Ralf HallerRalf Haller February 5, 2011

Why reward programs fail in Open Innovation projects and in general

“Do rewards work? The answer depends on what we mean by “work”. Research suggests that, by and large, rewards succeed at securing one thing only: temporary compliance. When it comes to producing lasting change in attitudes and behavior, however, rewards, like punishment, are strikingly ineffective. Once the rewards run out, people revert to their old behaviors. … Incentives, a version of what psychologists call extrinsic motivators, do not alter the attitudes that underlie our behaviors.”   by Alfie Kohn in Harvard Business Review, 1993

In his summary Alfie Kohn makes use of at least two dozen studies in the last three decades (which refers to 17 years ago in 1993) that have all shown- often to the total surprise of the researches themselves – that people who expect a reward for completing a task or for doing that task successfully simply do not perform as well as people who do not expect a reward at all.

These researches were conducted with children and adults, with male and female and with different types of tasks and they showed the same results. For open-ended creative work assignments the results were even worse. Important to note here is that we talk about performance in the sense of creating higher quality work and not in the sense of doing something faster or doing more of it, so quantitative. As he also mentions in terms of productivity, research and experiments clearly showed that once incentives were cut, after an initial drop a short period of time later the same or even better performance levels could be seen. In contrast training and goal-setting programs had a far better impact on performance than did pay-for-performance programs.

So in this context I also doubt that e.g. Open Innovation incentive programs such as shown by Innocentive or by the Swiss firm Atizo produce much useable results. They might show here and there some results (in Innocentive’s case probably more since they have awards in the 100s of thousand of US dollars) than with Atizo. What they achieve are collecting some ideas quickly which – in my opinion – a company could have also quickly and often much better been able to derive from its own employees or by asking customers, clients and partners.

Open Innovation as done by Starbucks with its MyStarbucksIdeas or Dell with its IdeaStorm communities are working though quite well and serve mostly as great public relations, communication and branding tools that interact with clients and secondly serve as initial idea collection opportunities. In addition they keep their corporate identity. It is a Starbucks or Dell and not an Innocentive or Atizo community which seems a very critical aspect too for most companies.

The true damages that company incentive programs cause Alfie Kohn summarized in these six points:

  1. Pay is not a motivator (when asked: “What do you care about?” Money ranks only 5th place)
  2. Rewards punish (they are one side of the same coin, they try to manipulate rather than motivate people and do not support a work environment conducive to exploration, learning, and progress)
  3. Rewards rupture relationships (people are trying to use the system for its own gain, no teamwork is supported, in addition incentive driven employees try to demand favors from their managers)
  4. Rewards ignore reasons (and managers use it as a way to manage comfortably and without having to do much)
  5. Rewards discourage risk-taking (the number one casualty of rewards is creativity, so rewards motivate people? absolutely they motivate them to win rewards and nothing more)
  6. Rewards undermine interests (people work because they love what they do but awards undermine this interest even and reduce performance, they undermine intrinsic motivation, it tends to make people less enthusiastic about their work and therefore less likely to approach it with a commitment for excellence, you get what you offer: some quick but overall low quality ideas that win an award but do not much more good for the company)

Ralf HallerRalf Haller January 25, 2011

Presentation with Prezi – how to collect and present your ideas in a new way

“Powerpoint sucks” is what you can hear for quite a while. And while this is partly true we all go back to it when we have to do a presentation, right? :-)  Well, recently the “PPT-is-no-fun community” got louder and came up with “visual meetings” that are based on the idea that visualizing what is being presented in a meeting will stick better and longer too. So far I have only experimented with this but not really used it in presentations or meetings. Although, intuitively I did already do it: what I like doing in meetings is to loosely prepare what I plan to say but instead of preparing something formal I open a bunch of PPT presentations, have websites I want to show or talk about ready and open on my laptop. This way the whole conversation is very customized and entirely focused on what the other side wants to hear and what questions come up. I basically let the other side (e.g. a prospective client) guide me through what I say.

