „Fantasia.“ HP incorporated in 1947 and ten years later made its first public stock offering. HP shares have been traded on the New York and Pacific stock exchanges since 1961. Today, about 92,000 shareholders hold slightly more than one billion shares of stock.
Rosanne Wyleczuk

IV.4. IBM: Using Global Networks for Virtual Development

Abstract
The International Business Machines Corporation (IBM) is an internationally operating company which strives to lead in the creation, development and manufacture of the information industry’s most advanced systems, including computer systems, software, networking systems, storage devices, and microelectronics. IBM translates these advanced technologies into value for our customers through a professional solutions and services business worldwide.
Manfred Roux, Oliver Gassmann

IV.5. SAP: International Project Management

Abstract
SAP was founded in 1972 by five former employees of IBM Germany and, over the course of its 25-year history, has developed into the leading global vendor of enterprise resource software. SAP continues to experience massive growth. Revenue growth has increased by an average of 40% annually over the last several years. Revenues of some 6 billion DM were earned in 1997, with a profit-sales ratio of 25%.
Mathias Vering, Dieter Rafalsky

IV.6. Unisys: Localization of Software Development

Abstract
Unisys serves organizations in 100 countries. Their 50,000 clients around the world include financial services, banking, airlines and transportation companies, government agencies, communications providers, and other commercial market leaders.
Arnold Winkler, Michael P. Edgar

Best-in-Class: The Electrical and Machinery Industry

Frontmatter

V.1. ABB: Management of Technology: Think Global, Act Local

Abstract
ABB is a global US$34 billion electrical engineering Group serving customers in electric power generation, transmission and distribution, industrial and building systems, and rail transportation.
Maurice Campagna, Tony Roeder

V.2. Daimler-Benz: Global Knowledge Sourcing and Research

Abstract
In 1997, Daimler-Benz turned over more than US$69 billion (DM124 billion) and employed a work force of more than 300,000 world-wide. There are 23 business units in four divisions: Passenger Cars, Commercial Vehicles, Aerospace, Services, as well as in the directly managed industrial business units (rail systems, microelectronics, diesel engines).
Maximilian von Zedtwitz

V.3. Schindler: Institutionalizing Technology Management and R&D Core Competencies

Abstract
Every day, elevators, escalators and railway cars made by Schindler transport half a billion people worldwide. In 1997, Schindler received orders of CHF6,362 million, providing work for 38,100 employees.
Oliver Gassmann, Martin Bratzler

V.4. Hitachi: Management Practices for Innovation in Global Industrial Research

Abstract
Global collaborative research is now the well-recognised, common and definite necessity among high-technology industries world-wide, because of the following reasons.
Yutaka Kuwahara

V.5. Leica Microscopy: International Transfer of R&D Activities

Abstract
Leica was formed by the joint venture of Wild-Leitz and Cambridge Instruments in 1990. Together, they have a history of some 180 years. There are two major businesses under the Leica group of companies; namely Leica Surveying Group and the Leica Microscopy Group. The business groups are bonded by the same vision, established with the formation of the corporation. The vision of Leica is to be totally focused on customers, core competencies and business processes, to be more flexible in meeting customers’ buying criteria and faster in the innovation process, lead and delivery times, to be friendlier to our allies, suppliers and partners because the resulting success will create more fun for stakeholders. In line with its vision the mission of Leica is to be the world’s first choice provider of innovative solutions to customer’s needs for vision, measurement and analysis.
Ah Bee Goh, Ruedi Rottermann, Clement Woon, Luitpold Schulz

V.6. MTU: Partner in International High-Tech-Cooperations

Abstract
Jet engines are an example of high technology products with extreme safety standards to the benefit of the airline customers. The resulting high development costs and the technical and financial risk lead to international corporations for the development and production of jet engines. As a consequence this worksharing has not only been limited to real engine projects but it has also been applied to the predevelopment phase of advanced future turbo fans. As an example for such an approach in the following contribution the international „Advanced Ducted Prop Fan“ cooperation between Pratt&Whitney, MTU München, Fiat Aviazione and Hamilton Standard is described with respect to motivation, organization of the program and the everyday work.
K.-D. Broichhausen, M. Renkel

Implications

Frontmatter

VI. Implications for Organizing Global R&D

Abstract
Research and development, and as a result technology, have improved the quality of human life tremendously over the last five decades. For the first time in the history of humanity it appears technically possible to eliminate acute poverty worldwide. But are we happier than earlier generations? No, it seems that human aspiration adjusts to opportunities. We know more, produce more externalities and become more sensitive to the indirect consequences of organizational activity. Today’s R&D has to take into account not only customers and economical issues, but ecology and society as well. DuPont’s “Better things for better living through chemistry” tries to catch this spirit. Kao with its “Safety for society and users” incorporates the critical customer into its vision. But what are the challenges for global R&D organization that result from considering economical, ecological, and societal issues (Fig. IV.1)?
Roman Boutellier, Oliver Gassmann, Maximilian von Zedtwitz

Backmatter

Additional information