Outsourcing Innovation

It's a trend that's been incubating for some time, but the move by large international companies to create new products using non-home country based research and development (R&D) professionals is now becoming more visible. The July 25, 2005 issue of Fortune has an interesting article on how these companies are looking to develop new products and services by utilizing the non-home-country-based intellectual capital at their disposal. The article focuses on five companies: U.S.-based General Electric (GE) and Motorola and Intel, Swiss pharmaceutical giant Novartis, and Dutch conglomerate Philips, examining how each are using foreign-based talent to increase the R&D productivity of their corporations.

Here's a quick rundown of the examples of the kind of work that each company profiled in the article are doing by using their overseas divisions to develop new products and services:

How Global Companies Use Foreign R&D
Company	Where and What They're Doing
General Electric	Operates R&D centers in Bangalore, Bangladesh, Shanghai, China and Munich, Germany. Developing wind energy generating technology.
Motorola	Operates R&D center in Beijing, China. Creating new operating system for mobile devices based on Linux.
Intel	28% of the companies 7,000 R&D employees work in more than 20 countries. Developing the Centrino family of wireless technology.
Novartis	Shanghai, China. Provides funding and technology transfer to the Shanghai Institute of Materia Medica to investigate traditional Asian remedies for potential development into new medicines.
Philips	Worldwide Tapping customers for new product ideas and conducting both home and field research into how products may be improved.

Forrester Research estimates that only five percent of the Fortune Global 500 companies have taken their innovation development global at present, and predicts that the number of companies doing so will only increase. Forrester Research CEO George Colony explains why in the Fortune article:

"There’s simply not enough qualified talent at home for global companies to keep pace."

The reasons for this lack of available home-grown talent will be explored on another day....