In this question we are going to discuss the statement given by Bartlett & Beamish which states that “certain principles-the differentiation of roles, the interdependence of units, and models of control-underpin the development of an effective transnational organization. Nonetheless, there is no one right way of managing the innovation process of an MNE, because each firm has its own unique administrative heritage that it can not and should not disavow”.
For an organization to become global, there are many challenges that it faces. The challenges do not only come in in terms of selling products but also how the organization takes in ideas from the many foreign subsidiaries affiliated to the organization, ideas which might be useful in innovation of new products. But many multinational managers find it hard utilizing this important foreign resource. Often a time heavy handed responses given from headquarters kill, the morale, enthusiasm and good ideas and even drive away good people that would have otherwise been useful to the company. But studies have shown that this can be eliminated if companies started doing things differently. Studies carried out on more than 50 multinational companies suggest that companies should start treating their subsidiaries as peninsulas to the organization not islands on their own; they should stop looking at these subsidiaries as outposts but as extensions of the bigger organizations. This will pave way for the free flow of ideas from the organization’s periphery to its center that will in essence encourage innovation bringing about massive benefits to the organization as a whole. To do these, two things must be done; improvement of communication channel, both formal and informal between the subsidiaries and the headquarters, and give subsidiaries authority to see through their ideas.
To do this is not an easy task; corporate executives should not just ask managers from the subsidiaries to be innovative, but they should provide them with support systems together with incentives in order to facilitate their efforts. These can be done by giving them seed money, formally requesting for proposals not demanding, encouraging them to be incubators and they should build international networks. In dealing with the issue of seed money, they should find a balance between giving them absolute freedom in pursuing new ideas and demanding that they meet short term results. These two factors in effect seem contradictory; this is because if given the freedom to do as they please, they subsidiaries might be tempted to pursue their own goals, they will come up with projects that will give returns below target levels. And on the other hand if they are told to meet short term results, they will start hiding profits especially if they anticipate difficulty times ahead. There to curb this, headquarters should give the subsidiaries discretionary budgets with limits within which ideas can be tested. Also major investments should only be handled at the corporate level but the seed money can be decentralized. Projects funded from seed money have grown to be big investments for many companies, for instance in Athens there was the creation of the state-of-the-art factory for electrical transformers in Georgia referred to us the “factory of the future”, funded from seed money.
Seed money alone is not sufficient; the corporate executives should sent requests for proposals to their subsidiaries. This increases the demand for seed money and also stimulates development of creative solutions to the corporate challenges. But this must also be regulated to reduce the cost of evaluation of multiple bids by limiting the number of competing proposals at the same time not suppressing variance but increasing it. Subsidiaries should also be encouraged to be incubators. This helps in protecting the unpopular or unconventional projects that would otherwise be closed down if known to the headquarters. Many projects that would be dismissed at the corporate level have been held by subsidiaries and later on rise to be big projects. This is also disadvantageous to some extent as new ideas may never find a place in the portfolio of the corporate. This is why building international networks comes in. linking of subsidiaries to sources of funding, sponsors in other parts of the company and to complimentary assets helps them to innovate new business ideas (Birkinshaw & Hood 2001)
From the article Connect and Develop, a same idea of treating the company as one among many has been used. Procter & Gamble when faced with the problem of printing images on its potato crisps, it did not sit back and dealt with the problem alone, instead it sought assistance from its other global networks. And it was not long before they found a solution to their problem, through their European network; they discovered a small bakery that was using the same idea as the one they were looking for. Both articles do agree that innovating from within has been by passed with time and that in this new era of technology companies or organizations need to employ the concept of open innovation, they should leverage one another’s innovation including competitors. The “connect and develop” innovation model encourages finding of ideas from outside and bringing them into the company so as to enhance and capitalize on the capabilities inside the company. Whereas “Building effective R&D capabilities abroad” encourages the strengthening of the subsidiaries by providing them with supportive innovation programs (Huston & Sakkab 2006)
Coming together to share ideas and hence be able to innovate seems a very prudent step for companies to take, but as the statement says, it still remains the respective companies’ willingness to uphold the ventures until their goals are mate. This is because the companies are separate entities and thus will be of varying opinions, aspirations and this might make it hard to be smoothly run jointly.