Innovative management culture
if corporate culture is the answer to radical innovation in the world’s increasingly convergent economies, how do you create the ideal conditions? Our research has identified three specific attitudes and three practices that radically innovative firms share. The attitudes include the willingness to cannibalize existing products, a tolerance of risk and an orientation towards markets of the future. The practices are the empowerment of product champions, internal competition and providing incentives for employees to be enterprising.
Embrace risk, don’t avoid it
Sacrifice existing successes to develop new ones
Face the future, don’t rest in the past
Empower product champions
Foster internal competition
Provide incentives for enterprise
And, in line with AIM Research’s goal to provide business research that has a practical application in business, we have created a benchmarking tool to enable firms to compare their own corporate culture against these criteria. It enables managers to become attuned to cultural factors, measure them, and foster them to maintain a culture of relentless innovation.
Changing corporate culture.
But how do you go about changing a corporate culture? Companies are often focused on maintaining the stream of profits being generated by existing products and services. That success can lead to complacency and a sense of invulnerability. Success in one generation of innovation can often be a limiting factor, with managers protecting profits and avoiding any developments that might threaten them. In addition, dealing with the micro problems of its successful products can blind a firm to radical innovations of the future.
However, forward looking firms are willing to sacrifice short term returns and cannibalize existing products for the sake of the next generation of innovations. They see the limitations of current technology and are able to identify future trends that will dominate. But taking that gamble is not something that comes naturally to most managers and that’s where firms need to promote a tolerance of risk internally. They can empower individuals with the resources to explore, research and build on promising, but uncertain innovations. This can for example be reflected in the firm’s reward system, gearing it more towards employees who explore or build new enterprises, rather than rewarding seniority or the management of existing products.
Fostering an innovative business culture.
Our findings have some important ramifications for both managers and policy makers. Firstly, they challenge traditional beliefs about the drivers of innovation; those typically cited including government regulation, country level labor, capital and culture. In particular, the suggestion that a firm’s corporate culture is a more significant driver of innovation would lead us to believe that all national attempts to stimulate innovation from the top down are doomed unless firms themselves embrace and foster a culture of innovation from within. Secondly, the relative innovativeness of countries has always been measured in terms of numbers of patents generated or the amount spent on R&D. This approach would appear to be misguided; rather it is actual innovation in terms of new products and services that translates into financial value for firms and ultimately national economies.
Six ways to build an innovative corporate culture
With the global recession deepening, governments will be looking towards innovation to help economies fight their way out of trouble. But how do you drive innovation and what makes one company more innovative than another? What drives innovation? Exactly what drives innovation has been the subject of debate for some time. Analysts and social scientists’ views vary according to their particular perspective.
Sociologists point towards religious beliefs, Max Weber famously citing the ‘Protestant ethic’.
Psychologists will talk about the role of ‘national culture’ – individualistic cultures more likely to develop and implement new ideas than collectivistic ones.
Legal scholars emphasize the importance of property rights, arguing that individuals are more likely to be innovative if they are guaranteed to benefit from the fruits of their enterprise.
Geographers believe that the distance from the equator holds the key; colder climates motivate people to think about and plan for the future, an important ingredient of innovation.
Finally, economists place their faith in the role of national inputs such as labor and capital, with countries that invest in advanced technical and scientific skills among their citizens stimulating greater innovation.
Most of these theories point to the same root – that innovation is driven by actions taken at a country level and that national policies hold the key to fostering enterprise.