To be innovative: Adapt market demands to work culture

Sharika Gupta

The author makes a case to prove that innovation is the only way for the Indian companies to confront competition. To be innovative, Indian companies have to continuously adapt to market demands and integrate innovation within the work culture to ensure their survival in the competitive global business environment. This calls for a cultural change. The paper explains the process of developing a diagnostic tool, and examines the innovation orientation of five companies. The findings highlight the significance of reorienting the strategic posture of Indian companies to be market-driven, and do build new capabilities for delivering superior customer values. Further, the paper highlights a few strategic initiatives Indian companies have to undertake to be innovative. ­

INTRODUCTION

It is rare to come across business managers who do not want their companies to be more competitive, not just on one or two dimensions but across the board. Yet, outstanding competitive performance remains an elusive goal. A few companies achieve it, but most do not. What distinguishes outstanding companies from the rest? They differ on only two counts: first, they understand that consistent innovation is the key to their survival. Occasional innovation here and there does not work. Second, they are aware that for making an impact it. Is necessary to create value for their customers. The outstanding companies, therefore, welcome change proactively as they are convinced that their competitive survival depends on innovation. It is innovation - more than application of capital or labour-that keeps a company competitive at a micro level and the economy healthy at the macro level.

"Post-1991, changes in the Indian economy have been tremendous. A market-based economy is slowly replacing a planned economy. The government is also slowly realizing that its main business is not running business. As a result, disinvestment of the public sector has become the order of the day. India has become an arena of world business houses. Large number of multinational companies are either setting up their shops or increasing their stakes in those businesses where they already had some interests. As a result, Indian business is experiencing competition, which was unheard of in India since the independence. We know that not all the industries can compete with multinational companies. What are the chances for Indian industries? Must they change their organizational culture to take up the challenges? Must they merge with multinational companies to survive? Is it possible for existing organizations to change in a desired direction? Can they be innovative, and especially, what is the role of the organizational culture in these processes? These are some of the issues constantly haunting different interest groups.

Several business executives I have spoken to, are in a dilemma to choose between turnaround and transformation. It is true that because of turnaround profits raise dramatically; the stock market responds extremely well and companies outperform their competitors. However, many executives fail to recognize that turnaround is not equal to transformation. Turnaround focuses on results and transformation on mindset. Turnaround emphasizes short-term activities that effect the balance sheet; transformation focuses on long-term behaviours that affect the collective thought processes of how a company works. Turnaround emphasizes winning; transformation points out why winning occurs and makes winning a habit. Turnarounds are mostly one-time events; transformations have to be on-going processes. Transformation fundamentally tries to mould and recreate the culture of an organization.

Two assumptions frame the rationale for cultural change: first, that culture affects the performance of a business and second, that old ways are rarely better ways. Employees who share a culture are more likely to be unified in their actions, and such unity shapes performance. It helps a business to focus its resources, to penetrate its markets, to meet customer requirements and to accomplish strategic goals. In general, the more thoroughly a culture is shared, the more likely it is that the business will be successful.

Because of the unity provided by a strong culture, such a culture can become the identity of an organization. This identity becomes the means by which customers, suppliers, employees and investors distinguish an organization from another, and they provide with marketplace recognition and acceptance. In business parlance, these cultural differentials are termed as brand equity.

Cultures and identity are unique to each firm. Competitors that try to mimic or copy cultures generally end up as also-rans, with little distinctiveness. In competitive markets, businesses are always looking for new ways to differentiate themselves from their competitors. And by and large the source of differentiation can be mainly four, namely technological, product, financial and cultural. When businesses have reached technological parity, one business can copy another is technology. When businesses have reached product parity, one business ca-n copy another is product features. When businesses have reached financial parity; one business can gain equal access to capitalistic cultural identity. However cultural identity always remains as a viable source of differentiation, since culture is tacit, intangible and hence is a non-imitable resource.

The second assumption for culture change, that old ways are not better ways, also has implications for both a company is internal and external relations. If businesses existed static worlds, cultures could be formed and formalized. In Reality, businesses exist ihcreasil1g1y complex and dynamic worlds. As a result, cultures that matched old business needs must give way to those that reflect current market trends. The greatest challenge with company cultures is not in defining or moulding them, but in constantly adapting them. This particular issue is very critical for Indian business. The business context in India has dramatically changed over time; forcing Indian businesses replace the old culture with a new one.