Now another tool popped up, called Prezi. I started playing with it yesterday and figured that it is basically exactly supporting my presentation style as described above. I think it could be used for a bunch of things such as:

  • create a formal presentation, preparing it is now really fun
  • create an informal presentation as described above, now this looks suddenly even well prepared and impressive while still keeps all the flexibility
  • explain things and create a self-running tutorial, ideal for e.g. software manuals or any “How tos…”
  • use it to write down and visualize what is said in meetings and presentations (basically a tool to support visual meetings)
To get a quick overview on how Prezi works look e.g. at this intro:
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Interesting to see that there are innovative and creative guys out there like the Prezi folks. This should have been brought up by Google though with its army of developers and product managers, but, well, they did not. I suspect they are now either copying this or acquire Prezi, we will see what the GoogleDocs people will do.
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One thing where Prezi can be improved e.g. is by allowing to easily include other documents such as -well – a PPT presentation or at least slides. This sounds very much then like GoogleDocs but with a more intuitive and creative approach.
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With Prezi there is now finally the potential to replace our Powerpoint approach to presentations, although I suspect it will take at least one generation to really do so; but I hope I am wrong and it goes faster.

Ralf HallerRalf Haller January 24, 2011

Idea and Innovation Management vs. an idea box

I experienced now many times that lots of people do actually not know the difference between idea & innovation management and a simple idea box (in German they call it “BVW = betriebliches Vorschlagswesen”). Instead of me explaining the difference now I am quoting the well-known management book author Reinhard Sprenger, who has written about this in his bestseller book “Mythos Motivation”. Here what you can find on page 136:

Betriebliches Vorschlagswesen

Misstrauen: Mitarbeiter enthalten Kreativitätsreserven vor.

Innovationsmanagement

Vertrauen: Mitarbeiter wollen kreativ sein.

Vorschläge betreffen den Pflichtenkreis anderer.

Vorschläge betreffen den eigenen Pflichtenkreis.

Vorschläge als Ausnahme. Verbesserung als Regelverhalten.
moralisiernde Appelle normal-selbstverständliche Praxis
wenige Teilnehmer

Teilnehmer: gesamte Belegschaft

Fokus auf punktuelle Misstände Fokus auf kundenorientierte Prozesse
Vorschläge i.d.R. von Einzelnen Verbesserung im Team (Kooperation)
Führungskraft “umgangen” Führungskraft einbezogen
Prämien keine Prämien
Vorschlag schreiben statt handeln handeln statt Vorschlag schreiben
bürokratisch aufwendig unbürokratisch-pragmatisch

Bewertung durch zentrale Institution (Rückdelegation von Führungsverantwortung)

Innovation und Kreativität als Führungsaufgabe

Most of the above points I can fully support. One might be a bit too hard though. It is the incentive part. While I agree that incentives will not buy creativity and should by no means be the main motivation, in case someone does bring in an exceptionally good idea then this should be also recognized financially. Not though by formulating upfront an incentive already but by deciding case by case.

Ralf HallerRalf Haller January 11, 2011

Be careful with innovation consultants advice!

Yesterday I by chance came across a report from a large IT consultancy where the authors claim to be innovation management experts and who were writing about two client cases running innovation award events.

What entirely shocked me about this report was the fact that they despite claiming to be experts in innovation management their core content about why and how an internal innovation award event should be done and work was scientifically wrong. They claimed that incentives would all there is to motivate people to participate. They also said that CEO participation would be required (which is true) but then gave as example the handshake the winners would obtain from the CEO during the award ceremony as a highly motivational gesture.

I am now not here to publicly name these guys but can only caution you to question the competency of so called innovation management experts and ask yourself if what they say and claim makes really sense. Judge them not by what they say but what they deliver. Measures should be e.g. participation rates in an idea/innovation award event, also the number of high quality ideas submitted but NOT simply the number of participants. In a large organization with say 10k people invited, 500 participants mean a participation rate of only 5% or in other words 95% of your invited employees could have cared less about this event. A very clear failure.

Ralf HallerRalf Haller December 15, 2010

Book review: “buy-in, saving your good idea from getting shot down”

I just finished reading this book and can recommend it. What the two authors (John P. Kotter, a well-known Harvard Professor of Leadership and Lorne A. Whitehead, entrepreneur and Leader of Education Innovation at the University of British Columbia) write about is a practical guide on how to prepare for fair or unfair attacks against your ideas.

