- Email: [email protected]
Book essay on Unrelenting Innovation: How to create a culture for market dominance
Journal of Business Research 68 (2015) 322–325
Contents lists available at ScienceDirect
Journal of Business Research
Book essay on Unrelenting Innovation: How to create a culture for market dominance Rajesh K. Aithal ⁎ Indian Institute of Management, Prabandh Nagar, Off Sitapur Road, Lucknow 226 013, India
a r t i c l e
i n f o
Article history: Received 1 April 2014 Received in revised form 1 June 2014 Accepted 1 June 2014 Available online 25 July 2014 Keywords: Culture Essay Culture Innovation Technology
a b s t r a c t The book Unrelenting Innovation by Tellis (2013) is about building a culture of innovation within firms. This book essay makes an attempt to summarize, compare the propositions in the book that culture is the answer to achieving continuous innovation in firms. The well-researched book looks at three traits and three practices to reach to the right culture in an organization. The traits are developed over years of market dominance and the practices can be used to push the organizations towards the path of continuous innovation. The book is backed with research and case studies from firms which have succeeded at innovation and those which have failed. An alternate solution to the incumbent's curse! © 2014 Elsevier Inc. All rights reserved.
1. Introduction Understanding what makes firms successful is a question that researchers continue to try to answer. And the role of innovation in a firm's success was acknowledged by Peter Drucker in 1950s when he identified it as one of the two most important functions for a business (Drucker, 1954). Through the 80s and 90s there was a genre of books starting from ‘In Search of Excellence’ (Peters & Robert, 1982) to ‘Built to Last’ (Collins & Porras, 2002) which tried to answer the question. The book Unrelenting Innovation is one more attempt in the same direction. The value of the book stems from the fact that the author has gone beyond the generic descriptors of innovation inhibitors to specific organizational wide initiatives which need to be adopted to promote innovation. According to the author culture is the answer to the innovation woes of a firm and building the right culture can promote innovation within a firm. Though this might seem as a one-stop solution to the complex problem of sustained innovation but then the solution itself is multidimensional and has been broken down into three traits and three practices. The book tries to address the issue of continuous innovation through an inside-out perspective versus the usual outside-in perspective. Which essentially means that the solution to the challenge lies within the organization and not outside. The use of many psychological theories to explain the human angle of why people fail to produce innovations makes the book more readable. The book is also different from innovation studies specific to individual firms like a 3 M or a P&G, as it improves its generalizability. ⁎ Tel.:+91 522 273 6662(office), +91 522 273 6407(home), 09451954958(mobile); fax: +91 522 2734025. E-mail address: [email protected].
http://dx.doi.org/10.1016/j.jbusres.2014.07.001 0148-2963/© 2014 Elsevier Inc. All rights reserved.
Tellis (2013) manages to make serious academic research accessible to a practitioner who might not have access to academic journals or have the inclination to read through them. For a practitioner who wants to dig deeper into any issue, the extensive references given at the end of the book would help. The book essay after the brief overview of the book moves into the details of each of the chapters, which have been summarized, compared with similar work and towards the end an attempt is made to identify some of the shortcomings of the book. 2. Book structure The book is organized into eight chapters over close to 250 pages with 40 pages of notes and references. The first chapter introduces the readers to the core proposition of culture of a firm. Tellis goes on to elaborate the culture thesis through a set of three traits and three practices. The three traits within a firm's culture is willingness to cannibalize current (successful) products, embrace risks and focus on future markets. And the three practices are empowering innovation champions, providing incentives and fostering internal markets. The remaining chapters elaborate each of these three traits and three practices along with cases and examples. The last chapter is devoted to comparing the culture theory with other popular theories on innovation. The traits are the result of market dominance or “incumbent's curse” and gets built up over years of market dominance. The three practices can be promoted by senior management within the firms to try and build the right culture of innovation. The author says that the culture of a firm is very difficult to change and no managerial fiat can change the same so he recommends that the practices should move the firm
R.K. Aithal / Journal of Business Research 68 (2015) 322–325
