8/9/2019 Globalization an Innovation Imperative
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Business Transformation
Globalizationthrough
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Globalization: An Innovation Imperative
Pari NatarajanCEO
Zinnov
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The Rapid Growth of the MNC R&D Centers in India & China
The current wave of globalization started in the 1980s and rapidly evolved
over the last 10 years
Volvo
BenQCisco
RedHat
ToyotaHoneywell
1Note:
Source: NASSCOM Strategic Review, FY 2009/ 2010; Zinnov India R&D Database Telecom Regulatory Authority of India (TRAI); Manufacturers Association of Information Technology (MAIT); Zinnov Analysis
Texas
Instruments
MotorolaCadence
1980s
Adventurous
1990s
Early adopters
2000s
The rest
OracleCiscoMicrosoft
SAP
Rockwell
AutomationIntel
EMC
GoogleNvidia
Freescale
Hyundai
Pace
Micro
Lockheed
Pou ChenEmersonIntel
Alcatel
Lucent
MicrosoftHitachi
MotorolaLG
Sanyo
ChinaIndia
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The presence of global 100 R&D spenders significantly increased between
2002 and 2007
60%
70%
80%
90%
100%
India/ China R&D Center Evolution Pattern of Top 100 R&D Spenders
2
3%15%
33%
68%
84%
0%
10%
20%
30%
40%
50%
Till 1990 Till 1995 Till 2000 Till 2005 Till 2008
Note:
Source: European Union Industrial R&D Score Card; NASSCOM; Zinnov India R&D Database; Zinnov Analysis
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Most global centers are optimized mainly for cost savings and access to
relevant talent
R&D Globalization Driver Priority as Perceived by US Stakeholders (Percentage of
Respondents)
15%
23%8%
8% 10%
42%
17%
75%
100%
3
54%
18%
33%
64%17%
25%
0%
25%
50%
Cost Talent Market Access Innovation
Very High High Medium Low
Note:
Source: Data aggregated based on Zinnov Survey of 100+ US R&D Stakeholders in Nov 2009; Zinnov Analysis
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Engineering Support Engineering Leadership Product Leadership
smovedtoInd
ia 52% 24%
15
Module Leadership
19% 4%
Product team maturity vs. Time since product was transitioned to India
This has resulted in product teams of the MNCs operating at a sub-optimal
level of maturity and with low level of innovation capability
4
Timesin
cetheProductw
a
Levels of Maturity0
3
7
Highest
Value
(4%)
Sub-Optimal(26%)
Progressive
(15%)
Note:
Source: Data aggregated based on the analysis of more than 200 product teams across multiple MNC R&D centers in India; Zinnov Analysis
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Different functions of shared services are at different maturity levels. They
are optimized for cost savings and for supporting local operations
IT*
Human
Customer
SupportF&A
ationRate
Globalization Maturity of Support
Functions
High
5
Sales &
Marketing
Resources
ProcurementInside
Sales
Maturity
Laggards Rapidly
Growing
Mature
Globaliz
Low
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While companies have been setting up their operations in emerging
locations, the market in these locations has seen rapid growth (1/2)
75%
100%
Split of top 1000 Global
Companies by HQ Location
90
120
Split of Small & Mid-
sized Businesses by
Location (in Millions)
$4
$6
Annual Per Capita
Disposable Income (in USD
Thousands)
6Note:
Source: Euro monitor International; Zinnov Syndicated Study on SMB Landscape in India; NASSCOM Strategic Review FY 2009/10; Forbes.com; FICCI; Zinnov Analysis
12
58
221
0%
25%
50%
2000 2009 2015E
India & China Others
0
30
60
2000 2009 2015E
India & China US
$0
$2
2000 2009 2015E
India China Developed Economies
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While companies have been setting up their operations in emerging
locations, the market in these locations has seen rapid growth (2/2)
13.5%
11.5%
6.0%
9.0%
12.0%
8%
12%
16%
Expected YoY IT Spend Growth, 2010
7Note:
Source: Telecom Regulatory Authority of India (TRAI); Zinnov Syndicated Study on SMB Landscape in India; NASSCOM Strategic Review FY 2009/10; Forbes.com; FICCI; Zinnov Analysis
0.0%
.
