Hotbeds of Innovation

U.S. multinationals are looking to small companies and startups for the next big ideas.

by William J. Holstein

http://www.strategy-business.com/article/00061?rssid=all_updates&gko=68976&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+StrategyBusiness-AllUpdates+(strategy%2Bbusiness+-+All+Updates)&utm_content=Google+Feedfetcher

Fabulous article on different approach to R&D driven innovation in our “flattening world”

"As companies in Asia and Latin America transform themselves from low-cost manufacturers to competitive innovators, many U.S. multinational corporations are confronting a strategic dilemma: Although under pressure to stay ahead of their often-flush global rivals, these multinationals are being forced to revisit their R&D budgets — a consequence of weak sales at home, where consumers are nervous about spending.

Some companies have responded by offshoring design and engineering to drive down costs. IBM, a well-known example, has invested significantly in its presence in China and India. Others have adopted open source policies that encourage collaboration, such as Procter & Gamble Company’s “Connect + Develop” platform, which lets P&G and external product and process designers share technologies and know-how. But another option is growing more popular. Called “ecosystem investing” by some innovation executives, it refers to the increasingly complex network of suppliers and innovators supporting large companies."

In this model, well-established U.S. companies are creating strategic partnerships with startups and small companies whose technologies and skills can help the large companies expand their own capabilities. Longtime ecosystem investors such as Johnson & Johnson (J&J) and Intel are driving existing ventures toward advanced breakthroughs, and companies such as General Electric, General Motors, and Google have adopted the approach in earnest in recent years.