in the direction of the desired culture. The general pattern of each of the chapter is that the first part is devoted to explaining the basic idea and then it is backed with elaborating elaborate case histories which support the idea proposed in the beginning of the chapter. The author and his colleague's extensive work in the area of innovation management over the years forms the skeleton of the book, wherein each theme within the book is derived from one or two major researches which the author has conducted. The challenges faced in fostering innovation at the larger organizational level boil down to human challenges and the author therefore falls back on theories from psychology to explain the reasons and remedies. The next section details out the three traits and practices. 3. Book details The first trait is the willingness to cannibalize successful products, which firms typically find it very difficult to do. A firm needs to cannibalize its own products because current products can only provide limited growth, along with issues related to the rate change of innovation, and the limitations of the acquisition model. There is a set of economic and organizational reasons which justify this inertia in firms. The issue has been identified by others also in their previous research, be it at a 3 M struggling with the issue (Von Hippel, Thomke, & Sonnack, 1999) or a Kanter (2006) identifying it as a tension. The economic reasons stem from the upfront investment needed, long gestation periods and high failure rates. At the organizational level issues revolve around resistance from internal stakeholders and bureaucratic processes within organizations. Through the chapter the author does speak about the level of innovation, platform, design and component level, but the treatment given to the issue seems inadequate. One of the key prescriptions which comes out of the discussion on the patterns of evolution is that one needs to support or at least monitor a portfolio of technologies rather than focus on one single technology. Another interesting observation is that in many cases the initial technology was with the incumbent firms and they failed to commercialize it. The examples used at the end of the chapter link up the concepts discussed with actual happenings within firms like Kodak and Sony. And result of successful handling of innovation at Gillette is also highlighted to show what can be achieved if enough attention is given to the issue. The second trait Tellis discusses is the issue of embracing risk. Reasons for risk aversion originate from financial concerns that are associated with breeding innovation, in terms of investing without any assured returns. Five sources of risk have been identified; most of them concerned with increasing expenditure along with no assurance of returns or success, and longer waiting periods associated with most innovation projects. Tellis brings in a series of psychological explanations like reflection effect, hot-stove effect and the expectation effect to explain the underlying reasons for risk aversion. Further in the chapter the three effects link up with type II error of missed innovations which are rated more serious than type I error of failed innovations. The three effects force more attention on avoiding type I errors and as a consequence end up making more type II errors. As with the earlier chapter, examples are used to reinforce the concepts starting with Toyota's success in the hybrid car space, Amazon and Facebook's success. The third trait is ensuring a focus on the markets of the future. To emphasize this examples of many niche products which eventually went on to become mass market products are given at the beginning of the chapter. And the chapter also makes it clear initially itself that focusing on the future is not easy, and uses the help of four psychological biases for explaining why. The psychological biases described are the hot-hand, availability, paradigmatic and commitment bias. In explaining the hot-hand bias, the growth of radically new products is shown to follow a reverse Z curve which essentially means that
323
the sales would seem to be of low potential and of little consequence in the initial days, which would make most of the incumbent firms to under invest in the category or pull the plug too soon. The second is the availability bias, which is the bias where people wrongly provide higher probability for the occurrence of an infrequent event rather than of a frequent one, which may lead managers to discount important emerging technologies that could disrupt them in the future. Paradigmatic bias talks about the reluctance of people using a particular technology to appreciate the relevance of a new emerging technology. The last bias is the commitment bias, wherein the decision makers continue to invest in a failing venture with the false hope of recovering past investments even in the face of contrary evidence. Though a lot of support is provided to emphasize the importance of focusing on the future but the example of a great innovator like Edison himself not being able to foresee the future belonging to AC not DC current, is bound to raise doubts in the minds of readers. The suggested ways to mitigate this bias is through models of predicting take-off, technological evolution and analyzing emergent consumers developed by the author and his colleagues. The paradox which is highlighted in these three chapters is that the very act of becoming a market leader makes you susceptible to the traits which would make it difficult for them to innovate. Which is very similar to what Theodore Levitt said in the 1960s in his classic article ‘Marketing Myopia’ when he said that “some that are now riding a wave of growth enthusiasm are very much in the shadow of decline” (Levitt, 1960). Next half of the book is about the practices needed to promote the culture of innovation within a firm. The first of the three practices identified is incentives and its role in promoting innovation. The limitation of traditional incentives lies in the fact that they are based on longevity and seniority. They focus on increasing productivity and are not suitable for promoting innovation. Earlier in the book embracing risk is seen as a key trait for fostering innovation and traditional incentives are designed to reward success and penalize failure, thus they would discourage risk taking and promote conformance. The prescription provided is to link the incentives to commercialized innovations and make them asymmetric; strong