Forum on Global Collaboration for Innovation: Sustaining Firm Capabilities

1. Creating a forum for understanding how firms can engage in global collaboration to sustain their capabilities to innovate Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

2. How did this all come about? How did we collectively make it happen? Are there lessons in this for global collaboration? Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

3. Forum creation as a microcosm of global collaboration for innovation: Spotting the opportunity CIBER (Centers for International Business Education and Research) National, Local Institutions International Business Center at Katz awards GAP (Global Academic Partnership) grants Common interests in innovation, collaboration, and education Ravi Madhavan, recipient of 2009 GAP grant Lou Musante, Managing Partner Echo Strategies Connect Sue Cohen studies how where knowledge resides matters for innovation, interest in global locus Connect Members of Organizations & Entrepreneurship group, Strategy area Connect Committee to develop University Technology Commercialization program Connect Rabi Chatterjee, Prof of Marketing Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

4. Forum creation as a microcosm of global collaboration for innovation: The vision How do we understand the best ways for firms to collaborate globally for innovation advantage? Content of the forum Firm differences (global strategy or multi-domestic, innovation leader or follower, etc.) Country differences (resources, market, institutions, culture, etc.) Industry differences (mechanisms to protect IP, nature of innovation, etc.) Bring together individuals who understand global collaboration from a diverse array of perspectives, to get a broad sense of the landscape and to identify research questions with high payoffs for theory and practice. Composition of participants Professional diversity: Business Executives and Scholars Academic diversity: Management, Law, Economics Country diversity: U.S. and China Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

5. Forum creation as a microcosm of global collaboration for innovation: Mobilizing resources But what kind of experts in each domain do we need? Our starting point for search was our understanding of the landscape of issues relevant to global collaboration, that we could sample from. What issues do academics think are important and what issues resonate with our executive audience? Assessing the terrain and areas of high potential dialogue required iterative face-to-face conversation between Lou and Sue over several months. Our search for relevant experts in academia and practice occurred simultaneously to these discussions, and together this helped to define the tracks for the forum. Our search for suitable experts (those with competence and interest in subset of the issues deemed of relevance to both groups) was conducted globally and locally, all through personal networks. Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

6. Forum creation as a microcosm of global collaboration for innovation: Engaging resources Now, how do we facilitate a productive conversation amongst the members of this diverse group, in a way that increases the chances that everyone leaves with something of value? Synthesis: discussion around themes amongst diverse groups multi-media data capture discussion around areas of agreement, areas of conflict or gaps in understanding, implicit theories behind ideas distill, classify insights Receptivity: selection, based on common interests setting conducive to conversation Engagement & Exchange: through themed tracks with issues that are tangible to most groups designated roles – presenters, Q&A panel periodic reflections, “take aways” Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

7. Take Aways • Spotting opportunities (for innovation) • Institutions create targeted opportunities (around specific agendas) • Networks bring together the people that exploit them, more so than co-location • Collaboration around common interests provides richer insight into interests and competencies, which suggests fruitful connections amongst other parts of people’s networks • Crafting a vision (for something potentially path breaking) • Face to face interaction facilitates synthesis of diverse perspectives and knowledge of different tools and how they might be used • Overlapping absorptive capacity enables faster synthesis across disparate thought worlds • Mobilizing resources (for collaboration) • Innovation requires engaging a sample of good people with diverse competencies but a common interest - there is no optimal configuration - many potentially fruitful mixes of people and domains exist • Networks (that bridge thought worlds) provide access to people in diverse domains • Networks act as two sided quality filters – enables faster mobilization Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

8. Knowledge outputs from the collaborative forum: A synthesis of knowledge flows from Friday & Saturday Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

9. Reframing the issues through discussion • Rather than debate whether firms need to locate R&D in specific places, to sustain their innovation capabilities, the more salient issue is: • What to locate where • Different factors drive success in Invention and Commercialization and this could mean they should be located in different places • Yet, success in invention can be influenced by an understanding of customers and the context in which products and services will be used, so there may be value in co-locating invention and commercialization • So, we should ask: When is it important to locate invention and commercialization in the same place? • To address this question we need to be clear about what we mean by invention and commercialization? What are the boundaries of R&D? Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

10. Questions worthy of further research • Boundaries of R&D need to be rethought… possible linkages: • Research  = Science from Invention and Discovery…but how much development of scientific knowledge do firms actually do? in many industries, most of this kind of research has shifted to Universities. • Development  = Development of Technology where Technology is defined as the application of Science to solve problems / usually the Technology is actually a Platform Technology that can solve many problems AND that is good and bad. What problem should a platform technology solve? To make money and receive funding to commercialize you have to FOCUS usually on specific problem in a specific market. • C = Technology applied to a specific problem to solve in a specific market  Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

11. Reframing the issues through discussion • Rather than debate whether firms need to locate R&D in specific places, to sustain their innovation capabilities, the more salient issue is: • What to locate where • It may be more useful to think about separable discovery and design tasks and consider their ideal locations apart from whether they reside in a traditional functional R&D unit. • Perhaps R needs to connect with parts of the C function – to better prioritize potential problems that emerging solutions could solve….there may be less need to connect R and D • The role of IT in each, and the function of IT in connecting people, may differ for distinctive discovery and design tasks. Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