Armed with this book you should be able to convince and ultimately get support for your ideas in companies or any other organization that you try to get something new decided on.

The book mentions 24 attacks and how to respond to them. Also it provides you with an overall strategy on saving your good idea.

In case you simply trust the authors wisdom and are also in a hurry to apply it to your case you can go to this website and check your case against the list of 24 attacks.

While you can also read the book cover to cover it is more practically used as a quick reference book whenever you are in need. I also recommend it in sales and business development to prepare against some of the often silly arguments that are frequently used to get rid of you instead of openly listening first and only then deciding.

Ralf HallerRalf Haller November 20, 2010

Why you should not be afraid listening to your employees

This is a blog post that I wanted to write about for quite some time but always deferred it. It is on one hand quite an obvious one but on the other quite tricky as it touches on the management culture of practically all larger and medium sized companies. Only if you are in (well you know what I am talking (1) about :-) ) things will be different and every employee’s input is not only requested but mandatory to make the startup venture a success.

Current status in your company

Currently the situation is as follows in practically all large companies: depending on ones responsibility in a company you provide your opinion to peers when being asked in company meetings or to your immediate manager. Same story when managers meet. We have a hierarchical decision making organization assuming that the people on top will make the right and best decisions. That this is an entirely flawed assumption you could read in an earlier blog post already.

What should be done differently?

I just finished watching the masterpiece movie Kingdom of Heaven from Ridley Scott once again on DVD (it’s one of my favorite movies), in my opinion the best movie about the crusades. In the movie one scene I think is an example of what modern companies should take into consideration as well. The surrounded Jerusalem is left alone to an army of soldiers and only one commander but with no knights. When the highest priest points this out to the commander (Balian de Ibelin, Orlando Bloom) that they could not fight without knights, the commander decides to make all soldiers to knights and with that give them total freedom and independence. Puzzled by this act the highest priest, not understanding, comments “will you alter the world, does making a man a knight make him a better fighter?” and Balian responds saying “Yes”.

Absolutely, it does make a difference if you feel not just serving some bigger corporate goal or entity but feel like you are in charge of what you can do best pretty much by yourself.

So what I am proposing is that companies leave the local decision making to the employees who know it best. Also call for their opinions on a regular basis using sophisticated idea management software. Armed with this the people will be motivated and provide much higher quality work than without.

In the movie they managed to achieve the practically impossible: defend the city and could negotiate excellent terms with Saladin, who had a huge army of 200k men, to walk away free and unharmed.

Now it must not be such a heroic Hollywood-style achievement :-) but still there are plenty of decisions to be made daily that require motivated employees making a difference to their outcome. Enabling them and including them will make a difference that is pretty clear and will also make the difference if you have a highly motivated workforce or just one that does their required jobs. I am convinced that companies with highly motivated workforces will beat any other company regardless of their size or financial power.

(1) Silicon Valley of course

Ralf HallerRalf Haller November 15, 2010

Swiss startups present at 1st Investor Elevator Pitch Event

This evening I attended the 1st Swiss ICT startup elevator pitch event. It was organized by SwissICT the largest ICT association here and surprisingly their first such event. Well it is never too late I thought and attended after quite some time a startup event here again. Eight companies were pre-selected to give an elevator pitch to investors and guests and then the investors selected 4 (due to a tight it got 5) that could present their companies in more detail.

To my surprise the pitches were quite good. I did a little game myself and picked my 4 best ones. Again to my surprise these were exactly the chosen ones then. With the exception of one which I think was totally overrated. Surprisingly that company was picked as the number one by the crowd. I guess time will tell now who is right or wrong, me or them. :-)

I must restate that the quality of the pitches was mostly excellent and deserves a lot of respect!