rewards for success and weak penalties for failure. This should promote trial and error within the firm which is again essential to encourage innovation. To emphasize the impact of properly aligned incentive examples from IBM, Google, 3 M are elaborated and that of a GM is also given to contrast the results of misalignment. The second practice identified is the creation of internal markets within a firm, to promote competition internally. Going back to the reasons of why successful firms find it difficult to repeat their success is that they rely too much on bureaucracy within the firm, which is essentially meant to maintain status quo rather than promote innovation. The reasons why firms need to consciously work on developing internal markets is to attract and retain innovators who otherwise would flourish independently outside the firm. Secondly it is also meant to retain more options internally in terms of technology. The third advantage of internal markets is that it motivates employees to give in their best. But then not everyone in the organization would be comfortable with the idea of internal markets, as it would promote competiveness within the firm. This increased competiveness within the firm might not be liked by employees who enjoy status quo, but would in turn attract the most enterprising and talented employees. Idea fairs, research contests, commercialization contests, contest for internal start-up, competing divisions, autonomous units and divesture have been identified as means of creating the spirit of competiveness within a firm. The successful management of internal markets calls for determining how to incentivize them, which would ensure that it does not degenerate into destructive internal competition. The conditions for setting up internal markets are when either multiple business models or technological platforms have to coexist with no certainty of success. The two additional conditions which would favor
324
R.K. Aithal / Journal of Business Research 68 (2015) 322–325
setting up internal markets would be one, when an emerging product or market threatens a firm's existing product, and second, when there is a high threshold for introducing innovations within the firm. The solution Tellis (2013) offers in terms of fostering a competitive culture within a firm is not uncontested, as counterviews attack its impact on the environment of cooperation within a firm (Kanter, 2006). Govindarajan and Trimble (2010) go a step further by recommending ways of preventing an innovation war from breaking out. The challenge is to balance competitiveness versus the human side of the competitive culture. The third and final practice identified is empowering innovation champions to invent, develop and commercialize innovations. According to Tellis today the biggest challenge is to ensure that a firm does not lose its talent to start-ups and provide the enabling environment inside the firm itself. And empowering them is how it can be done. History is full of examples of firms loosing talented individuals who went on to change the face of the industry. The chapter elaborates the steps on empowering an innovation champion. Starting with defining a clear product-market domain in which an innovation needs to be developed. Second, the firm needs to identify champions, empower them with responsibility, resources and talent to develop the innovation. And third step would be to provide some broad parameters of performance for the finished product. Kessler and Chakrabati (1999) highlight that these champions have to be highly political also. The last chapter of the book is devoted to comparing the culture thesis against other popular explanations of sustained innovations. Here a pre-emptive attempt has been made to defend the culture based explanation against other theories. And as with other chapters, this is also backed with formal research done by the author. The theories have been grouped into macro and micro theories, and the chapter begins with a detailed look at the micro theories. The Wall Street effect is the first theory, according to which publicly listed companies are forced to focus more on the short term than long term innovation projects and thus innovation is more difficult to achieve in these firms. But Tellis through his own research brings forth evidence which points to the limited validity of the Wall Street effect theory. The size theory has its own explanation of innovation, wherein the main proposition is that radical innovations destroy old ones but creates new markets and increases consumer welfare. The main argument of the size theory is that new innovations come only from smaller firms. But an extensive examination of sources of innovation across industries has shown that only size is not sufficient to explain innovation. The third micro theory, Prof Clay Christensen's disruptive technology effect is perhaps the most popular alternate explanation of innovation. According to which firms that lead the industry in developing and adopting disruptive technologies are entrants to the industry and not its incumbent leaders. Research done by the author and his colleagues refute two main tenets of the theory, first that it is incumbents in a market who introduce potentially disruptive technologies more frequently than new entrants. And second that incumbents are more likely to cause disruption in a market than new entrants. The other criticism which has been put forward is that the disruptive technology theory attributes failure to external technology rather than looking for an explanation internally. The fourth theory which is refuted is the S-curve effect, which proposes that the evolution of the performance of a technology follows an S-curve, and all incumbents concentrate on the old technology and ignore the new one. The study done by authors to test the theory brought out that technological performance does not evolve in the form of smooth S-curve, new technologies emerge at random intervals, the performance paths of technologies cross not only once, but multiple times and most importantly an approximately equal number of new technologies came from incumbents and new entrants. The theories which have been broadly classified as macro theories include factors like religion, climate, geography and patenting which