12. Reframing the issues through discussion • Interesting observations about R&D that affect the answers to these questions: • R&D as a function is really about the care and feeding of scientists • Projects are the only truly manageable locus of capability – The potential to reconfigure the ”pipes and prisms” of intra- and inter-organizational knowledge flows resides here • Benefit of separation is to allow for immersion in one ‘place’ – distinctive experiences, to sustain pools of diverse understanding • How we define R&D matters.. Connecting the potential in medical micro-dosing technologies with the functionality in the Freestyle Coke dispenser – Collection of fine-grained customer data from the machine that can be used to refine customer experience  Which part of this is R&D? Same mechanisms for opportunity sensing and creation, just different groups involved? • R, D, C all operate in different temporal windows of opportunity Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

13. Reframing the issues through discussion • From how much contact/overlap should we have between Research and Development (an issue that affects their country co-location), to: • How do we manage design and discovery driven innovation in the same organization? • To create fluid organizations, • That can exploit opportunities provided by open innovation and IT, and shifting centers of global excellence • Thereby continually creating unique innovation spaces where the firm invents/innovates faster than others, despite diminishing abilities to protect IP/knowledge outflows Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

14. Reframing the issues through dialogue • From considering the role of IT mediated communication as a vehicle for reducing the need for presence to: • Considering how firms can develop IT infused innovation capabilities: • Involves conceptualizing IT not just as a communication tool, but also as a means of: • Shrinking all distances – not just physical distance (WalMart) • Changing what location means (not solely geographic or functional) • Sensing and searching for opportunities (Dick Kouri) • Empowering customers to create their own interaction with the firm (Abercrombie) • Facilitating others’ search for you – make our “connectability” visible • Inputs and outputs to IT are interpretive – need to connect domain experts to utilize – so infusion means integration into interpersonal networks as well as cognitive frames Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

15. Reframing the issues through dialogue • From considering the role of IT mediated communication as a vehicle for reducing the need for presence to: • Considering how firms can develop IT infused innovation capabilities, cont’d: • But, there are cultural barriers between IT and R&D – How do we overcome them? • Project planning mindset dominates in IT • Involvement of CEO, CFO is critical – need a “seat at the table” for IT and R&D • Who is pushing for change matters a lot to whether and how it will happen • Individuals at all levels of the firm need to assimilate a sense of the potential of IT to transform not only how they work but also the value, functionality embedded in the end products they create • How do we build trust without face to face engagement? How is engagement via IT different from face to face? What understanding do we lose? • “Adaptive structuration “suggests unexpected gains from forced collaboration – but the power redistribution that can result from new information (e.g. customers drive innovation, IT shares decision rights) makes it difficult to implement in established firms Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

16. Reframing the issues through dialogue • One answer to “what to do where” is not to conduct core R&D activities where a firm cannot protect its IP. But markets and a need to be close to customers can create the opposite pull. Rethinking the way a firm benefits from particular locations suggests other ways of answering this question. • Think more broadly about ‘how’ to be there (from location as a way to access country-specific resources, to location as a place to create firm-specific resources) : • Is being there virtually sufficient for the discovery / design activity? • IT enables collection of fine-grained customer data remotely. Does it provide sufficient insight into what the next leap in new technologies will be – over 5 years out? Can it provide insight into the next wave of functionality that customers will value? • IT enables dispersed collaboration for platform technologies, solving known problems. Can it enable architecting, visioning, ideation as well? • Does the potential to use IT to minimize the need to be there for invention/innovation depend on whether firm is sourcing information in unstructured form – silly putty <as yet undefined experience want customer to have, health care> or structured form - Legos<Apple platform technology, scientific knowledge>

17. Reframing the issues through dialogue • What do I need from this place? Can I do these things remotely? • Opportunities are recognized through serendipitous encounters that illuminate connections across domains – discovery of problems to solve • Opportunities are created through synthesis, engagement, and interpretation across domains – solutions are designed • Am I am going there to listen, to learn, or to lead? How should I engage in these activities? • Listen - taping into relevant talent net/customer networks versus sense of place - hearing what is meant, developing subjective connection to the place • Learn - what unique access to talent and customers can I develop? Consider varied routes your firm and others can access knowledge (e.g. third party technology providers). What happens if you don’t collaborate? Who will? • Lead (here separation is better?) e.g. plot a way out of chaos, e.g. Apple, firm that creates a vision for markets in flux can attract others who fit within that vision, by providing direction and acting as a hub that connects the parties needed to make it a reality)

18. Reframing the issues through dialogue • How to be there (location as a place to create firm-specific resources) • To acquire resources, or to engage and transform resources? • Transformation occurs not simply by investing in community resources and local infrastructure, but by combining local resources with firm-specific resources, to imbue them with firm-specific value • Transformation of community resources enables quasi-appropriation: • Enhances the value of relationship with the firm over other potential employers/partners • Creates resources that attract other desirable partners to the region • Produces a sense of place, which underlies firm-specific insight into local opportunities • Embeds firm uniquely in local innovation system, to better exploit opportunities • What is the first thing we should do to engage local resources? • Cities as life support systems – where can you help? Where is the pain? Will getting involved here place the firm in a meaningful position to learn what problems it can solve or how? <IBM’s Smarter Planet initiative comes to mind, as a way to sense these things…> Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

