Authors Gerard J. Tellis, Jaideep C. Prabhu and Rajesh K. Chandy recently published a research paper, Radical Innovation Across Nations: The Preeminence of Corporate Culture in the American Marketing Association’s Journal of Marketing (requires paid subscription or purchase). Alternatively, try a Google search and check out Rajesh Chandy’s site at the Carlson School of Management.
The study highlights that corporate culture is the strongest driver in determining the firms’ innovation capability. According to the study, the successful innovators share the following key organizational cultural traits:
- high tolerance for risk to fulfill the desired goal;
- willingness to cannibalize the firms’ prior investments;
- continuous focus on the future through emphasis and research on market shifts, current and future customers as well as competitors;
In addition, successful innovators also embrace practices that foster an innovative culture through:
- offering monetary and non-monetary incentives;
- empowering and promoting product champions that aggressively pursue new product ideas;
- encouraging internal autonomy for agility and internal competition between business units;
As the authors indicate, with globalization and flattening effect that occurs through rapid adoption of best practices across businesses and governments, corporate culture is now a key differentiator and competitive advantage.
Indeed, corporate culture is a factor that is unique, intangible, sticky, and difficult to change. Moreover, success in one generation of technology can breed attitudes of complacency and invulnerability with a focus on managing current products and protecting current profits that brought that success. These cultural traits can blind a firm to radical innovations on the frontier. Thus, maintaining a culture of relentless innovation is difficult.
The research also highlights that radical innovations translate into financial value for the firm. These days, firms might be tempted to reduce investment in innovation. However, as Chandy argues, it is these radically new products that can propel new growth, and therefore firms should resist the urge to stifle the innovations and internal culture that nurture it.
My own personal experiences certainly support these findings. Yes, patents are important and potentially an indicator of a creative, idea generating culture. However, patents alone do not translate to innovative products. If the organization is not willing to take a risk, you will eventually run into a dead end, even if you tirelessly pursue new product ideas. Culture is key for innovation and execution, however perhaps what is more important is the leadership that drives the culture of the organization. It is quite possible to experience different culture and attitudes towards innovation, even within the same lab given the values and incentives brought by different mid-level managers. Perhaps another study should be mid-level managers and their role in fostering innovative culture, and firms’ leadership programs that support it.
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