Sharing the idea: the emergence of global innovation networks is an Economist Intelligence Unit report that examines a new approach to managing global research and development programmes.
The report notes that the traditional process of innovation, whereby a company maintains and funds a centralised research and development (R&D) department, is gradually being superseded. In its place, companies from a variety of sectors are seeking ways to disaggregate their R&D departments and distribute the innovation process across a network of external partners and offshore sites. This enables them to allocate activities according to the strengths of particular countries and external organisations, and thereby make their R&D processes more effective and efficient.
This survey and white paper, conducted by the Economist Intelligence Unit on behalf of IDA Ireland, examines current attitudes towards the global innovation network model and its implications for management. Based on a survey of over 300 executives worldwide, as well as a series of in-depth interviews with executives and innovation experts, the study identifies the following key attitudes and trends:
- The drivers of the global innovation network model are many and varied. Innovation is becoming more expensive and complex because of a confluence of disruptive forces. Meanwhile, customers are calling for higher rates of innovation and lower prices. To extract more value from their R&D, companies must become more “customer-centric’ and more efficient. The natural solution is to disaggregate the R&D function worldwide and share the burden of innovation with external organisations;
- R&D is increasingly being offshored. The past three years have seen a marked increase in the offshoring of R&D units. The US remains the most popular destination, thanks to its high-quality workforce and robust enforcement of intellectual property (IP) rights, but respondents consider that India offers the best combination of cost and quality, while Asia-Pacific is set to become the most popular destination over the next three years
- Innovation is increasingly “open’. Companies are not only offshoring R&D functions, but outsourcing them, too. Over the next three years, respondents predict a marked increase in the proportion of R&D being carried out by external partners. In order to realise the full potential of ideas, companies recognise that they need to let them flow out of their originating organisations to wherever they can be most efficiently handled at each stage of R&D. This process reduces time-to-market and maximises value for every organisation involved;
- Disaggregating R&D worldwide creates major management challenges. Intellectual property theft and a “loss of control’ over R&D are the biggest concerns for respondents as they consider embracing the global innovation network model. The key to overcoming the management challenges associated with the model is communication’”it is essential that every member of the network is clear about the strategy being employed. Online technologies can aid this process, but face-to-face interaction will remain vital to strategic alignment.
Economist Intelligence Unit Sharing the idea: The emergence of global Innovation networks (PDF files, 26 pages, 187KB)