Wednesday, August 29, 2012

Innovation is always and everywhere a cultural phenomenon

Yes, I'm stealing an idea from Milton Friedman, one of the most influential economists of our time.  Friedman stated that inflation is "always and everywhere a monetary phenomenon" meaning that the money supply dictates inflation far more so than rises in prices.  This was counter to prevailing theories of price inflation, which was thought to be solved by governmental fiscal policies.  His ideas, controversial in the 1960s, have come to be viewed as the prevailing theory.

What's this got to do with innovation?  I'll make a parallel claim:  Innovation is always and everywhere a cultural phenomenon.  In our current business thinking we tend to celebrate what I'll call the "big man" theory of innovation, that innovation is driven by powerful visionaries.  While that story is easily told by journalists and is palatable to business people, it is flawed.  While some executives may lead their companies to innovation gains, basing innovation success on one visionary leader is uncertain at best.  Executives rarely stay long in any position or remain long in any firm.  As they gain success they increasingly lose touch with customers and markets.  While Steve Jobs is the constant refrain of those who advocate the great man theory of innovation, he is the exception that proves the rule.  For every Steve Jobs, the recognized visionary innovation leader, there are dozens of firms that are innovating successfully, over long periods of time, with no visionary leader.

What do firms like P&G, 3M and W.L. Gore have to tell us about innovation culture?  Everything.  While CEOs have come and gone, these firms have demonstrated decades of innovation.  That success is based on the corporate culture.  And consider Microsoft, which over the last decade has lost market share and its ability to innovate.  What was once a hungry innovator has become a firm focused on vicious infighting and protecting older technologies.  Microsoft's culture has been shaped in some degree by Steve Ballmer, whose reign at Microsoft was covered in great detail by Vanity Fair in an article titled Microsoft's Lost Decade.

Or, look at the issue through a size and experience lens.  Most entrepreneurial firms are innovators, trying to create a new market or disrupt an existing market or service.  Yet, as they grow, their cultures and focus change.  Larger firms are far more concerned with defending their markets and delivering consistent results than they are with innovation.  The focus changes, and in many cases that shift in focus changes the attitudes and perspectives of the culture.  This does not mean that only small firms can innovate, and large firms are left to squeeze out efficiencies.  It simply means that what the culture rewards and reinforces is what become the primary purpose and intent of the firm.  Innovation is a result of the focus, attitude and intent of the firm, its executives and its culture.  But since the average tenure of a senior executive is often less than five years, culture has more resiliency and staying power than the ideas of intent of a leader.  An executive can influence an efficient firm to become even more efficient, but rarely can he or she influence an efficient firm to become more innovative.  Often the culture will simply wait out his or her tenure, and return to the safety and security of known processes.

We often say that culture eats strategy for breakfast, but we need to think seriously about how powerful culture can be.  In many instances, no matter how much an executive team may want innovation, cultural attitudes and behaviors can overcome the short term demands.  The inertia, resistance to change and fear of risk and uncertainty is simply too great.  Therefore, any firm that is a successful innovator has a culture that supports and sustains innovation.

The question then becomes - if culture is so important, and so difficult to change, can we change it and is it worth the effort?  I think the answer is yes, it can be changed, slowly and surely, and yes, you must change your corporate culture to embrace more innovation, for one simple reason.  The era of the long product cycle is done.  Finished.  Kaput.  Your organization must move faster, with less information and greater uncertainty to create new products and services in less time, and do so more frequently.  If you culture resists this notion, you will simply not be able to compete.  This is not an option, or a method to steal a march on your competitors, it is the minimum you'll need to do to stay afloat.

Will you allow an intangible force to block the ongoing success of your business, or will you harness that force to make your organization a font of new innovation?
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posted by Jeffrey Phillips at 6:22 AM


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