Polycentric Innovation: A New Mandate for Multinationals

Monday, November 9, 2009

What do John Deere, Cisco, and Obopay have in common? All three companies form a new breed of enlightened Western firms that have embraced what I call “polycentric innovation.”

Polycentric innovation is an emerging business practice that consists of networking international talent, capital, and ideas to meet global demand for new products and services. Wait, isn’t that what multinationals have been doing for decades? Not really. While it’s true that leading American and European MNCs (I won’t name any here for fear of embarrassing them) have been operating R&D centers in emerging markets like India and China for years, these regional R&D centers merely adapted existing technologies and products developed in the West for distribution in local markets.

While some MNCs do conduct original research in emerging markets, the products and services produced by their bright Indian and Chinese engineers and scientists have again been primarily geared for local market consumption only. As such most MNCs’ R&D centers in emerging markets like India and China have traditionally had a narrow mandate or were not tightly integrated with the firms’ global innovation network, whose center of gravity was solidly anchored in New York or London.

But John Deere, Cisco, and Obopay are turning this ethnocentric 20th century R&D model on its head by de-Westernizing their business model and shifting the epicenter of their global innovation network well beyond the borders of USA and European Union. And they are using India as the launch pad for their “polycentric” innovation approach.

Source: Wall Street Journal (link opens in a new window)