A key to cultural change is to recognize that the new culture must fit changing business requirements. New business cultures are not easy to instill. Employees are much more comfortable falling back into familiar habits. Old shoes fit better than new shoes; old work patterns are more comforting than new ones. A major rationale for cultural change-the need to throwaway old shoes that may feel good but that are' damaging one is feet6is the replacement of old, comforting ways of working with new, competitive ways of working. Just as our cupboards and lofts may be stuffed with mementos of sentimental value, organizations may preserve old cultures that feel cozy but become burdensome by failing to, respond to change. Cupboards must be cleaned; lofts must be seen to hold remnants of the past; and organizations must learn to let go of old cultures when new ones become necessary.

For survival and prosperity in the contemporary business environment cultural change for the Indian companies has become utmost importance. Towards this purpose, every organization has to solve two basic problems: the problem of adaptation to external requirements and the problem of integration of internal processes. Both problems are related to the continuity of the organization. Organizational culture develops itself from the processes of sharing the same experiences when searching for solutions to these basic problems. The type of culture Indian businesses should develop becomes relevant at this stage. Is it possible and desirable to suggest any cultural road map for Indian businesses, specifically with the objective of facilitating innovation in business?

The support orientation culture arises out of interactions of flexibility and being internally focused. Central concepts are participation, cooperation, social and mutual trust, group cohesion, individual growth, etc. The leadership style is mainly person-related. Employees are encouraged to express ideas about their work and feelings about each other. The commitment of the individual employee to work and the organization is a central value. To a large extent, TISCO and few other companies can be considered to have such a culture.

The rules orientation culture arises from being internally focused and being control oriented. The accent lies on respect for authority, rationality in procedures, division work, and Power is based on procedures. The style of management is procedure-related. Most of the public sector units have a rule- oriented culture.

The goal orientation culture is the product being control oriented and externally focused. In these types of organizations concepts like MBO, planning, goal setting, and efficiency are fundamental. The style of management is task-related, and consultation with the employee is not that important. A large number of family managed company’s come under this cultural typology.

The innovation orientation culture arises from being externally focused and being flexible. This orientation is characterized by searching for new information in the external environment, advocating changes, taking risks, creativity, competition, anticipation, enough - room for experimentation and a wish to be successful. Power is primarily based on individual knowledge and the "ability to solve problems. The style of management is both task- and person ­related. The communication is rather informal and flows in all directions, Employees have to work in task forces, formalization. the power to develop and improve their knowledge and skills lies with organizational members themselves, Because control from above is not - possible   is not required, the management takes it for granted that employees are involved in their work and in the realization of organizational objectives.

It is expected that organizations should move from a culture of rules orientation bureaucracy to more innovation/goal orientation, without ignoring the useful rule and support orientation aspects. Research has demonstrated that organizations with such orientation have better performances than those with other cultural orientations.

Having described four cultural orientations, let us now examine what the consequences of innovation­-oriented culture are for India. In other words, how can an organization move from rule orientation to innovation orientation?

Employees of an innovative organization have to be creative to invent new products or to find new solutions for certain problems. They have to question the existing framework for this and go through the so-called “deuteron learning”. That is, the organization needs to learn how to carry out “single- and double-loop learning”. Organizational members 'learn about organizational learning and encode their results in images and maps is the most demanding way of learning, but necessary for innovative organizations is natural to expect that for a large number of Indian organizations, which have developed an internal cultural focus because of historical reasons, it would be very difficult to become innovative.

In terms of the cultural model, Indian organizations have no choice but to move towards innovation orientation. To a certain extent organizations have to learn to deal with the external environment. For last 10 years or so, economic liberalization has made, market norms' the espoused values of most Indian companies. In real terms that does not mean much; there are many problems to overcome, People are used to living with large inconsistencies between what powerful people say and. what they'" actually do. Therefore, we have developed a considerable tolerance for these inconsistencies.

