Chapter 3:

Culture and Climate Considerations for High-Tech Companies

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?

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Culture and Climate in High-Tech Firms

High-Tech companies can become complacent Culture

Need to cultivate a climate/culture of innovativeness

Climate

Set of organizational values and beliefs that guide behavior Hard to change
Set of expected behaviors Observable manifestation of culture
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Success= Culture of Innovativeness

Break-through thinking
Risk taking

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

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Obstacles to Innovativeness
Core rigidities Innovators dilemma Organizational size? Cyclic nature of business

(see later slides)

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Develop/Maintain Innovativeness
Steady stream of innovations
Entrepreneurial spirit Nonlinear process
In contrast to stage-gate, step-by-step process

Forward-looking

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Chapter 3: Culture of Innovativeness

Chapter 4: Market-oriented culture; culture of collaborative crossfunctional interactions

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Creativity as a source of competitive advantage

Must be disciplined creativity guided and channeled with strategic planning Ideas must be novel AND useful

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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

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

Current technology made obsolete by proactively developing nextgeneration technology May be the antidote to the Innovators Dilemma if it overcomes internal rigidity
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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
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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
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Product champions in more innovative firms wield more influence than those in less innovative firms
Product champions in less innovative firms wield less influence
Are frustrated and demoralized
They have power to make ideas happen Reward system and top management support them

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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

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Actively facilitating the development of new knowledge and insights that influence the companys strategy Facilitated by:
Top management support Decentralized/market-based approach to planning

Market orientation firms ability to actively monitor customer/ competitor trends

A competency-based source of competitive advantage

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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

Learning may be the only source of sustainable competitive advantage Ray Stata, CEO
Analog Devices
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 Abandon

conventional wisdom

Unlearn traditional but detrimental practices

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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

Engage in creativity exercises

Get out in front of customers

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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

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Relationship between Entries in the Market and Quality

Model 3

Model 2

Model 1

Development Overall Revenue Incr. Revenue New Models

Time

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Tolerate mistakes
Learn from mistakes Mistake may prove to be next success
Reward risk taking

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Appropriate reward system

Long term perspective

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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
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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
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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 firms ability to develop unfamiliar skills, routines, and new knowledge

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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

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Core rigidities can be overcome by:

Unlearning Learning orientation

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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

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

To new markets and customers that may seem insignificant

To succeed: Engage in creative destruction

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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 todays star before you are mimicked. Todays radiantly blooming flowers are tomorrows mulch. Dont forget that for a moment. But dont think about it too long either.

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

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