January 28, 2009
What drives innovation? Answers to this question usually include inputs to innovation like government policy, amount of R & D spending, number of patents, access to talent and/or capital. Or the focus is on the consumer adoption of innovations.
However, a new study claims that although all these things matter in terms of inputs, nothing matters as much as the culture of the firm in terms of actual outputs or “radical innovation” (the commercialization of radically new products). Radical innovation is what drives a firm’s success. It’s also what drives the growth of markets and ultimately the economic growth of nations. It’s what we’re all after.
“Radical Innovation Across Nations: The Pre-eminence of Corporate Culture” (Journal of Marketing, January 2009) reports the results of a survey of 759 companies in 17 different countries. Data at the national level was compared with data at the firm level in different categories including labour, capital, government and culture to see what was the most important factor in the commercialization of radically new products.
According to the study, the strongest driver of radical innovation was the corporate culture of innovation, which was found to transcend national differences like government policy, R & D spending, number of patents, etc. The national differences were not the strongest influences as globalization is increasingly making these factors less important. For example, governments can rapidly adopt the best practices and policies of others (and are doing so at an increasing speed). Similarly, labour and capital are becoming increasingly mobile. In contrast, it is difficult (if not next to impossible) to copy corporate culture.
Examples abound of a firm’s culture bringing innovation to a screeching halt or success in one type of technology breeding complacency and in effect blinding firms to radical innovations (see Thomas Friedman’s examination of the Big Three’s lost opportunities in While Detroit Slept). It is clear that it’s imperative to maintain a culture of relentless innovation in a firm to ensure its longevity. But how can you create a corporate culture of innovation in your company? According to the key measures in the survey, you must:
The good news is that enterprising entrepreneurs have the ability to influence the culture of their company and that they ultimately have more control over this than they might have over some of the other inputs to innovation. The bad news is that it can be very hard to do so: the decision to protect one’s past successes or to cannibalize them (after working so hard for their success) is a weighty one. However, the right answer will ensure that a firm is not caught asleep at the wheel and continues to innovate after initial successes.