Although there may be a human drive toward consistency, people can become quite apathetic under circumstances where there is no chance of reducing inconsistencies. So people may be aware of the need to change the existing situation in a certain direction, and they may have the opportunity to affect this. However, this does not mean that there is a readiness to participate.

How can Indian organizations change themselves to become innovative?    The managers of companies have not only to learn to understand intricacies of the market-based economy; they have also to learn completely new styles of management. For innovative organizations, commitment of the organizational members is very important, for that reason management has to win over the apathetic atmosphere. But the management can itself resist necessary changes. It can be afraid of the possibility that managers are not capable of new management styles, and might lose their jobs. Therefore, one can assume that it is very difficult to change organizations with cultures characterized by a strong internal focus into innovative organizations.

Innovative organizations simply get on with the job of creating value by exploiting some form of 'Change, be it in technology, materials, prices, taxation, demographics, or even geopolitics. They thereby generate new demand, or a new way of exploiting an existing market.

Two things set apart all organizations ­with a good record of innovation. One is that they foster individuals who are internally driven-whether they are motivated by money, power and fame, or simply curiosity and the need for personal achievement. The second is that they do not leave innovation to chance: they pursue it systematically. They actively search for change (the root of all innovation), and then carefully evaluate its potential for an economic or social return.

One trick that has worked for some firms to create the modern equivalent of the 'skunk works' pioneered by the Lockheed aircraft company in the late forties. Engineers working inside this secret little laboratory-cum­ workshop, kept off-limits to all but the most senior Lockheed managers, were encouraged to break company rules wherever necessary. Above all, they were expected to ignore the official procedures demanded by the Pentagon. The result was stream of mysterious spy planes and supersonic bombers that set new standards for performance, ahead of schedule and below budget.

IBM had to create a skunk works at Boca Raton, Florida-just about as far, both physically and culturally, as it could get from its corporate headquarters at Armonk, New York ­and one has to experience to believe the impact they are making in the personal computer segment today.

OBJECTIVE

In a situation where technological progress makes products obsolete, where globalization exposes new competitors from unheard of corners of the world, where rapidly changing markets require more responsive production processes, and more demanding customers look for higher quality and better service, the need for innovation is pretty strong.

In today's context, innovation has become the only mantra for survival, A realization is gradually emerging that innovation is at the heart of the spirit of enterprise, and therefore, companies must constantly innovate, even if only gradually. However, innovation does not always mean employing the latest, most expensive and cutting-edge technology. On the contrary, innovation is not so much a question of technology as a way of thinking and of viewing the enterprise and its surroundings. We know there are several companies who were very preoccupied with technology and never considered innovation as a priority. As a result they could neither make the best use of the latest technology, nor cope with the market demand. Technology-obsessed companies think they are developing: a product when in reality they are making a 'technical object' -a bright idea-which is excellent in its own way, but does not necessarily meet the needs of the market. Innovation does not mean just new ideas; it means new ideas the market is looking for. This ability calls for a significant shift in organizational culture.

One of the fundamental challenges towards cultural change being suggested here, to diagnose to what extent a company is ready for innovation. One obvious means could be to get some idea of the extent to which the company has actually innovated in the areas of products and processes. If we know about a company doing quite well in these parameters, they indeed are innovative organizations. What about others? Who have not already made an impact in these areas, and also want to know what changes are necessary in their systems and procedures to be an innovative organization? The reality in Indian organizations is that most of them fall in the second category. In such a scenario, may be necessary for the organizations to understand their innovative capability. This can only be achieved by developing a suitable diagnostic test. A similar attempt has been made in this paper. The paper tries to communicate the process of developing the diagnostic-test, which can be used to understand innovation preparedness of Indian companies.

METHODOLOGY

To begin with, 12 dimensions were selected which are considered to have significant impact in determining innovation orientation of a company. These dimensions were selected from various studies conducted by scholars, in diverse socio-cultural backgrounds.

The dimensions and their short descriptions are as follows:

1. Top management is operating philosophy: rule/regulation­ oriented as against continuous adjustment, expert-oriented decision.

2. Strategic posture: tends to be market oriented, product leader by introducing new products and services, strong R&D base.

