Marginal Column

Prof. Hagen Lindstädt, Dr. rer. pol

is the director of the Institute of Corporate Management at the KIT, a part of Karlsruhe University. From 1992 to 1999 he was a consultant and project manager at McKinsey corporate consultants. Today he supports companies, including DAX 30 firms, on strategy and business war gaming. He advises the German federal government in questions of corporate leadership.

Photo: Gökhan Orhan/Prof. Dr. Hagen Lindstädt

“The point is not to increase internationalization, but to improve it!”

Content

November 2014

 

Complexity management, transfer of knowledge and standardization – Prof. Hagen Lindstädt knows which essential factors are decisive for the success of local engineering.

 

Which models for the internationalization of research and development promise the greatest success?

Our investigations have shown that the so-called hybrid models are the most successful. They are characterized by the fact that R&D sites exist both in the home country and in foreign nations. This is decisive, since companies active on a global scale have to detect local trends, identify customer needs, and achieve access to limited know-how. On the other hand, however, they must pool knowledge at a central point, define standards, and steer the international R&D organizations.

In the ideal case, how will an international R&D network cooperate?

There are two important factors in cooperation. Product platforms are the first success factor, especially in companies that actually produce something. Platforms standardize the configuration of multiple products within a product line. This brings about cost savings, above all in the later production process and by establishing uniform interfaces which decentralized development teams can use. Attention must be paid to intelligent interfacing as there is always a certain degree of conflict between standardization and the ideal individual solutions. The second success factor for cooperation in R&D networks is efficient know-how transfer.

How, in general, can knowledge exchange be managed in internationalized R&D efforts?

Exchanging knowledge is one of the greatest challenges for any international organization, and not just for R&D. The steering of the knowledge base and fundamental regulations on knowledge exchange should be handled centrally. And this exchange must flow in both directions. In fact, the local development departments often utilize the knowledge available from the central office, but transfer hardly any information back to the home country. It is important to overcome this one-dimensional type of collaboration. Successful firms install teams of experts who are responsible for and pool knowledge in a specific subject area. The remote unit picks up on new technologies in the global market and forwards details to the teams of experts at the central office. Team members there process the knowledge, define standards, and develop appropriate platforms. And then they disperse this knowledge into the decentralized organization.

What role do development partnerships with customers play in the internationalization of R&D?

Development partnerships are, in most cases, of benefit to both parties and represent a kind of symbiosis. Development costs can be split, the development can be closely targeted on goals, and the supplier ensures a leading position when compared with competitors. Entry into local engineering classically takes one of three routes. First: Local production, already established, is followed by R&D activities. Second: Cooperation with local scientific institutions such as universities or research facilities is established and expanded. Third: Development partnerships with customers or suppliers are intensified. In addition to local production, development partnerships are the most probable and the most efficient way to establish international R&D.

How does connected industry influence the internationalization of R&D?

Connected industry imposes, in fact, another demand on R&D because it entails additional product requirements that will have to be satisfied in the first phase and then implemented successfully across the board. In the second phase, R&D organizations must learn how to deal with this newly generated knowledge as a constant factor and turn this into a competitive advantage. Connected industry will document and manipulate the data on both machines and processes in new, innovative ways. People actually on site will be needed, however, to pick up the market’s pulse at an early date.

Will the cloud play a role in development projects at the international level? If so, then which role?

If one sees a cloud as a central database with decentralized access options, then it is nothing new for most of us. Almost every multinational company I know has been doing this for years. Employees all around the world can reach the central server via the Internet and a VPN client. Working in combination with connected industry, the cloud can score points with its open access concept. A decisive disadvantage of clouds operated by external firms is the question of data security. Especially in the highly sensitive R&D setting, this could be a reason for most companies to back away from the idea. It is generally true, however, that decentralized access to central structures is essential for multinational R&D organizations. The simpler the access and the more knowledge available at the international level, the more efficiently a decentralized organization can work.

How transparent can a development process be?

A development process itself should exhibit maximum transparency within the R&D organization. This does not mean, however, that every technological innovation must also be accessible to everyone. There are hardly any corporate processes that are so complex, and whose sub-processes interact so intensely, as the product development process (PDP). These are characterized by “stage gates” located between the development phases. These freeze the development status and form the basis for all further advances. After-the-fact modifications are extremely costly. In our work we repeatedly see companies that spend millions for retroactive corrections and impose insufficient discipline on the process. In regard to the subject of transparency in the PDP and effective communications among PDP participants, there is still enormous potential in many companies. Fundamentals should be set forth at an early date but the details should be kept flexible for as long as possible. This is a difficult balancing act.

How can companies best deal with the conflict of know-how exchange and security concerns?

Successful companies are distinguished by the fact that they implement multi-stage security concepts. This means that access to especially critical knowledge is more strongly protected than non-critical know-how. There are graduations between these two extremes. Over and above that, the teams of experts in a subject render global support without, however, disclosing all the know-how. It is true in principle, however, that sharing knowledge within the organization is one of the vital success factors. The decision on how openly to deal with knowledge will have to be made at the project level and from case to case. Over the past ten years our examinations of firms have revealed, however, that there is a clear trend toward more openness and a higher degree of cooperation.

Production first and then R&D – what course is company internationalization likely to take?

From a functional point of view, global value creation is already quite far advanced. At most companies, R&D is the final step in the expansion of local value addition. Our research at the Institute of Corporate Management in Karlsruhe has revealed many instances where companies centralize or recentralize their R&D activities. In this way – at least from the R&D viewpoint – they are withdrawing from the international setting. The reasons here are often found in the complexity of the international network and quality problems encountered in the development process. In my view, the next step will be to improve complexity management and increase the quality of the processes. The way in which connected industry will act as a driving force in this development is quite a fascinating question. It is not, first and foremost, a question of expanding internationalization, but instead of making it better.