As the world is changing at an insanely fast pace, every self-respecting company can agree on one thing: innovating is more important than ever. As Samsung blasts the latest generation of consumer electronics into the market and spent $13.8 billion on R&D in 2014, disruptive startups in Silicon Valley have been shooting up like mushrooms. A new generation of techies who, with Steve Jobs’ biography under one arm and a laptop under the other, are traveling the world. Their goal? To make the world a better place. The digital nomads, as they call themselves, are challenging the established order. All seem to have found the egg of columbus: innovation is what sets them apart.
We all seem to have our thoughts about countries that innovate more or less – but what’s the real deal? Published for the seventh time in 2014, the Global Innovation Index ranks countries according to their ability to innovate and the results achieved. Key factors are highly skilled human resources, funding opportunities and R&D spending. Switzerland ranks first, followed by the UK and Sweden. The Netherlands ranks fifth worldwide, with a relative score of 97%. The United States ranks sixth.
What about the consumer? After all, they have to buy all these gadgets – or pay some of the costs incurred if the new products are introduced into B2B markets. Are some consumer markets more open to new innovations than others? And are these differences caused by demographic, geographic, economic or cultural factors? Might it be possible to define a test market for innovations?
Scott Shane researched the influence of cultural differences on innovation in 1993. Shane draws on Geert Hofstede’s research and incorporates four of Hofstede’s dimensions into his research. He examines the influence of power distance, individualism, uncertainty avoidance and masculinity (the degree to which society is dominated by masculine traits such as courage, independence and assertiveness) on innovation.
There appears to be a relationship between power distance and the degree to which a firm innovates. Low power distance leads to more innovativeness in organizations. Hofstede’s power distance variable consists of five components. Innovative firms with low power distance are characterized by little hierarchy, free communication between layers of management, decentralized decision-making, high trust in subordinates and acceptance of change in power relations.
Individualism also appears to be an important factor for innovativeness. This variable consists of three factors: managers’ freedom to take action, contact with outsiders and the belief that contact with senior managers can be helpful.
Managers who want to encourage innovation should pay close attention to creating a culture where uncertainty is accepted. Uncertainty acceptance is the most important condition for developing an innovative culture, according to Shane’s research.
Shane cannot show that masculinity is related to innovation, which would imply that a society that is dominant in masculine of feminine traits does not affect innovation.
Taylor & Wilson (2012) base their research on Shane’s work. They use new datasets and, in addition to Hofstede’s dimensions, use global GLOBE research. They focus on the impact of individualism. First, they note that individualism is especially important for the acceptance of new technology, rather than its production. Does this perhaps address the paradox that many of the largest tech conglomerates (including Sony & Samsung) are located in countries where the culture is actually dominated by collectivism (group more important than individual, counterpart of individualism)? Another outcome is that certain types of individualism (nationalism) are good for innovations, while localism and too much family influence can prevent innovation.
Startups and established multinationals use different management methods and are dominated by different cultural values. Yet both can hone their organizational culture to create a more innovative culture. But will it help incumbents cope with the organizational paradox? Innovativeness was not the problem for KPN when Whatsapp took over instant messaging from SMS. KPN had invested billions and had no intention of smashing its own windows. Whatsapp had nothing to lose in return. So there can be competing interests against an existing business model.
Where many singularity doomsayers agree that the age of humans is over, Peter Thiel, in his book Zero to One, manages to put it best in my mind. Thiel, one of the co-founders of Paypal, argues that the most successful organizations are hybrid organizations, where humans and machines work together. In an era where change is more relevant than ever and the Human Resource is central to his organization, a manager creates a culture that welcomes innovation. So that his people can make a difference. Because there is no escaping innovation in the twenty-first century.