0.0%-1.0%
-4%
0%
4%
India China Asia
Pacific
Western
Europe
Central/
Eastern
Europe
Middle
East &
Africa
Latin
America
North
America
Canada
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The innovation ecosystem has also evolved and will continue to strengthen
in the next five years (1/2)
230400
480
560
Growth of MNC R&D Talent
Pool in Thousands, 2000-
2009
30,000
40,000
50,000
Number of Patents
filed (1990 to 2015E)
310
549
8
180
319
130
0
80
160
240
2000 2009 2015E
India China
0
10,000
20,000
1990 2000 2009 2015E
India China
Note:
Source: Zinnov India/ China R&D Database; Primary Interviews with Key Stakeholders; World Intellectual Property Organization; US Patents and Trade Office, Zinnov Analysis
32
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The innovation ecosystem has also evolved and will continue to strengthen
in the next five years (2/2)
1,061
800
1,000
1,200
300
400 Average # ofStrategic
Research
Projects
Average # of
Consulting
Projects
Research Scenario in Tier-1 and
Tier-2 Universities in India in 2010
rojects
Numbe
1,329
1,000
1,500
Number of Software Product
Start-ups in India (2000 to
2015E)
9Note:
Source: Zinnov India/ China R&D Database; Primary Interviews with Key Stakeholders; World Intellectual Property Organization; US Patents and Trade Office, Zinnov Analysis
148
36
359
63
161
0
200
400
600
0
100
200
Tier - 1
Universities
Tier - 2
Universities
Average # of
Doctorate
Scholars
NumberofP
r
ofPhDScholars
126
518
0
500
2000 2009 2015ETier-1 Tier-2
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The service providers also play an important role in the maturing R&D
ecosystem in emerging locations
Capabilities
across Various
Emerging
Locations
Capabilities
across Various
Emerging
Locations
GTM PartnersGTM Partners IP LedIP Led
a
10Note:
Source: Zinnov Analysis
Revenue Share
Models for
Sunset Products
Revenue Share
Models for
Sunset Products
EmergingMarkets
EmergingMarkets
Focus onProducts
Focus onProducts
Reduce CostPressure on
Product
Companies
Reduce CostPressure on
Product
Companies
Evolving Service
Providers
Ecosystem
b
cd
e
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Local companies in emerging locations are leveraging the innovation
ecosystem to compete in both global and local markets
MNCs from Emerging
locations
Leveraging emerging
market linkages
Asian companies are increasing their R&D investments to
come up with products that compete against global MNCs
a
b
11Note:
Source: Zinnov Syndicated Study on SMB Landscape in India
Global start ups
Companies in India are increasingly leveraging the
manufacturing ecosystem of China and Chinese companies are
looking to leverage the mature R&D talent pool in India
Disruptive technology and business models such as
Cloud/SaaS is allowing start up companies to leverage the
emerging market ecosystem
c
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Global MNCs should rapidly evolve and transform their emerging location
centers to increase their innovation capability
Operational
Support
Operational
Independence
Strategic
Independence
Global Strategic
Partnership
Cost SavingsCost Savings
Talent AccessTalent Access
Cost SavingsCost Savings
InnovationInnovation
Cost SavingsCost Savings
Talent AccessTalent Access
12
Cost SavingsCost Savings
Access to New
Markets
Access to New
Markets
InnovationInnovation
Talent AccessTalent AccessAccess to New
Markets
Access to New
Markets
InnovationInnovation
Talent AccessTalent Access Access to NewMarketsAccess to NewMarkets
Access to New
Markets
Access to New
Markets
InnovationInnovation
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Companies face a number of key challenges in this transformation. Some
are real and some are perceived challenges
Lack of domain
expertise
Micro-
management
Global teams do not
have deep domain
expertise
Middle management
teams in the US tend
to micromanage the
global teams
12
13Note:
Source: Zinnov Analysis
Cost escalation
LowerProductivity
High attrition
Lack ofcustomer
access
Productivity at Indiacentre is perceived to
be lower than US
Attrition at global
centres is very high
and could result in
business continuity
risks
Costs in emerging
locations continue to
increase at 15% to
20% a year
teams do not haveaccess to customers
at developed
locations
3
45
6
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Companies should focus on the key enablers to improve the innovation
capability of their centers
Operational
Support
Operational
Independence
Strategic
Independence
Global Strategic
Partnership
Deliver LeadershiDeliver Leadershi
Global LeadershipGlobal Leadership
Global Innovation
Groups
Global Innovation
Groups
Engineering
Leadership
Engineering
Leadership
Business LeadershiBusiness Leadershi
14
Key Enablers
Engineering TalentEngineering Talent
Process ManagementProcess Management
Basic InfrastructureBasic Infrastructure
HR as SupportHR as Support
Process LeadershipProcess Leadership
Advanced
Infrastructure
Advanced
Infrastructure
HR as a GrowthAgentHR as a GrowthAgent
Global VisibilityGlobal Visibility
Global HRGlobal HR
Focused Ecosystem
Linkage
Focused Ecosystem
Linkage
HR as a Change
Agent
HR as a Change
Agent
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Organizations that moved to higher level of maturity have similar
characteristics in their approach
Technical Leadership
Product management
Customer engagement
2
3
1
15Note:
Source: Zinnov Analysis
Ecosystem connect
Global roles
Organization structure
4
5
6
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If the Roman empire could figure this out 2000 years ago, we can as well
Ate fish from
Gibraltar
Drank wine
from Spain
or FranceSilk from
China
Globalization Footprint of the Roman Empire
16
Ate bread
baked with
wheat grown
in North
Africa or
Egypt
Dressed ingarments of
Linen from
Egypt
Diamonds/
Pearls from
India
Furniture in
Indian Ebony/
Teak
Note:
Source: Based on a 2008 article by Peter Jones and Lionel Casson in the Spectator; Globalization Is Great! by Tom G. Palmer, Senior Fellow, Cato Institute; Zinnov Analysis
Based on a 2008 article by Peter Jones and Lionel Casson in the Spectator
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Thank You
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