Adrian McDermottAdrian McDermott November 8, 2010

Benefitting from the wisdom of the crowd

One reason that innovation software, and the idea of crowd sourcing, has become popular in the last few years has been the influence of a single book, James Surowiecki’s The Wisdom of Crowds. While in the market of business publications there have been plenty of sensations – Malcolm Gladwell’s The Tipping Point would be an obvious example – it is hard to think of any in the last decade whose influence is unchallenged and still growing. I should make it clear, however, that this blog post is not a book review, but rather a discussion of some of the main ideas of “The Wisdom of Crowds”.

The other reason for the attention paid to Surowiecki’s ideas is that they are radically different to received wisdom and could be very important to many companies at a time when the margin for error is becoming very small. The technical and innovation lead that Europe and the US had over China and other Asia Pac economies has been vanishing gradually over decades, as quality of manufacturing and speed of innovation have improved steadily. Companies have to be strong in every area of their operation, from market analysis through to delivering the products that fit and even redefine the market. Intelligence, innovation and decision making have to be done well, and fast!

How businesses usually solve problems
The standard model of business decision making has been that the more important the decision, the more senior and the fewer people are involved in it. Where the expertise at the top is insufficient, outside experts are called in to assist. The rationale of course is that the best brains in the business have got to the top, and there is no point using the company’s second-best. Plenty of tools have emerged to stimulate analytical and idea creation abilities within these groups, but the point remains that the make-up of these groups is very restricted.

The problems with this approach:
1. Life changes: It is a truism that in each new war, the generals at the top, i.e. the commanders who fought most successfully in the previous war, are soon replaced because they are fighting the wrong war. Likewise in companies, a history of promotion shows at best success in dealing with past challenges, at worst a series of lucky breaks or a talent for getting spotted.

2. Experts are people who seem to know something you don’t.  It is very hard to tell whether they really know it. Experts are also famous for disagreeing with each other: the top expert is often simply someone who scored the most recent victory in an continuous argument.

3. Similar to point 1, experts have a history of solving past problems, but this guarantees nothing in respect of new ones, especially where these need a new way of thinking. For experts, too, awareness of past success can create a block to envisaging new solutions.

4. Experts often share a common academic background, which can bias their take on a problem, and often respond to each other either for validation or differentiation, both of which remove the critical element of independence.

5. The smartness of an organization has a relationship to the total smartness of all the people in it – the sheer weight of numbers of people thinking about a problem makes a real difference to the likelihood of successful analysis.

6. Restricting analysis of a problem to a small number of people leads to the danger of consensus for political reasons – either fair of disagreeing with the boss, or trying to pre-agree, i.e. to predict what the boss will want to hear, or maintaining consensus in the group. These are powerful factors and make it a dangerous business to try to be heterodox or introduce information that does not fit.

That all seems pretty damning, but to date, getting wider feedback in a practical way has been very difficult both technically and politically, and this is perhaps the main reason that we have stuck with the status quo for so long. However, collaboration and innovation technologies make solving these problems a practical proposition, and one that it makes no sense to ignore. But before looking at how such solutions can work, we should briefly look at why they work.

The organization is smarter than any of its subsets

That is the main single point that Surowiecki has to make, and he has compiled a lot of convincing research in social psychology to make the case. In experiment after experiment, a diverse group of people who are not expert has more predictive ability than any single expert or of a smaller group with more expertise. The phenomenon has long been known. Over a century ago, Francis Galton compared ordinary people’s guesses of the weight of an ox (in a competition in a country fair) to those of experts (e.g. cattle breeders). Galton was a snob, to put it bluntly, and wanted to prove how defective the judgment of the ordinary person was. The averaged guess of the crowd was astonishingly close, however, to the real weight, and much better than that of the experts. This phenomenon has been seen repeatedly since in experiments pitching large diverse groups of people against small groups of experts to predict election results, share prices and first-week box office takings.

Target practice: amateurs can miss by more, but their combined score hits the spot

In many cases, the accuracy of predictions made by a large, assorted group of people is almost eery, as though there is some paranormal power at work. More prosaically, though, it is easier to think of it as like throwing a large number darts at a target. An unskilled group will generally miss by quite a bit, but not all in the same way, whereas star players may well share strategies and training, hence make similar kinds of errors. Applying the idea to more information-related themes, one could say that a large, diverse group of people have all kinds of different ignorance, and make all kinds of errors, compared with a more homogenous group.