3. Environmental technological sophistication: operates in an environment where technology becomes obsolete rapidly.

4. Autonomy: freedom given in role performance.

5. Proactive organization: makes quick adjustments to respond to the market needs.

6. Organizational culture: power to experts, enabling and empowering environment.

7. Opportunity for learning: people development, exchange of ideas with internal and external experts.

8. Top management concern for innovation: people are encouraged to innovate, change resistance is not allowed.

9. Locus of control: feeling that the company is the victim of external influences.

10. Innovation reward contingency: tangible and intangible rewards are linked with innovation.

11. Advantage building strategy: urgency in creating new business, doing something new in the industry, driven by vision.

12. Resource allocation for innovation: company resources are made available to try something new at the risk of failure.

The questionnaire in the present form, after initial item analysis, has three questions under each dimension. This means that there are 36 questions in total in the entire questionnaire. To examine the efficacy of the questionnaire, it was subjected to factor analysis.

It was assumed that because of differences in the nature of businesses, the competition they face and also the technological environment in which they operate, innovation orientation would be different from one company to another. If the present questionnaire could capture this differing innovation orientation, the validity of the diagnostic test could be established. For this purpose, the questionnaire was administered to a group or junior and middle-level executives from five for different companies. It may be necessary to mention that the administration of the questionnaire was made as part of a training programme, where issues related to innovation in organizations were the subject matter of discussion. It took almost a year to complete data collection in this fashion. The number of respondents from each company varied from 35 to 100. It is also necessary to mention that although respondents from the five companies were comparable in terms of education, experience and status, when it came to the nature of the company, there were wide differences; To begin with, companies were in the business of computer hardware and peripherals, engineering, telecommunication, cement, and oil exploration.

Besides differences in the nature of the business they were in, there was significant difference in some other dimensions relevant, for the purpose at hand. For example, the first company is a multinational one. It is known world wide for its product innovation and innovative marketing strategy. The second company is a truly professionally managed Indian company. It is known as an engineering giant. Although it has interest in diverse businesses, interestingly, most of its businesses are doing well. Having such a history, it was thought that these two companies would have an innovation ­oriented culture. The third company is in the business of manufacturing high-tech telecommunication equipments. Environmental technological sophistication would force this company to have an innovation­ oriented culture.

However, the company being state owned is subjected to governmental bureaucracy. As a result, it is likely to be less innovation-oriented compared to the first two. The fourth company in the sample is in the business of cement, and family owned. Although this company is facing stiff competition for survival, the technological,­ environment it operates in cannot be termed as being sophisticated. It was assumed that this fourth company would be much less innovation oriented. The last, the fifth company in the sample, is state owned and in the business of oil exploration. In terms of innovation orientation, this state­ owned company would be least innovation-oriented.

IMPLICATIONS

This study was undertaken with the assumption that Indian organizations, for their survival and prosperity, have to look for strategies of innovation. It is true that it is ridiculous to talk about a generalized strategy of innovation, since innovation strategy is a dynamic one, subject to the influences of time and space. Especially when the study is based on only five organizations there are severe limitations about generalizations from the findings. Notwithstanding such limitations, the findings of the present study highlight certain issues, which can be studied more intensively in some other future studies on this subject.

One aspect emerges quite forcefully, and that is that the diagnostic test result very closely confirms the kind of innovation orientations the five companies were thought to have. Do the findings tell any story about what the organizations have to do to be more innovation-oriented? It looks like that there are certain lessons to be learnt by Indian organizations.

To begin with, companies have to reorient their strategic posture. Indian companies, traditionally, used to be production-oriented. In a protected economy whatever they used to produce could be sold. They never felt it necessary to understand the market. Being innovative, as the findings suggest, implies that companies have to be market oriented. How is this possible? Is there any magic want to achieve this? Profound understanding of the marketplace and creative understanding of customer needs are the hallmarks of a market-driven company. To change a company-is orientation towards being 'market driven' may require changes in many aspects of the organization with one of the most important being a refocusing of the production effort. Production people need to shift their attention from technology and failures to meeting specific customer needs. Such a transition is not that easy and sometimes a difficult one to implement. However, direct exposure to tl1e market is a very useful technique. Having engineers attend trade fairs, for instance, not only serves to educate them about the market but it also activates their urge to be unique and Innovative. Regular visits to customers are another important vehicle for putting production people in direct contact with how the product is being used and what the real problems and opportunities are. Moving people out of their workplace into the field and not relying solely on second-hand reports from the marketing department goes a10ngway -towards creating the market driven culture.

