By sourcing and integrating knowledge from dispersed geographic locations, companies can generate more innovations of higher value and lower cost.
Many companies have supply chains that are global. Starting with the sourcing of components and raw materials from around the world, they then move their basic manufacturing to low-cost locations overseas. An increasing number of companies also have begun to transfer their support services and customer call centers to cheaper sites. But few of them have innovation processes that are equally global.
It’s true that many companies have research centers or product-development teams scattered around the world. But more often that not, each of those units is focused on leveraging the knowledge available at its doorstep. Even so-called “centers of excellence” tend to be dominated by the thinking and technologies available in the countries where they are located. Rarely do innovation activities integrate distinctive knowledge from around the world as effectively as global supply chains integrate far-flung sources of raw materials, labor, components and services. Moreover, the units responsible for innovation in most companies are often poorly equipped to cut costs by accessing knowledge from nontraditional, cheaper locations.
But some companies have managed to assemble an integrated “innovation chain” that is truly global, allowing them to outflank competitors that innovate using knowledge in a single cluster. They have been able to implement a process for innovating that transcends local clusters and national boundaries, becoming what we dub “metanational innovators.” This strategy of utilizing localized pockets of technology, market intelligence and capabilities has provided a powerful new source of competitive advantage: more, higher-value innovation at lower cost.1 It is the logical next step beyond augmenting in-house R&D with external ideas in what has been called the “era of open innovation.”2 (See “About the Research.”)