Report urges multi-speed approach to business innovation

Succeeding in the new globalised economy will require multinationals to develop a schizophrenic approach to developing business process and systems, a report published today by Ernst & Young and the Economist Intelligence Unit (EIU) suggests.

Globalisation does not mean homogeneity, warns the report. The wide variation in the rate of growth between developed and developing markets means that one-size-fits-all IT strategies won't work and enterprises will have to take a "polycentric" path to business processes that support decision-making and innovation.

To be a long-term winner in the globalised world, "multinationals must essentially operate at multiple speeds in order to fit their strategies to both fast-growth and slow-growth markets," said Scott Halliday, managing partner of Ernst & Young for UK and Ireland.

"Success in the former requires rapid-fire decision-making and the capacity to experiment, to learn and to scale at speed. For large multinationals, this may require a re-think of reporting lines in order to bypass bureaucracy and maximise agility," he added.

Rather than innovate centrally, then adapt or de-feature products to suit different price points, the report's authors recommend companies decentralise the innovation process, and set up multiple innovation hubs in key strategic markets.

Products, processes or components should be developed primarily with local markets in mind, but reapplied when appropriate in other markets.

The report recommends breaking down the fortress mentality in centralised research and development departments.

"An open approach to innovation helps to facilitate the transfer of ideas and innovations," say the authors

The report shows that, after a brief pause in 2009 and a modest rebound in 2010, the world's 60 largest economies will continue to globalise steadily between now and 2014, driven by the continued global economic recovery, technological innovation and the rise of the emerging markets. It draws on Ernst & Young's Globalisation Index and a survey of more than a thousand senior business executives worldwide.