1. Organizing for Global Advantage
A. “The Globalization of Research, Development and Innovation”
(Summary) The traditional position on globalization holds that it is inevitable for low-skill, low-wage, labor-intensive jobs to be moved to low-cost countries but that this isn't a bad thing since countries, like the U.S., which is expected to lose these jobs can instead move up the innovation ladder and focus on “better” industries (producing high-skill, high-wage, high-tech jobs) where they have the comparative advantage. However, indicators show that high-tech (science & engineering) jobs are in fact among those being offshored and that this trend is growing. The usual suggested response is to increase R&D spending, produce more scientist and engineers, and improve science and math education (the so-called R&D infrastructure). Furthermore, it is thought that only non-core, “last generation” R&D is going offshore but core, cutting-edge R&D will remain in the developed, high-costs countries. But again, indicators show otherwise. The recipient countries, like China and India, are in fact also investing heavily on R&D infrastructure and are capturing even the core R&D. There is a growing tendency of multinational to bring technologies and tools to the offshore R&D facilities and train offshore workers. Moreover, universities and academic institution have also been putting up outposts on these countries (to tap new student markets). Indeed, all these factors point to the beginning of a fundamental shift in global innovation production; a shift that invalidates conclusions drawn from the comparative advantage theory on trade. A shift in productive capacity does not automatically benefits all parties in the long-term. This shift can be traced to the change in the nature of corporations. Corporations today are no longer rooted in a particular country. They are motivated by profit (not by patriotism) and make decisions based on this. They are increasingly adopting the so-called globally integrated enterprise model where production and markets (in which they sell) are often geographically separate. Despite its significance, the global shift in innovation production is proving elusive to measure and quantify. One factor contributing to this is the quality of available data. The sheer rate at which globalization is taking place (i.e. increase in the number of offshore research facilities and workers) means that data from a year or two ago are already severely inaccurate. Another factor is that traditional indicators like RDT trade, R&D spending, number of patents and number of science & engineering articles prove to be ineffective in capturing the magnitude of innovation that is happening.
(Reaction) The trend described by the article so well is nothing but the natural consequence of the capitalist system’s (or any natural system for that matter) tendency to settle towards an equilibrium. The barriers that allowed the imbalance that we have today (as manifested in the huge discrepancy in the cost of labor and quality of life between developed countries and the rest of the world) are continually being eroded by advances in technology and knowledge (not only scientific but also economic and political) that are making our world smaller and ever more interconnected. Ironically but unsurprisingly, the forces that made today’s developed countries what they are are, without the barriers, the same forces driving to level the global playing field. However, to take advantage, a developing country must break down its own barriers (such as lack of infrastructure or political stability) that are preventing it from becoming a player in this new reality.
B. “Globalization Alters Traditional R&D Rules”
(Summary) R&D activities in Asian countries like China and India have increased substantially as a result of the shift in the attitudes and approaches of governments in these countries; a shift towards technology-based economic development backed by investments directed at having a highly educated, technology-oriented population. Government spending and liberation in these countries has encouraged increased private investments on R&D including those from foreign industries. These factors lead to changes in the relationship between the industry from all over globe and the R&D communities in these countries from mere “testing-the-waters” approach to “major investments in institution building, the creation of new subsidiary operations, and the development of a wide range of joint ventures”, which in turn influences R&D performance patterns in other nations. Over the past few years, offshore collaboration has increased significantly as highlighted by the strong and growing tendency of multinational companies to support R&D in their subsidiaries (in other countries) or strike partnership deals with local companies in other countries. These (offshore) R&D investments are expected to become a substantial portion of the total R&D expenditures in facilities located in the “partnering” countries as well as be a major force affecting R&D patterns in both donor and recipient countries. The driving forces behind the rapid growth in offshore collaboration and outsourcing are the growing availability of talent, the declining costs of doing business, and the changing internal policies of the host countries. The goals of offshore collaboration and outsourcing are enhanced competitive position, higher productivity and enhanced R&D capabilities. Furthermore, it is expected to provide a more rapid entry into new markets, processes or products. It can also be postulated that savings accrued from outsourcing of applied research and development programs can be applied towards in-house basic research to enhance long-term technology development. Along with technological factors such as “general educational levels; public understanding, support, and participation in technology; public and private financial support of and commitment to science and technology; and technology-specific educational initiatives”, non-technological factors also influence the decisions of business to initiate or implement offshore collaboration. The non-technological factors include “government regulations, national cultures, disposable incomes, and the viability of local markets” and “establishment of technology relationships.”
(Reaction) Globalization presents a lot of opportunities to developing and under developed countries to catch up with the rest of the world. The article provides a clear description of what it takes to become a player in this age of globalization.