have been attributed to innovativeness. The counter to these macro theories is that the observations are based on a narrow set of countries or a narrow time period. The contention of the author is that none of the micro and macro theories provide a complete explanation of innovativeness of firms and it is only the culture based explanation which provides a comprehensive solution to the continuous innovation dilemma. 4. Short comings Overall the book has very few shortcomings. An attempt has been made to identify them in this section. First is the failure to clearly define innovation and its various kinds, which has been raised by earlier researchers who have observed that inconsistencies in labeling and operationalizing innovation (Garcia & Calantone, 2002) have limited the growth of research in the area. The fallout of limited classification and differentiation of innovations would be that the solutions offered would also differ based on the kind of innovation we are dealing with; radical product innovation versus business-model or technological innovation (Charitou & Markides, 2003; Markides, 2006). Perhaps the most forceful argument against the culture thesis is the work of Christensen and Overdorf (2000), who say that the capability of an organization to respond to radical innovation is its resources, processes and values. And in larger organizations over time these processes and values become part of the organizational culture making it very difficult to change. So according to them it is the culture of an organization which prevents them from responding to radical innovations. And the recommendation to handle this kind of a culture challenge has been to create a separate unit (Christensen & Raynor, 2003). The next shortcoming is the lack of attention being given to the role of top management in fostering innovation, though one might contest that many of the prescriptions given in the book would need the active support from top management. The importance of support from top management has been emphasized by Von Hippel et al. (1999) in their research on 3 M and Rigby, Christensen, and Johnson (2002), recommend that the senior executives should build the components that go into an innovation engine. The cases or examples in the book are of varying length and detail which leads to some inconsistency in the value derived from the cases. Some of the cases used do not seem appropriate, like the Facebook case where resisting the temptation to sell is equated to embracing risk. But the cases which the author has drawn from his own research are well written and focused. Tellis is not the first one to identify culture as a driver for innovation within an organization, but he is definitely the one who has made it the central theme or proposition in the quest of sustained innovation. And the detailed treatment given to the topic should be enough to convince a reader about its importance. The good thing about the book is that it is an easy to read book providing a manager with insights which he can put to use. The book has many consumer product examples and cases which help illustrate the various concepts elaborated in the book. The pluses outweigh the few negatives and makes the book a must read for marketers and anyone interested in understanding innovation. References Charitou, C. D., & Markides, C. C. (2003). Responses to disruptive strategic innovation. MIT Sloan Management Review, 44(2), 55–63. Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard Business Review, 78(2), 66–76. Christensen, C. M., & Raynor, M. E. (2003). The innovator's solution: Creating and sustaining successful growth. USA: Harvard Business School Publishing. Collins, J. C., & Porras, J. I. (2002). Built to last: Successful habits of visionary companies. USA: Random House. Drucker, P. (1954). The practice of management. USA: HarperCollins Publishers. Garcia, R., & Calantone, R. (2002). A critical look at technological innovation typology and innovativeness terminology: A literature review. Journal of Product Innovation Management, 19(2), 110–132. Govindarajan, V., & Trimble, C. (2010). Stop the innovation wars. Harvard Business Review, 88(7/8), 76–83.
R.K. Aithal / Journal of Business Research 68 (2015) 322–325 Kanter, R. M. (2006). Innovation: The classic traps. Harvard Business Review, 84(11), 73–84. Kessler, E. H., & Chakrabati, A. K. (1999). Speeding up the pace of new product development. Journal of Product Innovation Management, 16(3), 231–247. Levitt, T. (1960). Marketing myopia. Harvard Business Review, 38(4), 45–56. Markides, C. (2006). Disruptive innovation: In need of better theory. Journal of Product Innovation Management, 23(1), 19–25. Peters, T. J., & Robert, H. W., Jr. (1982). In search of excellence: Lessons from America's best-run companies. USA: HarperCollins Publishers.
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Rigby, D. K., Christensen, C. M., & Johnson, M. (2002). Foundations for growth: How to identify and build disruptive new businesses. MIT Sloan Management Review, 43(3), 22–32. Tellis, G. J. (2013). Unrelenting innovation: How to create a culture of market dominance. USA: Jossey-Bass. Von Hippel, E., Thomke, S., & Sonnack, M. (1999). Creating breakthroughs at 3 M. Harvard Business Review, 77(5), 47–57.
