Innovation, Strategy, Culture and Suicide

Eras of rapid change come and go. Schumpeter, Kondratiev, Piatier and others, studied waves of fundamental innovations. We are in the middle of the 4th wave at the moment (comprising ICT, electronics, internet, biotechnology, molecular engineering and the applications of quantum mechanics, etc), still with new innovations being developed, some still growing, some already maturing and some even starting to decline.

During these technological revolutions, competitive positions change, leaders become followers, start-ups become leaders, the dice are shaken up and anything can happen. But revolutions don’t go on for ever. At some stage, things will settle down again. And when they do, it will be good to be ahead of the game, rather than stuck as an also ran, struggling to make ends meet. Being ahead means being an effective innovator.

There have been over 5000 serious empirical studies of innovation and the essential characteristics of effective innovators. So we know how to be an effective innovator. More than anything it depends on people. There’s really no mystery about it. To be an effective innovator requires a company to have two characteristics: it needs a focused strategy so that everyone in the company knows what it’s about and where it’s headed. And it also needs a progressive organisational culture which enables and encourages people to contribute to achieving the strategy.

But adopting the management approach defined by neoclassical economic theory frustrates both. Ghoshal defined it as ‘the ruthlessly hard driving, strictly top down, command and control focused, shareholder value obsessed, win at any cost business leader.’ It focuses on quick results ignoring the long term; it focuses attention on deals rather than developing the existing business; it sorts problems by cutting, closing things down and ‘releasing’ people, rather than working to create and build; it focuses on shareholders, and ignores customers; and it not only disregards the interests of employees, but seeks actively to exploit them to the maximum.

The real problem for an effective innovator today in most industries is ‘how to recruit, retain and develop highly skilled and educated people, working in smaller numbers with a high degree of autonomy and their rates of pay no longer the main cost drivers, but their individual and team contributions crucial to organisational survival and prosperity.

Following the neoclassical line is industrial suicide.

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