A new awareness has to be developed all along organizations that the only way a business can succeed is by delivering superior customer value. It will not just happen without some reconditioning. It requires a thorough ­cognitive restructuring of the entire organization and building new capabilities. This is the ability to make those deeper changes that separate firms that talk about becoming market driven from those that are doing so successfully. Market-driven organizations have superior skills in understanding, attracting and keeping valuable customers. These skills allow companies to keep their strategy aligned with changing market requirements. Such organizations have an externally oriented culture, capabilities for market sensing and market relating, and a configuration that aligns vertical functions and horizontal processes. All these elements work together to create a market orientation. While many competitive advantages are rapidly eroded in today is environment, connections to customers are more dynamic and enduring if they are well developed and maintained. The power of a market-driven organization can be seen in the success of companies such as Nirma.

The process of globalization has brought certain issues to the fore, which companies have to address. They are product related, like high technological obsolescence. Emergence of new competitors coupled with customer demands put pressure companies for higher quality of service. In such a rapidly changing market scenario, companies are required to develop responsive production processes. All factors taken together imply very strongly that organizations have to rediscover newer ways of survival. Fortunately, a realization is gradually emerging that a passion for change and improvement are essential elements of a winning management strategy. To make this strategy operational, a significant shift in corporate culture has become necessary, which gets reflected in managers' orientation to power and empowerment. The objective of empowerment is in fully engaging people in what they do, in making them accountable for the results in which companies are naturally most interested. The process of learning and doing is what creates engagement. This process gives rise to a sense of control and responsibility. Many of us tend to think that such a condition may give rise to a free-for all. Obviously it is not what is needed. What is needed is autonomy with responsibility. Nowadays a child gets more freedom at home and school whereas when the same child joins a company after attaining adulthood, autonomy is severely restricted. Autonomy is the hallmark of creating a climate for innovation. In operational terms autonomy implies freedom given to individuals in their role performance. Allowing people to act independent to the wishes of one is boss is an important component autonomy. People also have to be given enough freedom to choose whom to deal with in order to carry out their duties. Autonomy also implies allowing people to decide how to tackle problems and to determine priorities of different aspects of their job. It appears that for creating a climate for innovation, organizations have to be more knowledge-oriented. Organizations are required to acquire and disseminate implicit and explicit knowledge, this is only possible by giving more power to experts. Experts should have more say than people occupying authority positions. Intense interactions with outside bodies, which are in the business of idea generation, like universitie3 and research institutions, need to figure in a long-term way to this end. The biggest challenge is to increase the range of a company is knowledge by encouraging people to see old problems in new ways, and by helping companies break away from the past. Organizations have to discover their own ways of encouraging people to innovate, even gradually. Towards this end, tangible and intangible rewards linking to innovation are practical.

Organizations also have to send a clear message that resistance to change is not allowed. Some amount of resources can be allocated for people to try something new and fail. Well ­known companies, specially in the high-tech industry, like IBM, Texas Instruments, Philips, and others have all along followed a resource-based strategy of accumulating valuable technology assets, often guarded by an aggressive intellectual property stance. However, this strategy was not enough to support a significant Competitive advantage. On-the other hand, winners in the global marketplace have been firms that have been able to demonstrate timely responsiveness and rapid and flexible product innovation, coupled with the management capability to effectively coordinate and redeploy internal and external competencies. Not surprisingly, industry observers have now realized that companies can accumulate a large stock of valuable technology assets and still not have many useful capabilities.

Therefore, issues like developing appropriate culture for innovation are gaining ground. Only these can ensure inimitable internal and external competence, which is the basis for sustained profitability.

Sharika Gupta,
E-Commerce, MCSE, MBA, Phd (Pursuing),
Rai Business School, Rai University
Phone: 26959000 (Extn: 336)
Personal Ph: 9811093921
Personal e-mail: sharika_gupta@hotmail.com