2. Developing a Productive Industrial R&D
A. “An Industrial Revolution in R&D”
(Summary) Over the years, the pharmaceutical industry has been characterized by its ability to evolve in response to advances in scientific knowledge (in medicine, biology, epidemiology, economics and information technology). However, the industry now faces unprecedented challenges in terms of soaring R&D costs, shortening product lifecycles and sluggish sales growth. “The rise in R&D expenditure is partly attributable to the fact that there are more drugs in the pipeline.” While there was once an “innovation deficit” due to the “dearth of drugs in discovery, it is now the quality of those leads and development of the plenitude of drugs competing for resource” that must be addressed. To overcome these challenges, the industry must rethink their approach and “adopt a new strategic, tactical and operational management model.” But it is not only challenges that the industry faces but also opportunities. Advances in combinatorial chemistry and high throughput screening (HTS) will bring about an explosion in the number of compounds it can generate and explore. Together with new areas of business (such as “diagnostic testing, preventative medicines, follow-up treatments and support services such as lifestyle counseling”) along with new treatment areas expected to be opened by advances in Genomics, these tools will yield enormous opportunities. The industry must be able to capitalize on these opportunities in order to overcome the challenges in now faces. It must “improve the quality of the drugs it produces, either by being much more selective at a much earlier stage in the R&D process or by completely changing the parameters in which it operates to ensure that it gets better results.” Furthermore, it must acquire new skills in areas like knowledge management and bioinformatics to leverage its knowledge assets. It is the quality of compound libraries and ease of access to the information within those libraries that will distinguish the leaders of the industry from the rest. “The industry leaders must therefore learn to foster a creative culture without losing control of the purse strings” (for instance, they might have “research scientists, linked by powerful intranet facilities, working from home”). They must also be able to cut any drug “that does not fully live up to expectations in terms of its safety, efficacy and commercial viability” as early as the preclinical trials. To achieve this, they must move from an iterative and intuitive way of doing things to systematic, predictive processes that will rapidly identify disease targets in commercially viable disease segments. Another key success factor is computing and information technology. The industry leaders must be able to establish a knowledge infrastructure that will allow their staff to “access to data, wherever they sit in the product development chain, whether they work in early stage discovery, late stage development, in head office, at home or at the premises of a partner organization.” They can also cut the amount of clinical resources required by conducting virtual trials – clinical trials on populations of software “people” created using preclinical data and “designed to behave like the real thing.”
(Reaction) To survive in today’s rapidly evolving world, organizations must be able to assimilate and leverage advances in knowledge and technology (whether discovered inside or outside the organization). They must be continually rethinking their strategies and operations to best adapt and take advantage of these advances or risk being left behind.
B. “Management of Industrial Research”
(Summary) The industrial lab provides a venue for technology development and innovation outside the pressures of tight product development deadlines. It can be a source of technology expertise for addressing company problems. Its impact is reflected in the change or difference it makes for the other units of the company and the company as a whole. Furthermore, it is expected to provide a means for “importing useful ideas developed elsewhere.” It is therefore necessary for the lab to “be forthcoming with its own creative results” and to interact and exchange knowledge with the outside world (e.g. fostering ties with the academe). Another important function of the lab is recruiting technical talent. A good lab with renowned researchers can easily attract such talents. Moreover, it must be able to “nurture and develop future generations of technical leadership for the company.” The lab also stands for the management's corporate commitment to the company's future. The lab management must therefore realize that it has a “responsibility to deliver real value to the company” and that it must exercise fiscal responsibility. Lab management must promote the role of the lab as a change agent, pressing forward with creative initiatives while “balancing thoughtful planning and recruiting with pragmatic forward progress”. Lab management must also realize that "explanation is one of a lab's key products." That is, it is the lab's job “to infect the company with new knowledge—often in spite of people's resistance to change and learning”. The lab management must therefore encourage “the staff to think broadly, and to reach for new thoughts.” It must foster a culture of creativity, curiosity and open communication. To develop future technical leaders, it is important for lab management to delegate project responsibilities including control over the budget. When it comes to starting projects, it is helpful for lab management check for the presence of a novel approach to solve an interesting problem, a champion that will lead the project with burning passion and enough resources for “critical mass of project activity to make progress in a reasonable time frame.” Furthermore, the projects should fit into the lab's portfolio profile. On the other hand, “the best way to end a lab project is to move it out into the company as a nucleus for change there.” But sometimes, it is necessary to end projects that have been overtaken by external developments. “Lab management needs the confidence and trust of the lab staff in order to redirect staff onto new endeavors without damaging morale and creativity.”
(Reaction) The necessity of coming up and adapting new technologies and innovations in today’s world has made organizations ever more dependent on its industrial lab for long-term viability and relevance. Therefore, more than ever, lab management must understand the many functions of the lab and seek to create an environment that enables it to deliver.
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