Global R&D Strategies
Many global companies are expanding their worldwide engineering locations. There are a number of reasons to spread engineering resources around the global:
• Proximity to local markets
It is hard to design and develop a product targeted at Korea when your resources are located in the US. Products for a local market are most successful when they have been designed and/or engineered in that market.
• Access to engineering graduates
With the resource pools for engineers drying up in the US and Europe, large companies are setting up R&D centers where schools are cranking out engineers, most notably China and India.
• Cost reduction
While costs in some emerging countries have been increasing, they are still lower than in US and Europe. However, an apples to apples comparison is often difficult. Hourly rates are significantly lower, yes, but experience levels are significantly lower also. You might need 2 or 3 young engineers in China to match the productivity of one European engineer.
Personally, I believe the first two arguments outweigh the cost reduction topic. Companies are expanding overseas (especially in the BRIC countries) to be there and to have access to human resource.
The Boston Consulting Group just completed a report which includes a look at R&D centers in emerging markets. They identified four main forms of centers: Offshore units (focus on low-cost talent), Engineering nuclei (products for local markets), Local R&D hubs and Centers of Competence. The most common form (55%) is the “Engineering nuclei” where local teams work on products for local markets.
The approaches for training staff at a new global R&D center vary. While US and European companies send a few experts overseas to help with start-up, Japanese companies will bring the new staff to headquarters for training. In some cases, this could be 30% of the new staff training in Japan for up to 18 months. Those are companies that truly believe in standardized processes.
The BCG report, called Winning Localization Game, can be downloaded for free.
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Tags: BCG, Boston Consulting Group, GLobal R&D, offshore, R&DRelated Stories
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