Tuesday, September 4, 2012

The Changing Nature of Innovation in a Globalized World

Industry and organizations have discovered the importance of supply chain management to the bottom line and are working to find the correct balance for their needs. How will innovation in a global world factor into that balance to different ends? 

In the article Learning from Tata's Nano, the author discusses how "[e]merging markets are a fertile ground for innovation."[1]  Part of the genius of the supply chain of Tata Motors lay in how they farmed the innovation of their distributors and customers. Similarly, in the interview with Charles H. Fine explaining the design of the value chain, Fine discusses how Proctor & Gamble have successfully used open innovation over both zero-sum and win-win value chain architecture.[2] 
From these two articles, innovation seems to be one piece of the puzzle where developed countries will have to compete where in the past they might have had a significant advantage. With globalization as a main influence of future supply chains[3], innovation could be something developed countries choose to outsource.

The outsourcing of innovation is not a new concept. Organizations hire consultants, hold contests and reach out for new ideas. From a survey of 359 U.S. based companies, the outsourcing of innovation is most successful when organizations strive for the following circumstances: 1) the innovation is centered around a concept or method with which the organization has little prior experience; 2) the innovation is in its early and uncertain stages; 3) the innovation is in an area with little intellectual protection; and 4) the organization has a great deal of experience outsourcing.[4]

But what does this mean in an increasingly globalized world, and what will the downsides be for both developed and developing countries? As explored by Catherine Mann at the Peterson Institute for International Economics, some of the negatives for developed countries such as the United States include "fewer innovations tailored to our domestic needs and local demand", incomes going overseas, and a decline in our entrepreneurial spirit.[5] However, the outsourcing of innovation must also bring greater collaboration and ideas from across the globe.

These decisions have implications for an organization's approach to innovation. As was related many times in the readings, there is no 'one-size-fits-all' solution, but with an increasingly level playing field, domestic organizations must consider the challenges and opportunities of no longer being the most capable of capitalizing on innovation. 
[1] Hagel, John, and John Seely Brown. "Learning from Tata's Nano." Bloomberg BusinessWeek. 26 Apr. 2010: 51-53. Print. 
[2] "Your Next Supply Chain: Interviews with David Simchi-Levi and Charles H. Fine." MIT Sloan Management Review. Winter 2010: 76-80. Print. 
[3] Ibid. 
[4] Stanko, Michael , Jonathan Bohlmann, and Roger Calantone. "Outsourcing Innovation ." Business News & Financial News - The Wall Street Journal - WSJ.com. N.p., n.d. Web. 4 Sept. 2012. <http://online.wsj.com/article/SB10001424052970204488304574426521384198990.html>. 
[5] Mann, Catherine L. "The Globalization of Innovation and Entrepreneurship." Ewing Marrion Kauffman Foundation. N.p., n.d. Web. 4 Sept. 2012. <www.kauffman.org/research-and-policy/globalization-of-innovation-and-entrepreneurship.aspx>.

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