Chapter 3: Culture and Climate

Considerations for High-Tech Companies

©2010 Pearson Education, Inc. publishing as Prentice Hall

What characterizes an innovative culture in high-tech companies?

How is creativity related to innovativeness?

What are the facilitators of a culture of innovativeness?

What are possible barriers to an innovative culture?

©2010 Pearson Education, Inc. publishing as Prentice Hall

High-Tech companies can become complacent ◦Need to cultivate a climate/culture of

innovativeness Culture

◦Set of organizational values and beliefs that guide behavior

◦Hard to change Climate

◦Set of expected behaviors◦Observable manifestation of culture

Culture and Climate in High-Tech Firms

©2010 Pearson Education, Inc. publishing as Prentice Hall

Success= Culture of Innovativeness

◦Break-through thinking

◦Risk taking

◦Assess by percent of revenue derived from recently-released products and breakthrough innovations

©2010 Pearson Education, Inc. publishing as Prentice Hall

Obstacles to Innovativeness (see later slides)

◦Core rigidities

◦Innovator’s dilemma

◦Organizational size?

◦Cyclic nature of business

©2010 Pearson Education, Inc. publishing as Prentice Hall

Develop/Maintain Innovativeness

◦Steady stream of innovations

◦Entrepreneurial spirit

◦Nonlinear process In contrast to stage-gate, step-by-step process

◦Forward-looking

©2010 Pearson Education, Inc. publishing as Prentice Hall

Chapter 3: Culture of Innovativeness

Chapter 4: Market-oriented culture; culture of collaborative cross-functional interactions

©2010 Pearson Education, Inc. publishing as Prentice Hall

Creativity and a Culture of Innovativeness Creativity as a source of competitive advantage ◦Must be “disciplined creativity” – guided

and channeled with strategic planning ◦Ideas must be novel AND useful

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

Top managers have a strong influence in innovation◦ Set example for values and beliefs ◦ Successful NPD efforts have CEO that is

intimately involved with every aspect of the process

◦ Completely back the project◦ Exhibit a future focus◦ Exhibit an external (market/customer)

focus

©2010 Pearson Education, Inc. publishing as Prentice Hall

Process of developing/commercializing breakthrough product, service, or model that obsolete or cannibalize existing products Current technology made obsolete

by proactively developing next-generation technology

May be the antidote to the Innovator’s Dilemma if it overcomes internal rigidity

©2010 Pearson Education, Inc. publishing as Prentice Hall

Use fear of obsolescence as motivation to engage in creative destruction

Drivers:◦SBUs compete internally for resources◦Product champions carry strong role◦Focus on future markets more than current

markets

©2010 Pearson Education, Inc. publishing as Prentice Hall

People who assume significant risks to see their innovative ideas succeed ◦Tireless crusaders

Product champions are characterized by:◦Rule-breaking and risk-taking◦Political astuteness◦Technical competency◦Aggressiveness

©2010 Pearson Education, Inc. publishing as Prentice Hall

Product champions in more innovative firms wield more influence than those in less innovative firms ◦ They have power to make ideas happen ◦ Reward system and top management support

them Product champions in less innovative firms

wield less influence ◦ Are frustrated and demoralized

©2010 Pearson Education, Inc. publishing as Prentice Hall

Isolate new venture groups outside the normal organizational hierarchy

Pros:

-More creativity, unfettered by existing corporate protocols

Cons:

-Signals impediments to innovation

-Isolates the creative process

©2010 Pearson Education, Inc. publishing as Prentice Hall

Actively facilitating the development of new knowledge and insights that influence the company’s strategy

Facilitated by: ◦ Top management support ◦ Decentralized/market-based approach to planning◦Market orientation – firm’s ability to actively

monitor customer/ competitor trends A competency-based source of competitive

advantage

©2010 Pearson Education, Inc. publishing as Prentice Hall

“Learning may be the only source of sustainable competitive advantage” Ray Stata, CEO

