“Innovation” may be the buzz word of the post-crisis world, but getting decision makers at multinational corporations to pay attention to ideas that are new, foreign and at odds with the company’s business model can leave subsidiary managers banging their heads against the wall.
As the world becomes smaller and more competitive, multinational companies (MNCs) are sending their managers to far-flung subsidiaries to absorb new techniques, ideas and markets, and to transfer the knowledge back home. However, with so much information flowing and vying for attention, it’s not always easy to be heard. So how can remote managers capture the attention of decision makers at headquarters?
The simple answer, according to Felipe Monteiro, INSEAD Assistant Professor of Strategy, is to find new ideas that “fit in” - technology and systems that are market-tested and easily adapted to the organisation’s business model.
“Organisations have a specific way of seeing the world,” Monteiro notes. “They are overloaded with information and knowledge, not everything can be followed up, so they have to be selective.” But, he warns, the easy sell is not necessarily the best thing for the company.
Corporate decisions a paradox
In his research paper Selective Attention and the Initiation of the External Knowledge Sourcing Process in Multinational Corporations, Monteiro studied the knowledge-sourcing opportunities presented by subsidiary managers to decision makers at one of the world’s leading telecommunications companies to examine why some opportunities are embraced while others are screened out.
The results reveal an intriguing paradox. It seems while MNCs are keen to set up foreign subsidiaries thousands of miles away from headquarters to overcome the limitations of local search, back home decision makers tend to shun novel, disconfirmatory, external opportunities in favour of those which confirm what the MNC already knows.
“MNCs are more likely to disregard opportunities that challenge or are dissonant or don’t conform to the company’s business model,” notes Monteiro.
This doesn’t mean the new technology or information is bad or that decision-makers are making the wrong decision. In fact adopting market-validated information which fits in with the company’s dominant logic and business model does have short-term benefits – it is more easily recognised and absorbed into existing operations and can help the firm become “more expert” in its domain. But by limiting themselves solely to what is familiar the company may be missing out on broader opportunities.
“There may be implications for the long–term particularly in industries where there is a lot of change. By perpetuating their way of doing business and concentrating on refining existing models rather than diversifying, organisations can fall into what is known as the competency trap,” says Monterio, noting it is the subsidiary manager’s role to be aware of this bias and to push ideas which can challenge but ultimately reward a firm.
Therein lies the quandary. To promote new ideas which seem destined to be scrapped in the very early stage of the screening process.
The first step is to know whom to talk to, says Monteiro.
Subsidiary managers should have rapport with not just the company heads but the leaders of the organisation’s different departments and the people who have the ear of the decision makers.
“Subsidiary managers have to be very experienced managers,” notes Monteiro. “It’s very hard to develop relationships if they are not well connected from the very beginning. They should have relationships and standing and networks within their company. They need to know whom to talk to and they need to have credibility.”
Typically subsidiary managers spend a lot of time going back and forth between headquarters and their base, whether it’s across the country or on the other side of the globe. “These guys have a crazy life,” he admits. “They need a lot of energy to commit to that position. It’s not all cocktails and conferences, although that is part of the job, but the other part requires a lot of face-to-face time maintaining connections and a lot of travelling.”
Effort also needs to be spent understanding the MNC’s business requirements, needs and constraints. Subsidiary managers need to have the ability to match external opportunities to specific teams.
They also have to be aware of the organisation’s bias and be able to present new ideas to suit. “By finding ways of reframing the new technology or ideas, so the dissonance becomes less resonant, the manager can increase the likelihood it will get HQ attention,” says Monteiro.
And finally and perhaps most importantly, managers have to be persistent.
“My results show the level of effort expended by subsidiary managers significantly affects the odds that decision-makers will attend to an opportunity to transfer external knowledge,” insists Monteiro. “Organisations are not necessarily destined to disregard opportunities to transfer knowledge that is dissonant or unproven. Where managers expend the maximum possible effort on internal activities even unproven and dissonant opportunities (which under usual circumstances would almost certainly by disregarded) are likely to capture the decision-makers’ attention.”
Subsidiary managers can be great contributors in bringing innovative change to an organisation but it requires a lot of effort and I think it would be wrong to believe it can happen just by telling HQ about it, there must be a certain amount of selling, he says.
The hunting dogs
“During my research I interviewed a subsidiary manager in Japan who said there are many times he feels like a hunting dog. He can see the prey, and he can bark. He can chase the pray but he cannot shoot it. For that he needs the hunter. And that’s how many subsidiary managers feel. They can see the opportunities but it’s not for them to make the decision.
“But at the same time with a lot of persistence they can pick up and get little things adopted that can generate millions and millions of dollars in new revenues. They can bring a lot of value to an organisation by facilitating connections and ideas that can allow MNCs to innovate in rapidly changing environments.”
Felipe Monteiro is Assistant Professor of Strategy at INSEAD.