Contents lists available at ScienceDirect
Journal of Business Research
Book essay on Unrelenting Innovation: How to create a culture for market dominance Rajesh K. Aithal ⁎ Indian Institute of Management, Prabandh Nagar, Off Sitapur Road, Lucknow 226 013, India
a r t i c l e
i n f o
Article history: Received 1 April 2014 Received in revised form 1 June 2014 Accepted 1 June 2014 Available online 25 July 2014 Keywords: Culture Essay Culture Innovation Technology
a b s t r a c t The book Unrelenting Innovation by Tellis (2013) is about building a culture of innovation within firms. This book essay makes an attempt to summarize, compare the propositions in the book that culture is the answer to achieving continuous innovation in firms. The well-researched book looks at three traits and three practices to reach to the right culture in an organization. The traits are developed over years of market dominance and the practices can be used to push the organizations towards the path of continuous innovation. The book is backed with research and case studies from firms which have succeeded at innovation and those which have failed. An alternate solution to the incumbent's curse! © 2014 Elsevier Inc. All rights reserved.
1. Introduction Understanding what makes firms successful is a question that researchers continue to try to answer. And the role of innovation in a firm's success was acknowledged by Peter Drucker in 1950s when he identified it as one of the two most important functions for a business (Drucker, 1954). Through the 80s and 90s there was a genre of books starting from ‘In Search of Excellence’ (Peters & Robert, 1982) to ‘Built to Last’ (Collins & Porras, 2002) which tried to answer the question. The book Unrelenting Innovation is one more attempt in the same direction. The value of the book stems from the fact that the author has gone beyond the generic descriptors of innovation inhibitors to specific organizational wide initiatives which need to be adopted to promote innovation. According to the author culture is the answer to the innovation woes of a firm and building the right culture can promote innovation within a firm. Though this might seem as a one-stop solution to the complex problem of sustained innovation but then the solution itself is multidimensional and has been broken down into three traits and three practices. The book tries to address the issue of continuous innovation through an inside-out perspective versus the usual outside-in perspective. Which essentially means that the solution to the challenge lies within the organization and not outside. The use of many psychological theories to explain the human angle of why people fail to produce innovations makes the book more readable. The book is also different from innovation studies specific to individual firms like a 3 M or a P&G, as it improves its generalizability. ⁎ Tel.:+91 522 273 6662(office), +91 522 273 6407(home), 09451954958(mobile); fax: +91 522 2734025. E-mail address: [email protected].
http://dx.doi.org/10.1016/j.jbusres.2014.07.001 0148-2963/© 2014 Elsevier Inc. All rights reserved.
Tellis (2013) manages to make serious academic research accessible to a practitioner who might not have access to academic journals or have the inclination to read through them. For a practitioner who wants to dig deeper into any issue, the extensive references given at the end of the book would help. The book essay after the brief overview of the book moves into the details of each of the chapters, which have been summarized, compared with similar work and towards the end an attempt is made to identify some of the shortcomings of the book. 2. Book structure The book is organized into eight chapters over close to 250 pages with 40 pages of notes and references. The first chapter introduces the readers to the core proposition of culture of a firm. Tellis goes on to elaborate the culture thesis through a set of three traits and three practices. The three traits within a firm's culture is willingness to cannibalize current (successful) products, embrace risks and focus on future markets. And the three practices are empowering innovation champions, providing incentives and fostering internal markets. The remaining chapters elaborate each of these three traits and three practices along with cases and examples. The last chapter is devoted to comparing the culture theory with other popular theories on innovation. The traits are the result of market dominance or “incumbent's curse” and gets built up over years of market dominance. The three practices can be promoted by senior management within the firms to try and build the right culture of innovation. The author says that the culture of a firm is very difficult to change and no managerial fiat can change the same so he recommends that the practices should move the firm
R.K. Aithal / Journal of Business Research 68 (2015) 322–325
