Soft Facts Drive Hard Facts
Corporate Culture and the Ability for Innovation The ability for innovation is regarded as one of the most important levers for long-term increase of profitability and growth of companies, in order to be able to stay competitive in the long run. Therefore the new and further development of services and products gains central importance. Accordingly, over 90 percent of the managers see the ability for innovation as most important lever for the increase of profitability and growth (1), based on a survey by Arthur D. Little. Only then do »lowering of costs« and the »development of new markets« follow.
A worldwide survey conducted on a regular basis since 1993 by the consulting company Bain & Company shows similar results (2). Moreover, in the survey, 65 percent of the managers state that »dramatically more innovation could be achieved through cooperation with partners«, in reality however, only 53 percent use »innovation through cooperation« as a management tool. A number that still seems too high according to a new empirical survey among the top 500 companies (3) in Austria. Only one quarter of those questioned gain innovation from external innovation sources, even though their innovation rank is very high. But how can the behavior of the involved be influenced? |
Ulrich Bauer |
Living innovation
Innovation processes must be lived by the employees. The topic »corporate culture« is strongly put into focus in this study. With 91 percent the statement »corporate culture is just as important as strategy for the success of a business« received the highest compliance and therefore placed first rank. But how is corporate culture connected to innovation?
Corporate culture defines which behavior is asked for as innovation promoting, and expected by the company management. Worded in writing as vision, mission, or strategy, the corporate culture becomes clear and »seizable«. In order to insert these thoughts into the »minds and hearts« of those involved, intensive communication and role model effect is needed, which is top priority task of the leading positions of all hierarchy levels of a company – beginning from the company management. Beyond that, moderation, coaching, quality circles, problem-solving workshops, and other measures have proven themselves many times in practice.
Strengthening the ability for innovation
Structural measures only lead to actual changes in behavior of the employees if they are accompanied by cultural adaptations (4), meaning soft facts drive hard facts! »Weak-nesses in the company culture are the probably most evident innovation inhibitors«, the Arthur D. Little authors state (1).
The results of the empirical studies concerning innovation controlling in Austrian Top-500-companies (3) show a differentiated picture of how innovation is currently evaluated and lived.
In summary, the following statements can be made:
> Innovation has a high ranking in general, but especially in technology-oriented companies. Still, only about a fourth of the companies possesses an explicitly worded innovation strategy, which again is only known to a small number of employees.
> The most important sources of innovation are the own areas R&D, Sales, and Production. The most important external sources of innovation are lead user/customers, standards, and suppliers.
> Only barely a quarter of innovation comes from external sources even though the level of innovativeness of external sources is far above average. Pressure in price, respectively limited R&D budgets, secrecy, and incompatibility with the corporate culture are regarded the greatest hindrances for the utilization of external sources of innovation.
> The meaning of interdisciplinary internal groups, lead users, universities, and customers as sources of innovation are estimated as strongly increasing.
> The companies see high potential for improvement for themselves in a quicker process of innovation, the development of new, largely external sources of innovation, and the improvement of the own innovation culture that is mirrored in the different aspects in the individual statements.
Literature:
1 cf. Baron, R., Wasner, R.: »Trainings für Siegertypen« in Absatzwirtschaft 11/2006
2 cf. Kuhn, L.: »Das Ende des Kostenkürzens« in Harvard Business Manager, 7/2007
3 cf. Pichler, H.: Innovationscontrolling, Dissertation TU Graz 2007
4 cf. Gomez, P., Raisch, S., Rigall, J.: »Die Formel für profitables Wachstum« in Harvard Business Manager, 7/2007
About the person
Univ.Prof. Dipl.-Ing. Dr. Ulrich Bauer is Chairman of the Institute for Business Economics and Business Sociology at the Technical University in Graz, Austria. Due to longstanding experience in the industry he focuses on practice-relevant research topics in the area of company management, and acts as accompanying advisor for companies.
