‘Innovate or die’: An innovative corporate culture for sustainable competitive advantage

Wednesday, 9 December 2015 00:00 -     - {{hitsCtrl.values.hits}}

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By Viruli de Silva

“Innovate or die. With markets becoming less and less local, Canadian companies are being advised to compete globally based on their ability to innovate successfully. The Canadian Advanced Technology Alliance said recently that “looking at a pure cost, Canada can’t compete at the level of India or China; (but) when you move up in the engineering class or the highly innovative manufacturing talent, Canada ranks right up there.” – Robert Angel

The above quote from a popular Business Management Journal in Canada emphasises the importance of innovation: ‘Innovate or die’. To elaborate further, it does not matter how big or small you are as a company or a country. If you are not ready to innovate or change, you better be ready to die!

What is ‘Innovation’? It has been defined in many ways; but in a management perspective, ‘Innovation is the act that endows resources with a new capacity to create wealth’ (Drucker, 1985). In the common usage, ‘Innovation is the introduction of new things, new ideas, or ways of doing something’ (Oxford Advanced Learner’s Dictionary). To understand the notion of innovation better, let’s look at few synonyms of the word ‘Innovation’, such as change, revolutionise, invent, transformation, alteration, newness, novelty, originality, freshness, modernism, modernisation, or uniqueness etc. 

Further, for a business organisation such as banks, innovation could mean implementing new ideas, creating dynamic new products and services or improving the existing services/processes. Hence, innovation is ‘looking at things in a unique, different way’. For example, innovation could be a new idea, new method, new device, new skill or new process. Thus, innovation signifies ‘change’. Innovation is considered to be creating new, more effective processes, products or services that could increase the prospects of a business proposition. Organisations that innovate thus could enjoy increased productivity and performance. Further, innovation could promote growth and success of business in the long run, helping the organisation to adapt and grow in the marketplace.

Crafting innovation into practice can definitely be a challenge to any organisation, since it needs a change in the mindset of people.  Hence, creating an innovative culture is easier said than done. However, there is no magic formula for creating innovation, or any guarantee of a sustaining competitive advantage as a result of innovation. Generating new ideas and implementing them quickly as a team, will bring the organisation together, to transform product and service initiatives into sustained results. 

If the goal is an ‘innovative culture’ how should the CEO of an organisation or the leaders of a country change the mindset of their people? How should the organisation be mobilised as a team to effect the innovations or bring in the new ideas, new products and services to the market quickly? What would bring the organisation together to transform the innovations in products and services into sustained results to enjoy a competitive advantage in the market? How could innovation add value to banking in order to achieve sustainable competitive advantage in the market? This article aims at providing few insights. 

 



What is an ‘innovative corporate culture?

Why it is important to know what is an innovative corporate culture? In order to boost the flow of new ideas required to breed innovation in an organisation, there are many basic features which can be identified and developed. An ‘innovative corporate culture’ stands out them all. Firstly, let us look at what is an internal corporate culture or an internal organisational culture? Organisational culture has been defined by scholars in many ways. It is ‘a pattern of basic assumptions that are considered valid and that are taught to new members as the way to perceive, think, and feel in the organisation’ (Schein, 1985).  

Further, it is identified as a system of shared beliefs and values that develops within an organisation and guides the behaviour of its members (Schein, 1985). It is ‘the shared beliefs of an organisation’s members’ (Key, 1999). Organisational culture is a cognitive framework that consists of attitudes, values, behavioural norms, and expectations shared by the members of a particular organisation. Hence, corporate culture can be considered as the social glue that binds members of the organisation together. 

Further, the corporate culture of an organisation is compared to the ‘personality’ of a human being, as it is unique in nature with regard to the individual, whether it is a human being or an organisation.  Hence, there is no particular standard definition for corporate culture or organisational culture, but there is a common understanding that, ‘it is a set of values, beliefs, and norms or expectations unique to a particular group of people in the organisation, which are shared by the members of the organisation and be guided by them for their behaviour’.  

Based on the above, ‘innovative corporate culture’ is ‘a set of shared values, beliefs, and norms or expectations unique to a particular group of people in the organisation, and be guided by them for their behaviour towards generating new ideas or innovation’. However, there is no guarantee that an innovative culture will lead to innovation, but it certainly is a prerequisite for innovation. 

