By Barry Jaruzelski
Nearly all large companies are now conducting elements of research and development work outside their home country. To compete in global markets, companies need to choose the innovation model that best suits their business strategy, build their innovation capabilities, and deploy their R&D assets and personnel in regions that will best support world-class innovation and design. Asia has become the world’s number-one region for corporate R&D activity, surpassing both Europe and North America.
Establishing a global research and development model has become a basic requirement for large corporations that want to be competitive in today’s marketplace. An overwhelming 94% of the world’s top R&D spenders currently conduct elements of their R&D programs abroad, according to Strategy&’s 2015 Global Innovation 1000 study.1
Multinational companies are shifting their innovation investment to countries in which their sales and manufacturing are growing fastest, and where they can access the right talent. Companies based in fast-growing emerging markets are building their innovation capabilities to preserve their market shares and to compete with multinationals – both in their home markets and, increasingly, as they expand their businesses in other countries.
To compete effectively worldwide, companies must first determine the innovation model that is best aligned to their overall business strategy, build their innovation capabilities, and then implement their model around a global network. Competing with multinationals is particularly important for Asian companies, which are based in the largest and fastest growing region for innovation activity. Over the last seven years, Asia has become the number one location for corporate R&D, surpassing both Europe and North America, chiefly because of European and US firms setting up R&D centers in Asia to better serve local needs.
Building a world-class innovation model and strategy, and implementing it globally, comes with a unique set of complexities. Survey respondents to our study cited a variety of challenges in conducting R&D outside their home countries, with “ﬁnding and retaining top talent” and “protecting intellectual property” most often cited. Other challenges included quality and customer focus, risk and project management, and cultural differences. The good news is that leading innovators are creating specific innovation models that work, and are ﬁnding ways to manage these and other complexities on a global scale.
About the Author
Barry Jaruzelski is a thought leader on innovation for Strategy&, PwC’s strategy consulting business. Based in Florham Park, N.J., he is a principal with PwC US. He works with high-tech and industrial clients on corporate and product strategy and the transformation of core innovation processes. He created the Global Innovation 1000 study in 2005, and in 2013 was named one of the “Top 25 Consultants” by Consulting magazine.
1. “2015 Global Innovation 1000 study: Innovation’s New World Order,” (strategy+business, Winter, 2015) http://www.strategy-business.com/feature/00370
2. “2014 China Innovation Survey: China’s Innovation Is Going Global,” (Strategy&, 2014) http://www.strategyand.pwc.com/media/file/Strategyand_2014-China-Innovation-Survey.pdf
3. “How Emerging Markets Companies Can Avoid Growth Traps,” strategy+business December, 2015) http://www.strategy-business.com/blog/How-Emerging-Markets-Companies-Can-Avoid-Growth-Traps
4. “Emerging Best Practices of Chinese Globalizers: Develop the Innovation Models,” (World Economic Forum, in collaboration with Strategy&, March, 2015) http://www3.weforum.org/docs/WEF_Chinese%20Globalizers_2015_EN.pdf
5. “2015 Global Innovation study: China Press Release,” (Strategy, 2015) http://www.strategyand.pwc.com/cn/home/press/press-releases/displays/