19. Reframing the issues through dialogue • From what capabilities should we build, to how can we leverage global collaboration to innovate faster or smarter? • See also slide on fostering collaboration between IT and R&D • IT enables data processing – but being smarter means asking better questions – connect domain experts to jointly define the initial Qs - collaboration leads to new shared cognitive filters for sensing opportunities for invention and innovation – role of language in constructing shared understanding of desirable firm capabilities • Redefine the problem space to one where the structure of collaboration required to solve problems enables sustained differences in how firms sense, create, commercialize innovations….e.g. we are not sellers to our customers – we buy and bundle solutions for them, we co-create with them, we chart a vision and put in place the collaborative infrastructures, platforms to create for/with them

20. Reframing the issues through dialogue • From what capabilities should we build, to how can we leverage global collaboration to innovate faster or smarter? • Gang /Mier/ Allen – since IP is often of questionable value in protecting innovations, both for institutional reasons and because technology is available through so many different sources, firms need to position themselves to be better collaborators. This includespositioning firm in national/regional innovation clusters and networks and systems to sense early, mobilize faster, and suggest firms should worry more about knowledge inflows and how to exploit them then they worry about outflows. It also suggests there is no one best set of capabilities to develop – many possible ways for firms to create unique combinations of knowledge resources. • How should firms leverage R&D service organizations? How does this differ if you are the innovation leader vs. you are playing catch up? • How much R does a firm need to do? Does it depends on availability of absorptive capacity or bridging organizations, like TTPs?

21. Questions worthy of further research • How to adapt to the “wrong” country? • How to look at differences across legal institutions as potential opportunities? • Regional transfers across regions within a country may be an important element of national innovation system firm can take advantage of in locating – e.g. in China cross regional transfers through Universities are encouraged and managed • Governments stimulate innovation in m any indirect ways – e.g. by funding Universities. How do the differences in whether innovation regions are supported by various ground-up vs. top down government initiatives matter for the way firms can tap into the knowledge generated in the region? Which ones seem to correlate with innovation regions being discovery vs. design driven – or falling somewhere in between? Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

22. Questions worthy of further research • How do location and spillovers relate to exploitative versus exploratory innovation? Note there is a difference in what these mean from discovery versus design driven innovation, and confusion in the literature about these terms. Usually exploration means to move into new domains, innovate in ways that build on little of a firm’s experience, whereas exploitation occurs when firms do more of what they already know how to do well. • How can firms organize to capture exploratory and exploitative opportunities in a region? • We need to understand how knowledge and innovation flows at different levels (individual, firm, region, country, global) affect each other, since each will likely be managed differently. Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

23. Questions worthy of further research • How can innovation be better integrated into a company’s corporate strategy? • Some believe separate of R & D is the end of organizations as we know them – firms are instead comprised of systems of relationships with more transient functional boundaries. • To find the right organization of R, D, C need to first understand the natural flow of these activities, then decide where they should reside. Groups need to understand the lifecycle of what the other group is creating – scope and durability of solutions. • Management of transitions between activities is key. Need to manage overlap to enable insights consistent with activity lifecycle and minimize distraction. Managing connection is also about managing and sustaining absorptive capacity. • Ideal separation likely differs by industry, region, and company. Historical contingencies of firms’ co-location of these activities will constrain adapting these boundaries.

24. Questions worthy of further research • Outsourcing of R & D & C – what are the effects on a firm’s absorptive capacity and ability to assimilate knowledge and technologies from geographically dispersed listening posts, knowledge factors, design driven clusters? Does it depend on a firm’s position in national innovation systems or regional clusters? • Are there configurations of R, D, C activities that are more successful for certain strategies or for particular kinds of innovation than others? • How does thinking about innovation as an open system alter the possibilities for organizing R, D, C? Perhaps we can think about these choices as ‘make or buy’ decisions and consult the mergers & acquisition literature for insight into how to manage the associated search, transaction, and integration costs. How to manage the risk of knowledge outflows and harvesting of ideas will have to address cultural differences and failure management. Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

25. Summary of Questions Gaps in Understanding • When to be there? • For what kinds of discovery and design activities? • Boundaries of R&D need to be rethought – inside and outside the firm • Integration of IT & R&D needs to be better understood • How to be there? • What kind of innovation system will benefit me, what role should we play in it? • How to engage country-specific resources to create firm-specific resources – priorities, specific kinds of actions? • How best to manage organizations to benefit from these various knowledge flows and maximize the gains from discovery and design driven depends on all of these factors Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011

26. Action Items • Make the forum an annual event • Include a focus on other emerging markets (India, Brazil) • Expand the disciplinary and industry variation of participants Katz Graduate School of Business - Echo Strategies - International Business Center, University of Pittsburgh Forum on Global Collaboration for Innovation January 7-8, 2011