 



Why is it important to have an innovative corporate culture?

Reading through many business and academic articles on innovation revealed that, the idea of innovation is a vital management concept which had matured over the past several years. Corporate and management leaders such as Clayton Christensen, Michael Porter and others have promoted the topics such as disruptive technology, competitive advantage and competitive strategy, highlighting the importance of generating new ideas and doing things differently, or bringing out ‘innovation’ as a unique management tool to gain competitive advantage in the market. 

For example, Porter sees strategy as resting on unique activities: ‘choosing to perform activities differently or to perform different activities than rivals, leads to sustainable competitive advantage and profitability’ (Harvard Business Review, November 1996). Christensen (Gartner Group Interview, April 2004) argue that, disruptive innovations need not be a breakthrough from a technological sense, but instead of sustaining the course of improvement that has been established in a market, it disrupts and redefines it by bringing to the market something that is simpler and different. Corporate world, specially the banking and finance industry, is faced with many challenges due to ever increasing intense competition. 

‘Competitive Advantage (CA) is the ability that an organisation can have a relatively better market share and then a better profit or rate on investment compared with its competitors’ (Opatha, 2009). In other words, CA is a status a firm could achieve when it gains a superior market position relative to its competitors. Once an organisation achieves a CA it should be able to sustain it for a long period of time. This means, the organisation should be able to enjoy the market superior position relative to its competitors or to enjoy a sustainable competitive advantage. 

Many strategies used by organisations to enjoy a CA in the market are unable to sustain it in the long run because their innovations can be easily copied by its competitors (Kleiman, 2000).  In other words, a company could achieve a sustainable competitive advantage only if it is capable of producing goods and services that could not be imitated or copied by its competitors in the long run. Hence, the importance of an innovative culture or a conducive organisational environment for innovation is a prerequisite to produce unique products and services that cannot be copied by its competitors in the long run. Therefore an innovative corporate culture is a precondition for an organisation to achieve sustainable competitive advantage.

Catering to this long-term organisational need, innovators attend to their customers with products, services and processes that significantly shape customers’ perceptions and needs, creating new and enduring markets. It is evident that, innovations require advance creativity, out-of-the box thinking and instinct. Developing innovative products or services require insightfulness, imagination and agility or alertness. Implementing or executing the innovative plans require co-operation across the entire organisation. Hence, it is obvious how an innovative organisational culture would facilitate innovation in the organisation.

 



How to create an innovative corporate culture?

We discussed above, innovative corporate culture is ‘a set of shared values, beliefs, and norms or expectations unique to a particular group of people in the organisation, and be guided by them for their behaviour towards generating new ideas or innovation’. Hence, innovation requires a clear vision across business and a strong leadership to drive people in the organisation towards it. 

There are many influencers that affect the ability of a business or an organisation to innovate. Out of them, the internal corporate culture and the external culture in which the organisation operates would influence the ability of a business to innovate strongly. Another key influence on innovation is the risk-taking ability of the organisation. Innovation is said to succeed in a corporate culture that is bold enough to take risks. Innovation process in an organisation is usually a top-down process or is led from the top management of the company to the lower ranks of the hierarchy. 

To create an innovative corporate culture, the people in the organisation, from top-to bottom, should be creative, flexible and open to new ideas.  Top managers need to adopt a positive attitude and focus on the potential for enhancing competitiveness through innovation. They should listen to new ideas of the employees and find ways of doing business in different ways, even if this means it has to change the current business model.

The allocation of resources for innovation is another vital task for any business organisation.  Proper allocation of resources is dependent on the top management understanding the benefits of new ideas or innovations. However, it is unfortunate that, business expenditure on innovation is often recognised as an expenditure, rather than as an investment. For example, improvements to current operational processes may not be seen as innovation at all. 

A free flow of information and ideas, up, down and across the business inspires the development of new ways of performing tasks and can also lead to the development of new products. Processes which allow employees to suggest improvements and ideas circulate these ideas and be rewarded for their entrepreneurial behaviour can be implemented.