in the direction of the desired culture. The general pattern of each of the chapter is that the first part is devoted to explaining the basic idea and then it is backed with elaborating elaborate case histories which support the idea proposed in the beginning of the chapter. The author and his colleague's extensive work in the area of innovation management over the years forms the skeleton of the book, wherein each theme within the book is derived from one or two major researches which the author has conducted. The challenges faced in fostering innovation at the larger organizational level boil down to human challenges and the author therefore falls back on theories from psychology to explain the reasons and remedies. The next section details out the three traits and practices. 3. Book details The first trait is the willingness to cannibalize successful products, which firms typically find it very difficult to do. A firm needs to cannibalize its own products because current products can only provide limited growth, along with issues related to the rate change of innovation, and the limitations of the acquisition model. There is a set of economic and organizational reasons which justify this inertia in firms. The issue has been identified by others also in their previous research, be it at a 3 M struggling with the issue (Von Hippel, Thomke, & Sonnack, 1999) or a Kanter (2006) identifying it as a tension. The economic reasons stem from the upfront investment needed, long gestation periods and high failure rates. At the organizational level issues revolve around resistance from internal stakeholders and bureaucratic processes within organizations. Through the chapter the author does speak about the level of innovation, platform, design and component level, but the treatment given to the issue seems inadequate. One of the key prescriptions which comes out of the discussion on the patterns of evolution is that one needs to support or at least monitor a portfolio of technologies rather than focus on one single technology. Another interesting observation is that in many cases the initial technology was with the incumbent firms and they failed to commercialize it. The examples used at the end of the chapter link up the concepts discussed with actual happenings within firms like Kodak and Sony. And result of successful handling of innovation at Gillette is also highlighted to show what can be achieved if enough attention is given to the issue. The second trait Tellis discusses is the issue of embracing risk. Reasons for risk aversion originate from financial concerns that are associated with breeding innovation, in terms of investing without any assured returns. Five sources of risk have been identified; most of them concerned with increasing expenditure along with no assurance of returns or success, and longer waiting periods associated with most innovation projects. Tellis brings in a series of psychological explanations like reflection effect, hot-stove effect and the expectation effect to explain the underlying reasons for risk aversion. Further in the chapter the three effects link up with type II error of missed innovations which are rated more serious than type I error of failed innovations. The three effects force more attention on avoiding type I errors and as a consequence end up making more type II errors. As with the earlier chapter, examples are used to reinforce the concepts starting with Toyota's success in the hybrid car space, Amazon and Facebook's success. The third trait is ensuring a focus on the markets of the future. To emphasize this examples of many niche products which eventually went on to become mass market products are given at the beginning of the chapter. And the chapter also makes it clear initially itself that focusing on the future is not easy, and uses the help of four psychological biases for explaining why. The psychological biases described are the hot-hand, availability, paradigmatic and commitment bias. In explaining the hot-hand bias, the growth of radically new products is shown to follow a reverse Z curve which essentially means that
323
the sales would seem to be of low potential and of little consequence in the initial days, which would make most of the incumbent firms to under invest in the category or pull the plug too soon. The second is the availability bias, which is the bias where people wrongly provide higher probability for the occurrence of an infrequent event rather than of a frequent one, which may lead managers to discount important emerging technologies that could disrupt them in the future. Paradigmatic bias talks about the reluctance of people using a particular technology to appreciate the relevance of a new emerging technology. The last bias is the commitment bias, wherein the decision makers continue to invest in a failing venture with the false hope of recovering past investments even in the face of contrary evidence. Though a lot of support is provided to emphasize the importance of focusing on the future but the example of a great innovator like Edison himself not being able to foresee the future belonging to AC not DC current, is bound to raise doubts in the minds of readers. The suggested ways to mitigate this bias is through models of predicting take-off, technological evolution and analyzing emergent consumers developed by the author and his colleagues. The paradox which is highlighted in these three chapters is that the very act of becoming a market leader makes you susceptible to the traits which would make it difficult for them to innovate. Which is very similar to what Theodore Levitt said in the 1960s in his classic article ‘Marketing Myopia’ when he said that “some that are now riding a wave of growth enthusiasm are very much in the shadow of decline” (Levitt, 1960). Next half of the book is about the practices needed to promote the culture of innovation within a firm. The first of the three practices identified is incentives and its role in promoting innovation. The limitation of traditional incentives lies in the fact that they are based on longevity and seniority. They focus on increasing productivity and are not suitable for promoting innovation. Earlier in the book embracing risk is seen as a key trait for fostering innovation and traditional incentives are designed to reward success and penalize failure, thus they would discourage risk taking and promote conformance. The prescription provided is to link the incentives to commercialized innovations and make them asymmetric; strong rewards for success and weak penalties for failure. This should promote trial