What is essential for groups to make accurate judgments:
1. Diversity. Groups work well when the types of people and the information sources they use are diverse. Larger numbers of participants offer more diversity and less risk of “groupthink”. Small groups, especially where members share common interests, are likely to polarize towards a consensus, rather than risk a split.
2. Independence. Crowd sourcing works best when participants are not responding to each others’ opinions – or trying to predict them. This is perhaps the biggest single source of problems in decision making. One effect is to predict what the most important or prestigious group member might think, meaning that the focus is on second-guessing, rather than on the real problem. A second effect is cascading, when one person’s judgment sways that of others, independent of their own ideas. Nearly all forms of open discussion cause positive feedback effects or distortion
3. Decentralization. When questions of loyalty, prestige or career advancement come in, the effects of distortion and feedback are serious. These distortions are particularly strong when information flow is strongly influenced by, and reinforces, hierarchies.
3. Selection. There has to be a way to actually get the information from the people who have it, to the people who want it, that does not create bias or feedback. It is easy enough to talk about open businesses, but it is a model that is extremely rare in practice, because it is part of a manager’s job to stay in control, and without the sense of control it is hard to manage! This is perhaps the place where collaboration and innovation software play their greatest part, enabling decision makers to retain control, but gain a wide enough variety of input.

The power of social technologies to improve analysis and idea selection

One thing that sets The Wisdom of Crowds apart from titles that have caused a storm and then disappeared, is that the thesis does not depend on the internet for its validity. The research cited spans many decades. However, social technologies are the great enabler. Companies need a strong sense of leadership, and people who have demonstrated good judgment, effort and responsibility are rightly chosen to lead. However, that does not mean they have to have all the ideas. What they need is a way of selecting and aggregating the best of a diverse input of ideas from all the brains of the company – and of course that includes their own ideas, too. What employees need is a simple, enjoyable way to contribute those ideas, and one that establishes their worth as idea generators for the company. This is not a utopian vision, but a simply reality, and one that is increasingly being espoused by companies that dare to think positively.

Ralf HallerRalf Haller October 14, 2010

Why small decision-making groups in business fail so often

In today’s business world small groups of decision makers typically decide on what will be done. This is far away from any broadly organized decision making process and noone seems to have a problem with this tyipcally as long as the group making the decisions does so in a highly competent way using expert inputs when needed. And of course as long as things work out well.
Unfortunately as numerous scientific researchers have shown, small groups are by nature not making good decisions at all and that has a multitude of reasons. Question becomes then of course how can small groups maybe still made to work?
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Some of the reasons why small groups might not work:
  • they have an identity of its own even if they are formed ad hoc for a single project
  • the influence of the people in the group on each other’s judgement is inescapable
  • “confirmation bias”: this s what psychologists mean when decision makers seek those bits of information that confirm their underlying intuitions
  • small teams also tend to believe much more than they really do and reinforce this mis-judgement even further making more extreme decisions e.g. more risky or very risk-averse
  • verdict-based juries (vs. evidence-based) see their mission as reaching a decision as quickly and decisively as possible, votes are taken before discussions even
  • small groups tend to start the discussion with its quick conclusion already. as a result every new information that is coming in was reinterpreted to fit that conclusion. this is a very common problem for small groups who have as a consequence a hard time incorporating new ideas and information
  • social psychologist Garold Strasser has also shown that in unstructured, free-flowing discussions, the information that tends to be talked about the most is, paradoxically, the information that everyone already knows
  • the order of when someone presents is very critical as well since it has a clear impact on how the group members frame and judge subsequent talks
There are even more shortcomings in small group decision making but I think the above list (taken from the book The Wisdom of Crowds, by James Surowiecki) is convincing enough.
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So what can be done to still make small groups work and with that improve the decision making of so many companies and organizations?
  • have a “devils advocate” role assigned whose job it is to find critique for anything that is being discussed and suggested by others making sure that both the presenters and the others critically question things.
  • one of the consistent findings from decades of small-group research is that group deliberations are more successful when they have a clear agenda and when leaders take an active role in making sure that everyone gets a chance to speak
  • use software tools that allow to vote – anonymously – subjects under discussion, that also help both prepare a meeting as well as discuss further later on when new ideas and information comes to mind, in addition it archives the discussion so one can revisit it at a later time without having to start totally from scratch. also important is the fact that time pressure to make a final go/no-go decision in a meeting is reduced. and lastly others outside the group could be invited to comment, vote and also provide own ideas and opinions.
If groups are made to work they are genuinely smarter though than the smartest people within them so it is the right thing to aim for. (other research work: Cass Sunstein in “Why Societies Need Dissent”, Alan S. Blinder and John Morgan did studies on small-group performances which was modeled later on by a Bank of England study)
One additional comment from James Surowiecki’s book:
if an organization sets up teams and then uses them purely for advisory purposes, it loses the true advantage that a team has: namely, collective wisdom.

