He and his fellow researchers, Gerard Tellis of the University of Southern California and Jaideep Prabhu of Cambridge University, find that the most important factor in a company’s inventiveness is its corporate culture.
Corporate culture is key
Their research uncovered five attributes that these innovative companies generally shared.
Results suggest that:
1. Among the factors studied, corporate culture is the strongest driver of radical innovation across nations; culture consists of 3 attitudes and 2 practices.
2. The commercialization of radical innovations translates into a firm’s financial performance; it is a stronger predictor of financial performance than other popular measures such as patents.
Culture:
1. Future market focus: the extent to which managers focus on the customers and competitors of the future rather than those of today. e.g. One is that the chief executives at these businesses are more focused on the future than typical CEOs. And how do the researchers know this? By toting up the number of “will” sentences in the chiefs’ communications, as in, “We will prosper if we think ahead.”
This was the most important factor they found.
2. Willingness to cannibalise current products for future business
3. Tolerance for risk – simply the extent the managers take calculated risks
Practices:
4. Incentives for enterprise – actively reward innovation activities
5. Role of product and process champions – individuals empowered to make things happen
What does not seem to make a difference:
- Government policy – company culture much more important. Governments tend to copy each other so there is no long term advantage.
- National culture – again company culture matters more.
- Geography – ditto
“Happy families are all alike; every unhappy family is unhappy in its own way.”
A quote from the first line of Leo Tolstoy’s "Anna Karenina".
This applies to companies too. Innovative firms tend to look like each other and look to each other, including across industries, for role models which may make them look similar.
The full paper "Radical Innovation Across Nations: The Pre-eminence of Corporate Culture" can be downloaded from - here