 Another key component of an innovative corporate culture is the interest that the company is showing in their Research and Development (R & D) activities Organisations that promote the value of experimenting or encourage R & D, is adaptable and rewards the organisation in the long run to gain sustainable competitive advantage. R & D is used as a management tool to find new ideas. Regular technology upgrades in organisations is another vital component in creating an innovative corporate culture.  

Upgraded technology is much influential in creating innovations and bringing them to the market. It enables consumers and businesses to do things not previously conceivable or affordable. It also can provide intelligent, inventive and complex automation to mitigate high labour costs or gives a cost benefit advantage in the long run, contributing to sustainable competitive advantage. Further, an innovative corporate culture would be nurtured by a continuous learning culture in the organisation. 

To build knowledge on innovation, employees should attend regular workshops, seminars and events about innovation. A culture of continuous learning can be encouraged by supporting training programs and on-the-job training, to enhance the innovative skills of employees. It is also important to explore networking and mentoring opportunities in organisations. 

 



Benefits of innovative corporate culture

Everyone in the organisation could contribute in the process to innovate. Incorporating innovation in the business could support to find new ways to save time and money. Innovative culture drives the organisation towards competitive advantage and helps to grow and adapt the business in the marketplace, leading to sustainable competitive advantage in the long run. Innovation means implementing new ideas, creating dynamic products/services, or improving the existing services.  

Innovation promotes business growth, and helps to adapt in the marketplace. Hence, innovation could change the organisation’s business model, adapting to changes in the business environment to produce better, quality, innovative output. Successful innovation should be an in-built part of the business strategy, where it enables to create a culture of innovation, and leads the way in innovative thinking and creative problem solving in the organisation.  Therefore, it is obvious, organisations that innovate or willing to ‘change’ create more efficient and effective work processes and have better productivity and performance, leading to sustainable competitive advantage.

 



Human resource innovations for service firms: Adding value in banking

Consumers in service industries are familiar with the service providers’ competing on price. Hence, now consumers demand increasingly higher levels of service quality. For service companies, staying competitive in the new market environment means not only offering products at reasonable prices, but also modifying these products to meet individual customers’ needs.  Many companies have moved quickly to take advantage of this market shift (e.g. banks, credit card companies, mobile phone companies). 

These companies have redesigned their work practices to leverage information among different products and provide customers with quick, customised, price-competitive service offers. The companies have trained and empowered employees directly involved in service delivery to undertake a broad range of tasks. They have given priority to minimising labour turnover on the theory that employees with long tenure better understand both a firm’s customers and its internal work processes and so are better able to meet individual client’s needs.

Banks and other service providers, however, can overcome these constraints by reforming their human resource policies and practices. By working with educational providers to smooth the school-to-work transition, firms will realise higher skill levels in the labour force at a lower cost. And a new employment contract that features stronger career paths in all positions, modularised training programs, and more internal recruiting will encourage broader skill formation and lower employee turnover. Together, these innovative human resource practices can make it much easier for services to meet the emerging quality demands of their customers.

 



Conclusion 

Shaping innovation into practice is definitely a challenge to any business organisation, since it needs a change in the mindset of people. Hence, creating an innovative culture is easier said than done. However, there is no magic formula for creating innovation, or any guarantee of a sustaining competitive advantage as a result of innovation. Generating new ideas and implementing them quickly as a team, will bring the organisation together, to transform product and service initiatives into sustained results. 

If the goal is an ‘innovative culture’, the CEO of the organisation has a key role to play. Innovation requires a clear vision across business and a strong leadership to drive people in the organisation towards it. Further, the organisation should be mobilised as a team to effect the innovations, or bring in new ideas, new products and services, processes as a team to the market quickly.

Innovative culture drives the organisation towards competitive advantage and helps to grow and adapt the business in the marketplace, leading to sustainable competitive advantage in the long run.  Hence, an innovative corporate culture is a prerequisite for an organisation to achieve sustainable competitive advantage. 

(The writer, MBA (USJ-PIM), AIB (Sri Lanka), Dip. in Bank Mgt. (IBSL), AMIM (SL), is a senior Commercial Banker and former Director Studies of the Institute of Bankers of Sri Lanka, and can be reached via email: Viruli2@gmail.com.)

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