Adrian McDermottAdrian McDermott September 22, 2010

Innovation: a cultural challenge for European companies

Look at any electronics store in Europe and it is clear that European market penetration lags way behind the US and PAC countries in this sector. In fact, outside of the motor industry and pharmaceuticals, European tech companies lag behind US companies who are quick to build and exploit new markets, and are being overtaken by Asian ones who are great at catching up and offering great value. Innovation counts for more than ever before as global competition heats up and demands ever shorter product cycles. However, the 2009-10 Innovation for Development Report from the IMF, OECD and World Bank suggests that European countries are great innovators – here is their ranking of the world’s 10 most innovative countries by ICI (Innovation Capacity Index) score:

ici-innovationtable.jpg

So what is going on?

What’s wrong with the measurement

The key problem is how to define innovation, and in particular not focus only on technical innovation. Producing technical innovations that end up in unsuccessful products is neither here nor there. But measuring the right thing is also not easy. Here are some of the problems in measurement:

  1. How to standardize across industries to be statistically reliable.
  2. Is spending on R&D a useful measure and how can its results be gauged?
  3. How accurate is patent registration as a measure, when patent applications are often defensive. Should commercially successful patents only be measured, and how?
  4. Possibly the main one in fast-moving industries: do we mean innovation in product only, or in marketing, management, process and other areas, too?

Basing government spending on indices that do not measure this can even be counterproductive because it can distort the market, waste public money, and keep talented people from reaching their full commercial potential.

A different perspective

The BusinessWeek / Boston Consulting Group survey of CEOs of major companies asking them to pick the most innovative international firms used a wider range of criteria, not just product but also process, marketing and user experience. On this index, Nokia is the only European company outside of the motor industry to make it into the top 20.

BCG_innovationSurvey.jpg

In other surveys, too, the only major successes among large European companies are in the motor and pharmaceutical industries. These companies are mostly at least 50 years old and they have long product cycles. European countries are clearly still strong in general product quality and in industrial design and engineering. However, these strengths are becoming less and less a guarantee of long-term success. In the newer, fast-changing sectors in electronics, internet and telecoms that European companies are clearly behind. In the mobile device industry, Nokia is a lone giant under siege from Asian and US competitors as never before. Even in motor manufacturing, fast innovation and time to market are becoming more critical than ever before, so it remains to be seen whether the European companies will be able to maintain their current strong position.

Why European companies have an uphill struggle: Culture

This problem is one that governments in Europe have been trying to deal with for a long time with only limited success, so it is not a lack of attention or effort, nor of technical education, as some of the world’s best technical universities are right here. I think there is a deeper issue of outlook or culture that needs addressing at individual or company level. Because it is ingrained, it is not very visible and not easy to deal with. To illustrate it, in previous blogs we have looked at the idea that European governments often fund startups for a few years while they explore ideas and publish patents. However, that does not galvanize companies into launching fast and big in the way that the cut and thrust of VC funding does in Silicon Valley, for example. That indicates, as we have pointed out before, a high level of risk aversion. However, it is also a matter of social culture. In our experience, even in larger European companies, there has been less ability or readiness to produce radically new products fast because companies are often too strongly process-oriented and compartmentalised. One problem is almost certainly under-representation of innovators at board level, but this in itself is a sign of European emphasis on social cohesion. These are factors that can be assessed in more detail and, if they are true, worked around so that they become just a factor to be acknowledged and not a barrier to progress.