and error within the firm which is again essential to encourage innovation. To emphasize the impact of properly aligned incentive examples from IBM, Google, 3 M are elaborated and that of a GM is also given to contrast the results of misalignment. The second practice identified is the creation of internal markets within a firm, to promote competition internally. Going back to the reasons of why successful firms find it difficult to repeat their success is that they rely too much on bureaucracy within the firm, which is essentially meant to maintain status quo rather than promote innovation. The reasons why firms need to consciously work on developing internal markets is to attract and retain innovators who otherwise would flourish independently outside the firm. Secondly it is also meant to retain more options internally in terms of technology. The third advantage of internal markets is that it motivates employees to give in their best. But then not everyone in the organization would be comfortable with the idea of internal markets, as it would promote competiveness within the firm. This increased competiveness within the firm might not be liked by employees who enjoy status quo, but would in turn attract the most enterprising and talented employees. Idea fairs, research contests, commercialization contests, contest for internal start-up, competing divisions, autonomous units and divesture have been identified as means of creating the spirit of competiveness within a firm. The successful management of internal markets calls for determining how to incentivize them, which would ensure that it does not degenerate into destructive internal competition. The conditions for setting up internal markets are when either multiple business models or technological platforms have to coexist with no certainty of success. The two additional conditions which would favor
324
R.K. Aithal / Journal of Business Research 68 (2015) 322–325
setting up internal markets would be one, when an emerging product or market threatens a firm's existing product, and second, when there is a high threshold for introducing innovations within the firm. The solution Tellis (2013) offers in terms of fostering a competitive culture within a firm is not uncontested, as counterviews attack its impact on the environment of cooperation within a firm (Kanter, 2006). Govindarajan and Trimble (2010) go a step further by recommending ways of preventing an innovation war from breaking out. The challenge is to balance competitiveness versus the human side of the competitive culture. The third and final practice identified is empowering innovation champions to invent, develop and commercialize innovations. According to Tellis today the biggest challenge is to ensure that a firm does not lose its talent to start-ups and provide the enabling environment inside the firm itself. And empowering them is how it can be done. History is full of examples of firms loosing talented individuals who went on to change the face of the industry. The chapter elaborates the steps on empowering an innovation champion. Starting with defining a clear product-market domain in which an innovation needs to be developed. Second, the firm needs to identify champions, empower them with responsibility, resources and talent to develop the innovation. And third step would be to provide some broad parameters of performance for the finished product. Kessler and Chakrabati (1999) highlight that these champions have to be highly political also. The last chapter of the book is devoted to comparing the culture thesis against other popular explanations of sustained innovations. Here a pre-emptive attempt has been made to defend the culture based explanation against other theories. And as with other chapters, this is also backed with formal research done by the author. The theories have been grouped into macro and micro theories, and the chapter begins with a detailed look at the micro theories. The Wall Street effect is the first theory, according to which publicly listed companies are forced to focus more on the short term than long term innovation projects and thus innovation is more difficult to achieve in these firms. But Tellis through his own research brings forth evidence which points to the limited validity of the Wall Street effect theory. The size theory has its own explanation of innovation, wherein the main proposition is that radical innovations destroy old ones but creates new markets and increases consumer welfare. The main argument of the size theory is that new innovations come only from smaller firms. But an extensive examination of sources of innovation across industries has shown that only size is not sufficient to explain innovation. The third micro theory, Prof Clay Christensen's disruptive technology effect is perhaps the most popular alternate explanation of innovation. According to which firms that lead the industry in developing and adopting disruptive technologies are entrants to the industry and not its incumbent leaders. Research done by the author and his colleagues refute two main tenets of the theory, first that it is incumbents in a market who introduce potentially disruptive technologies more frequently than new entrants. And second that incumbents are more likely to cause disruption in a market than new entrants. The other criticism which has been put forward is that the disruptive technology theory attributes failure to external technology rather than looking for an explanation internally. The fourth theory which is refuted is the S-curve effect, which proposes that the evolution of the performance of a technology follows an S-curve, and all incumbents concentrate on the old technology and ignore the new one. The study done by authors to test the theory brought out that technological performance does not evolve in the form of smooth S-curve, new technologies emerge at random intervals, the performance paths of technologies cross not only once, but multiple times and most importantly an approximately equal number of new technologies came from incumbents and new entrants. The theories which have been broadly classified as macro theories include factors like religion, climate, geography and patenting which
