We’ve been hearing a lot from the government lately about innovation and disruption. But to succeed in this brave new world, companies first need to address what’s really happening behind the closed doors in their own offices, writes Tanya Perry-Iranzadi.
As the Turnbull Government polishes a new innovation strategy in time for Christmas, much is being said about Australia’s failure to adapt and develop compared to countries like, say, Israel and the Nordic states. But new government policy and executive strategy aren’t everything. Even in countries where innovation is at the top of the policy agenda, like Finland, companies that don’t first adapt their corporate culture can get it terribly wrong. Just look at Nokia.
In 2007, Nokia controlled 41% of the mobile phone market. That all ended last April with Microsoft’s US$7.5bn acquisition of the company. Why? As newcomers Apple and Google blazed into its space, Nokia failed to respond to a market that was rapidly moving forward without it.
In his book, The Decline and Fall of Nokia, David J Cord cites the reasons for Nokia’s failure as incompetent middle management which hampered attempts to bring innovation to market, a pervasive bureaucracy leading to the inability to act, destructive internal competition, and failure to realise the importance of lifestyle products such as the iPhone.
Nokia’s not the only company where corporate culture has stymied attempts to innovate. The Daimler/Chrysler merger in the late nineties was labelled a fiasco, with major differences between German and US culture resulting in two competing divisions with differences over philosophy, operating styles and even the level of formality in meetings. Then there was Time Warner, whose stocks plummeted from$71.88 in 2000 to less than $15 in 2008 after a merger with AOL. The New York Times reported that Time Warner president Richard Parsons later blamed the collapse of the venture on the companies’ inability to figure out how to blend the old media and the new media culture. “I remember saying at a vital board meeting where we approved this, that life was going to be different going forward because they’re very different cultures, but I have to tell you, I underestimated how different,” he said.
Closer to home
Australian companies are not immune to the same destructive global forces. A recent report from the Committee for Economic Development of Australia (CEDA) warned that 40% of Australia’s workforce could be replaced by automation in the next 10 to 15 years, including the most highly skilled. And research by CPA Australia found nearly a third of all ASX-listed companies were close to insolvency in 2013, including a staggering 58% of the smallest 500.
In today’s market, businesses that don’t evolve are facing dramatic downturns in a matter of months. The emergence of new technology and global virtual teams, particularly in the third world, is threatening Australian business in a way that would have been unthinkable five years ago.