Wall Street Journal
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.
Take John Deere. It has developed low-cost, high-value products—like the 5003 tractor series and John Deere construction equipment —entirely inspired by the frugal Indian market. For instance, after serving the cost-conscious Indian farmers, John Deere ag equipment designed for the Indian market is finding increasing demand in Western markets, including among farmers in the U.S. Midwest who are reeling under the recession. Raj Kalathur, managing director of John Deere India, points out that his firm could never have successfully developed and marketed this innovative product line globally if its top management had stuck to its U.S.-centric core business model, and if it didn't empower and connect a diverse team of U.S. and Indian engineers to collaboratively design low-cost, high-value products that benefit farmers worldwide. That's polycentric, networked innovation in action!
Cisco has been bolder than John Deere by taking polycentric innovation to a whole new level. Even a few years ago, when I was a tech analyst, I would have never believed that this tech giant would one day practice polycentric innovation given its parochial outlook (almost all Cisco's top execs used to be located in San Jose, the company's headquarters). But all this changed in 2007 when John Chambers, Cisco's CEO, opened in 2007 the Globalization Center East in Bangalore, which de facto acts as Cisco's second HQ. By dispatching Wim Elfrink, a Dutchman who is Cisco's number two exec, to head this new center, Chambers sent a strong message to his company on how serious he was about diffusing the locus of decision-making beyond the confines of Silicon Valley. GCE was given a global remit from Day One: it was tasked with launching whole new business units with high strategic relevance that would serve both emerging and developed markets.
Fast forward to 2009: Cisco's GCE is alive and kicking. I recently spoke to Dr. Anil Menon, who co-heads Cisco's globalization efforts out of Bangalore, who shared with pride the fact that GCE has successfully incubated and spawned a new business unit called Smart Connected Buildings that is now globally rolling out entire new products lines that integrate U.S. technology and Indian know-how. He also reiterated Chambers' commitment to shift 20% of Cisco's top leadership to Bangalore soon. These India-based senior execs, many of whom Indians promoted from within, will soon call the shots on how Cisco innovates (and even operates) globally. You can call it polycentric management philosophy!
John Deere and Cisco are large corporations pioneering the practice of polycentric innovation out of India. But you may ask: "What about small Western firms? Are they capable of orchestrating global innovation networks out of India?" The answer: You bet. Let me show you how a Silicon Valley startup called Obopay is practicing polycentric innovation with much gusto.
Obopay specializes in mobile banking services. Obopay's technology allows consumers and small businesses to buy, pay, and transfer money through any mobile phone via a simple text message. Thanks to Obopay, millions of unbanked people in places like Africa and India are having access to financial services for the first time in their life. Although Obopay's R&D team is spread across Silicon Valley and Bangalore, the technology and business inspiration for Obopay's cutting-edge solutions mainly comes from India, which is adding 10 million new cell phone subscribers each month and yet is home to 600 million unbanked citizens.
Carol Realini, Obopya's forward-thinking CEO, is keen to make basic banking services affordable not only for low-income Indians but also to the 106 million underbanked Americans who are turned down by the risk-averse U.S. banking system. These disenfranchised American citizens have much to gain from the innovative, affordable financial inclusion schemes which Obopay has developed and deployed in India. What is good for India can indeed be good for the world.
At the beginning, I called John Deere, Cisco, and Obopay "enlightened." Why? Because they recognize that we are rapidly shifting to a multipolar world in which the bulk of the economic growth will come from emerging markets like India. As a result, these smart firms are proactively using India to mold their post-Western global identity.
These visionary firms are engaging India not just as a low-cost talent supply base or a lucrative mass market for their offerings but as a test-bed for trialing 21st century operating models -- like polycentric innovation -- that are fit for the globally-networked knowledge economy. Let's hope more Western firms – MNCs and startups -- will embrace polycentric innovation and use their R&D hub in India to design, build, market, and manage new products and services with global relevance.
John Deere and Cisco are large corporations pioneering the practice of polycentric innovation out of India. But you may ask: "What about small Western firms? Are they capable of orchestrating global innovation networks out of India?" The answer: You bet. Let me show you how a Silicon Valley startup called Obopay is practicing polycentric innovation with much gusto.
Obopay specializes in mobile banking services. Obopay's technology allows consumers and small businesses to buy, pay, and transfer money through any mobile phone via a simple text message. Thanks to Obopay, millions of unbanked people in places like Africa and India are having access to financial services for the first time in their life. Although Obopay's R&D team is spread across Silicon Valley and Bangalore, the technology and business inspiration for Obopay's cutting-edge solutions mainly comes from India, which is adding 10 million new cell phone subscribers each month and yet is home to 600 million unbanked citizens.
Carol Realini, Obopya's forward-thinking CEO, is keen to make basic banking services affordable not only for low-income Indians but also to the 106 million underbanked Americans who are turned down by the risk-averse U.S. banking system. These disenfranchised American citizens have much to gain from the innovative, affordable financial inclusion schemes which Obopay has developed and deployed in India. What is good for India can indeed be good for the world.
At the beginning, I called John Deere, Cisco, and Obopay "enlightened." Why? Because they recognize that we are rapidly shifting to a multipolar world in which the bulk of the economic growth will come from emerging markets like India. As a result, these smart firms are proactively using India to mold their post-Western global identity.
These visionary firms are engaging India not just as a low-cost talent supply base or a lucrative mass market for their offerings but as a test-bed for trialing 21st century operating models -- like polycentric innovation -- that are fit for the globally-networked knowledge economy. Let's hope more Western firms – MNCs and startups -- will embrace polycentric innovation and use their R&D hub in India to design, build, market, and manage new products and services with global relevance.