have been attributed to innovativeness. The counter to these macro theories is that the observations are based on a narrow set of countries or a narrow time period. The contention of the author is that none of the micro and macro theories provide a complete explanation of innovativeness of firms and it is only the culture based explanation which provides a comprehensive solution to the continuous innovation dilemma. 4. Short comings Overall the book has very few shortcomings. An attempt has been made to identify them in this section. First is the failure to clearly define innovation and its various kinds, which has been raised by earlier researchers who have observed that inconsistencies in labeling and operationalizing innovation (Garcia & Calantone, 2002) have limited the growth of research in the area. The fallout of limited classification and differentiation of innovations would be that the solutions offered would also differ based on the kind of innovation we are dealing with; radical product innovation versus business-model or technological innovation (Charitou & Markides, 2003; Markides, 2006). Perhaps the most forceful argument against the culture thesis is the work of Christensen and Overdorf (2000), who say that the capability of an organization to respond to radical innovation is its resources, processes and values. And in larger organizations over time these processes and values become part of the organizational culture making it very difficult to change. So according to them it is the culture of an organization which prevents them from responding to radical innovations. And the recommendation to handle this kind of a culture challenge has been to create a separate unit (Christensen & Raynor, 2003). The next shortcoming is the lack of attention being given to the role of top management in fostering innovation, though one might contest that many of the prescriptions given in the book would need the active support from top management. The importance of support from top management has been emphasized by Von Hippel et al. (1999) in their research on 3 M and Rigby, Christensen, and Johnson (2002), recommend that the senior executives should build the components that go into an innovation engine. The cases or examples in the book are of varying length and detail which leads to some inconsistency in the value derived from the cases. Some of the cases used do not seem appropriate, like the Facebook case where resisting the temptation to sell is equated to embracing risk. But the cases which the author has drawn from his own research are well written and focused. Tellis is not the first one to identify culture as a driver for innovation within an organization, but he is definitely the one who has made it the central theme or proposition in the quest of sustained innovation. And the detailed treatment given to the topic should be enough to convince a reader about its importance. The good thing about the book is that it is an easy to read book providing a manager with insights which he can put to use. The book has many consumer product examples and cases which help illustrate the various concepts elaborated in the book. The pluses outweigh the few negatives and makes the book a must read for marketers and anyone interested in understanding innovation. References Charitou, C. D., & Markides, C. C. (2003). Responses to disruptive strategic innovation. MIT Sloan Management Review, 44(2), 55–63. Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard Business Review, 78(2), 66–76. Christensen, C. M., & Raynor, M. E. (2003). The innovator's solution: Creating and sustaining successful growth. USA: Harvard Business School Publishing. Collins, J. C., & Porras, J. I. (2002). Built to last: Successful habits of visionary companies. USA: Random House. Drucker, P. (1954). The practice of management. USA: HarperCollins Publishers. Garcia, R., & Calantone, R. (2002). A critical look at technological innovation typology and innovativeness terminology: A literature review. Journal of Product Innovation Management, 19(2), 110–132. Govindarajan, V., & Trimble, C. (2010). Stop the innovation wars. Harvard Business Review, 88(7/8), 76–83.
R.K. Aithal / Journal of Business Research 68 (2015) 322–325 Kanter, R. M. (2006). Innovation: The classic traps. Harvard Business Review, 84(11), 73–84. Kessler, E. H., & Chakrabati, A. K. (1999). Speeding up the pace of new product development. Journal of Product Innovation Management, 16(3), 231–247. Levitt, T. (1960). Marketing myopia. Harvard Business Review, 38(4), 45–56. Markides, C. (2006). Disruptive innovation: In need of better theory. Journal of Product Innovation Management, 23(1), 19–25. Peters, T. J., & Robert, H. W., Jr. (1982). In search of excellence: Lessons from America's best-run companies. USA: HarperCollins Publishers.
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Rigby, D. K., Christensen, C. M., & Johnson, M. (2002). Foundations for growth: How to identify and build disruptive new businesses. MIT Sloan Management Review, 43(3), 22–32. Tellis, G. J. (2013). Unrelenting innovation: How to create a culture of market dominance. USA: Jossey-Bass. Von Hippel, E., Thomke, S., & Sonnack, M. (1999). Creating breakthroughs at 3 M. Harvard Business Review, 77(5), 47–57.