Analog Devices

“In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge” Ikujiro Nonaka,

The Knowledge Creating Company

“A unique characteristic of knowledge is that it is one of the few assets that grows most – usually exponentially - when shared” James Brian Quinn,

Intelligent Enterprise

©2010 Pearson Education, Inc. publishing as Prentice Hall

Abandon conventional wisdom◦“Unlearn” traditional but

detrimental practices

©2010 Pearson Education, Inc. publishing as Prentice Hall

Create a vision of the future based on “markets that do not yet exist” and unconfined by existing industry boundaries

Challenge the status quo ◦ Overturn price/performance assumptions

◦ Escape the “tyranny of the served market”

◦ Use new sources of ideas for innovation

◦ Get out in front of customers Engage in creativity exercises

©2010 Pearson Education, Inc. publishing as Prentice Hall

Frequent fast-paced market incursions (see next slide)◦ Based on “times at bat” rather than one home run◦ Requires:

Accurate learning of customer needs Recalibration of market offerings “Light and fast” Shorten time between market learning and product launch

◦ Implication: Accumulate market experience, and quickly adapt market offerings

Enlightened experimentation

©2010 Pearson Education, Inc. publishing as Prentice Hall

Model 1

Model 2

Model 3

Time

Development Overall Revenue Incr. Revenue New Models

Relationship between Entries in the Market and Quality

Model 1

Model 2

Model 3

Time

Development Overall Revenue Incr. Revenue New Models

Relationship between Entries in the Market and Quality

©2010 Pearson Education, Inc. publishing as Prentice Hall

Tolerate “mistakes”

Learn from mistakes

“Mistake” may prove to be next success

Reward risk taking

©2010 Pearson Education, Inc. publishing as Prentice Hall

Appropriate reward system

Long term perspective

©2010 Pearson Education, Inc. publishing as Prentice Hall

Emphasize the importance of diversity

Maintain close relationships with the most innovative customers

Frequently evaluate project progress

Build innovation into performance review process

*see table 3-1 for a complete listing

©2010 Pearson Education, Inc. publishing as Prentice Hall

Provide considerable freedom of action

Educate employees about emerging technologies

Use teams of employees

Rapidly communicate new ideas across the company.

*see table 3-1 for a complete listing

©2010 Pearson Education, Inc. publishing as Prentice Hall

Well-established routines that prevent a firm from taking a fresh perspective ◦Bound by existing rules of the game

◦Ingrained routines, knowledge, and skills become strait-jackets

◦Inhibit a firm’s ability to develop unfamiliar skills, routines, and new knowledge

©2010 Pearson Education, Inc. publishing as Prentice Hall

In high-tech firms, core rigidities might be based on cultural norms that include: ◦ Status hierarchies that give preference to

technical personnel over marketing personnel ◦ Preferences for existing technologies and

products ◦ Focus on technologies/products rather than

customers/markets

©2010 Pearson Education, Inc. publishing as Prentice Hall

Core rigidities can be overcome by: ◦ Unlearning ◦ Learning orientation

©2010 Pearson Education, Inc. publishing as Prentice Hall

Difficulty in innovating and responding to disruptive innovations ◦Due to need to divert resources from pursuing

incremental innovations that addressed known customer needs in established markets

To new markets and customers that may seem “insignificant”

◦Arises from sunk costs in old technology; bias in managerial decision making, and reliance on existing customers

To succeed: Engage in creative destruction

©2010 Pearson Education, Inc. publishing as Prentice Hall

Life is pretty simple: you do some stuff. Most fails. Some works. You do more of what works. If it works big, others quickly copy it. Then you do something else. The trick is in the doing something else. You must take pot shots at today’s star before you are mimicked. Today’s radiantly blooming flowers are tomorrow’s mulch. Don’t forget that for a moment. But don’t think about it too long either.

Tom Peters

©2010 Pearson Education, Inc. publishing as Prentice Hall

Chapter Features Opening Vignette: Google Technology Expert: ESRI (GIS software) Technology Tidbit: Star Sight End-of-Book Case: ESRI

©2010 Pearson Education, Inc. publishing as Prentice Hall

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.