Culture and change in companies

One simple way to summarize differences between business culture in the US and Europe is using Edward Hall’s idea of high and low context cultures from his classic book from 1976, Beyond Culture. Continental European cultures are seen according to this index as high-context, meaning there are lots of implicit rules, social relationships are long-term and have a big influence on what people do as individuals. In these cultures, it takes time for a newcomer to settle in and form new relationships. The US, in contrast, is a low context culture, where the rules are more explicit, new relationships can be forged quickly, and groups start up and change according to external needs rather than internal identification. It is pretty easy to see on that basis which society is going to favour flexible teams and open communication, both of which are essential ingredients of an innovation culture.

Geert Hofstede’s set of five cultural dimensions have also become a popular gauge – available as an iPhone app – to use when communicating or doing business across borders. The dimensions are Power-Distance, Masculinity, Individualism, Uncertainty Avoidance and Long-Term Orientation, drawing on business experience, social science and anthropology studies.

Folie2.jpg

I have not put in the masculinity index in the table above because it seems rather obvious, and because I don’t really know how that influences innovation. But some of the others have a definite influence. Individualism and uncertainty stand out as strong contrasts between the main European countries and the US: The French, Dutch, Germans and Italians are all significantly less individualistic and more intolerant of uncertainty.

On the basis of these comparisons, a predictable consequence is that innovation in companies in North America would be driven by individuals fighting to get their ideas recognized, and companies ready to try give things a try even when the outcome is highly uncertain. Contrast that with the more typical need for consensus in European countries, where introducing new ideas has to be done cautiously in order not to upset existing social groups and hierarchies, and where uptake of ideas, too, is strongly affected by uncertainty avoidance. Interestingly, uncertainty avoidance is low in the Nordic countries, and perhaps explains the relative vitality of Nokia and Ericsson compared with many of their French and German rivals.

Where high social cohesion may have been beneficial for European companies is in developing technically excellent products, and in growing tight-knit teams, particularly as individuals emerge from state-funded technical universities into state-funded startups. However, this does not then scale into large, cohesive companies because of their size and complexity, and because increasing employee mobility does not create the conditions for such networks to continue. In big firms, the ability to form fluid new groups and to take business risks becomes important.

The cultural factors in Asia-Pac are different from both Europe and the US. Here, the major differences are in power distance (higher than in Europe) and long-term orientation (also higher in Asia-Pac). A tentative conclusion that I would draw is that Asian companies utilize social cohesion by maintaining teams over the longer term, so that they are able to follow long-term goals.

So perhaps in the US, company culture is flexible enough to adapt quickly to market changes and create new markets, and in Asia, long-term thinking enables companies to work their way determinedly into existing markets. European culture makes neither of these strategies easy to pursue. China may, perhaps enjoy the best of both worlds, because in contrast to other Asia-Pac countries, PRC has a low score for uncertainty avoidance.

Can European companies get better at innovating?

I think the answer here is a definite yes. European technical education is at a very high level still, as University world league tables testify, and Europeans are very quality-minded as a rule. The innovation indices generally show European countries being good at technical innovation. That means there is something real to base market-winning products on. However, there are some key cultural factors that need to be met squarely and worked around in order to do that:

  1. Unwillingness to take risks
  2. Uncritical acceptance of authority
  3. Relatively fixed company roles and structures
  4. Personal loyalties taking priority over business realities
  5. Valuing formal processes over creativity

Business reality is going to force some of these things happen, as Europe is increasingly squeezed by the other major regions, but the good news is that it does not mean having to experiment wholesale with company structure, because of the power of targeted web technologies for innovation and collaboration. These applications improve continuity and visibility in team-working and facilitate idea creation, and can do it intuitively enough that all that is companies have to do is use them as designed. That might require some change of practice in process and product management, and it will certainly require more interworking between departments and teams in a company, but this is nothing revolutionary. The only real cultural change needed is to acknowledge the need for using them.