Exploiting Cross-Border Knowledge Management PDF

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Exploiting Cross-Border Knowledge Management...

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Creating Worldwide Innovation and Learning: Exploiting Cross-Border Knowledge Management In today’s competitive environment, no company can assume that it can accumulate world-class knowledge and expertise by focusing only on its home-country environment, or that it can succeed just by tweaking its domestic product line. The ability to develop and rapidly diffuse innovations around the world is vital, and in this challenge, overseas operations need to take on important new roles. Traditional Innovation: Central and Local Models: Traditionally, MNEs’ innovative capabilities were dominated by one of two classic processes. In the centre-for-global innovation model the new opportunity was sensed in the home country, the centralised resources and capabilities of the parent company were brought in to create the new product or process, and implementation involved driving the innovation through subsidiaries whose role it was to introduce that innovation in their local market. In contrast, the local-for-local innovation model relies on subsidiary-based knowledge development; responding to local opportunities, subsidiaries use their own resources and capabilities to create innovative responses that are the implemented in the local market. The centre-forglobal innovation model typically occurs in global or international companies, whereas the local-for-local innovation model occurs in multinational companies. Making Central Innovations Effective: The greatest risk of centre-for-global innovation is market insensitivity and the accompanying resistance of local subsidiary managers to what they may view as inappropriate new products and processes. As a result, the most successful firms developed three important capabilities that are key to managing the centre-for-global process: (1)gaining the input of subsidiaries into centralised activities, (2)ensuring that all functional task are linked to market needs, and (3)integrating value chain functions by managing the transfer of responsibilities across development, production, and marketing. Gaining Subsidiary Input: Multiple Linkages: Companies should build multiple linkages between HQ and overseas subsidiaries, not only to give HQ managers a better understanding of country-level needs and opportunities, but also to offer subsidiary mangers greater access to and involvement in centralised decisions and tasks. Responding to National Needs: Market Mechanisms: Managers in HQ should not be sheltered from the constraints and demands felt by managers on the front line of the operations. A key element of achieving this difficult organisational task is the company’s use of internal ‘market mechanisms’ to direct and regulate central activities. The internal market connects consumer demand to (technological) innovation. Managing Responsibility Transfer: Personnel Flow: The local-for-local innovation process facilitates integration across R&D, marketing, and manufacturing by the smaller size and closer proximity of the units responsible for cross-functional coordination. In centralised organisations, alternative means to integrate different tasks must be constructed carefully (e.g. transfer of people.). Making Local Innovations Efficient:

Local-for-local innovations often suffer from needless differentiation and ‘reinvention of the wheel’ caused by resource-rich subsidiaries trying to protect their independence and autonomy. Three abilities proved most significant to deal successfully with these problems: (1)empower local management in national subsidiaries, (2)establish effective mechanisms for linking these local managers to corporate decision-making processes, and (3)force tight, cross-functional integration within each subsidiary. Empowering Local Management: Giving control of organisational assets and resources and the delegation of authority provide the tools for country-level organisation to take the initiative in creating new products or processes. Linking Local Managers to Corporate Decision-Making Processes: These linkages are necessary to make these local-for-local tasks effective for the company as a whole. Many European companies have, over the years, sent out ‘expatriates’ to national operations, working in the subsidiaries for 3-4 years. These expatriate managers tend to identify strongly with the national organisation’s point of view, and this shared identity creates a strong bond and distinct subculture within the company. Integrating Subsidiary Functions: The local innovativeness of decentralised federation organisations is enhanced when there is a strong cross-functional integration within each national operation. National subsidiaries should retain primary responsibility for its own strategies and priorities. Transnational Innovation: Locally Leveraged, Globally Linked: Locally leveraged innovation involves ensuring that the special resources and capabilities of each national subsidiary are available not only to that local entity, but also to other MNE units worldwide. Globally linked innovation pools the resources and capabilities of many different units, typically at both the parent company and the subsidiary level, to create and manage an activity jointly. It allows the company to market intelligence developed in one part of the organisation, perhaps link it to specialised expertise located in a second entity and a scarce resource in a third, and then eventually diffuse the new product or proposal worldwide. These two transnational innovation processes have supplemented rather than replaced the traditional centre-for-global and local-for-local innovation processes imbedded in many MNEs. Making Transnational Processes Feasible: Not only must companies avoid the various pitfalls associated with each process, they must also find ways to overcome the organisational contradictions among them as they try to manage all the sources of innovation simultaneously. Three simplifying assumptions have blocked the organisational capabilities necessary for managing such multifaceted and often contradictory operations: (1)an often-implicit assumption that roles of organisational units responsible for very different businesses, functions, and national operations should be uniform and symmetrical; (2)an assumption that HQ-subsidiary relationships should be based on clear and unambiguous patterns of dependence or independence; and (3)an assumption that corporate management has a responsibility to exercise decision making and control uniformly. Instead of treating all businesses, functions, and subsidiaries the same way, they systematically differentiate tasks and responsibilities. Instead of seeking organisational clarity by basing relationships on dependence or independence, they

build and manger interdependence among the different units of the companies. And instead of considering control their key task, corporate managers search for complex mechanisms to coordinate and co-opt the differentiated and interdependent organisational units into sharing a vision of the company’s strategic tasks. From Symmetry to Differentiation: Different businesses face different demands for integration and responsiveness. In addition to differentiation the way they managed their various businesses and functions, most companies eventually recognised the importance of differentiating the management of diverse geographic operations. Differentiating first by product, by function, and by geography. From Dependence or Independence to Interdependence: For and effective interdependent organisation to exist, two requirements must be satisfied. First, the company must develop the interdependent configuration of dispersed and specialised resources that we described as an integrate network (chapter 4). In this organisation, all country subsidiary companies will take on sensing and scanning roles to detect the consumer trends, technological advances, or competitive activities that may trigger a new opportunity or threat. Second, the innovative transnational organisation must build inter-unit integration mechanisms to ensure that task interdependencies lead to the benefits of synergy rather than the paralysis of conflict. Above all else, inter-unit cooperation requires good interpersonal relations among managers in different units. From Simple Control to Flexible Coordination: The growing interdependence of organisational units strained the simple controldominated systems and underlined the need to supplement existing processes with more subtle and sophisticated ones. Additional coordination needs required by transnational innovation processes forced many MNEs to develop a coordination system that best fits the needs of various functions and tasks, recognising the need to coordinate some different flows among the organisational units involved in the execution of each task. Three flows are the lifeblood of any organisation but are of particular importance in a transnational company: (1)Flow of goods. Can be managed effectively at lower levels of the organisation through clear procedures and strong systems. (2)Flow of resources. These should be managed at the corporate level, as only managers with an overview of the total situation can make critical decision about the funding of projects, the sharing of scarce technological resources, and the allocation of organisational skill and capabilitiescentralisation (3)Flow of valuable information and knowledge. The most effective way to ensure that worldwide organisational units analyse their diverse environments appropriately is to sensitise local managers to broader corporate objectives and priorities, ensuring that they are exposed to the relevant knowledge of values through frequent contacts, or by creating organisational forums that allow for free exchange of information and foster cross-unite learningsocialisation.

The most effective way to exploit the knowledge within an organisation depends on the complexity of the technology itself and understanding of the focal market....