Need for stronger patent protection.
Business faces unprecedented challenges in the rapid evolution of global markets. In this new world economic environment, corporations must integrate their activities globally if they are to achieve competitive advantage. Thus, many companies are now redefining their business plans to address a crucial question: What is the key to competitiveness in this new global marketplace?
As Honeywell has found in its more than 100 years of operation, several critical factors are inherent in achieving global competitiveness. They include: * Ability to evolve as customer needs change; * Creating a structure and corporate perspective dedicated to making certain customers have products they can count on, wherever they are in the world; and * Nurturing and protecting technological innovation.
Honeywell has long understood and practiced constructive change in order to remain competitive. When the company was formed in 1885, it manufactured just a few products - in the United States, for domestic consumption. Today, Honeywell provides control systems and services for homes and buildings, aviation and space, and industrial applications all over the world. Most of this growth beyond U.S. borders occurred in the past 60 years as Honeywell evolved from an international to a multinational to a truly global enterprise. Honeywell employees speak more than 30 languages, represent over 50 national cultures, and serve customers in 90 countries through 38 wholly owned subsidiaries, nine joint ventures, and 75 distributors.
While Honeywell does not have all the answers on the most effective ways to achieve global competitiveness, it is an issue we have paid close attention to for decades. Certainly, one critical competitive advantage has remained constant: providing Honeywell customers with consistent, quality products and services anywhere in the world. We attained this advantage by identifying six components necessary to achieving and maintaining our rank as a successful global company. * Global business must be perceived as a long-term opportunity for profitable growth. * The company must also take a worldwide view of its businesses, managing activities to meet customer needs more efficiently than regionally focused competitors. * An effective global infrastructure will enable the company to overcome national parochialism and cultural and language differences. * The company must be able to coordinate activities worldwide to take advantage of geographically based advantages and economies of scale. * A global leader must back this worldwide strategy with the long-term investment necessary for it to pay off. * And the company must develop a truly international management team, encouraging communication and decisionmaking within a global context and prizing multicultural understanding.
More recently, the third factor - technological innovation - has emerged as critical for any firm that aspires to global competitiveness.
Technological innovation plays a critical role in every industry. A few years ago, Michael Porter of the Harvard Business School conducted a landmark, four-year, 10-nation study of patterns of competitive success. He concluded that innovation is the critical difference in the ability of companies, and nations, to achieve competitive advantage. National prosperity, he pointed out, is "created, not inherited" - and is inextricably linked to how effectively industry innovates and upgrades. Too often, though, a company in one country has seen its technology appropriated for use elsewhere in the world.
It is clear that the ability to compete depends on a company's skill in protecting its investment in, and future access to, technological innovation. But the incentive for high technology companies, such as Honeywell, to continue investing in leading-edge research and development is undercut by the current disarray in global intellectual property laws which puts the products of our investment at risk from unfair appropriation internationally.
As one example, last year Honeywell spent almost $700 million in R&D and generated about one-third of our $6 billion-plus sales in control technology from international markets. But we have also been deprived of legitimate payback when our technology is "borrowed." Patent and other intellectual property violations, including the infringement of our auto-focus technology patents by Minolta Camera and other camera manufacturers, have cost us hundreds of millions of dollars.
Intellectual piracy has a striking bottomline impact on a company's ability to compete globally. By one estimate, intellectual property of various kinds represents some 23% of total U.S. exports ($394 billion in 1990). At the same time, the International Trade Commission has estimated that in 1986, total losses to American corporations stemming from intellectual property piracy were as high as $60 billion, including $4.1 billion for computer firms, $3.2 billion for pharmaceuticals and chemicals, and $2.3 billion for advanced electronics.
High technology companies require stronger patent and copyright protection for their new ideas and technology, the most important element in the drive for competitive strength in global markets. An international agreement on intellectual property that includes uniform protection standards, an effective dispute resolution mechanism, and strong enforcement measures will encourage an expansion in R&D.
Improved international rules protecting this most valuable of commodities will facilitate the legitimate transfer of technology, for a savings of billions of dollars to U.S. corporations in all industries. Improved technology transfer will ultimately benefit the entire global community by enhancing productivity and economic activity worldwide.
Corporations willing to face the challenges of achieving global competitiveness will have to embrace fundamental changes in their corporate culture, organization, and planning. They may be forced to become more aggressive in protecting their intellectual property. Such change can be intimidating, but there is no alternative. In view of the economic and social forces at work in the world today, globalization is not an option. It is an imperative.
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|Title Annotation:||Special Section: Being a Global Leader; views of James J. Renier, Chairman and CEO of Honeywell Inc.|
|Publication:||Directors & Boards|
|Date:||Sep 22, 1991|
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