Culture. That’s a word I’ve heard a lot over the past two days here in Rio de Janeiro at the US-Brazil Innovation Summit. But what does it mean? And how does culture actually cause innovation?
I attend my share of conferences, and sometimes I notice trends. This time, I observed a sea change: the willingness to speak openly about culture as a driver of innovation. A few years ago, talking about the economic role of culture might have gotten someone in trouble as an arrogant American. Now, it’s a consensus opinion. That’s a huge shift.
Talk of culture came from all sides. The Summit featured policymakers and executives from both Brazil and the U.S., and there was visible head-nodding when culture was mentioned. My friend Bill Colglazier, the Science Advisor to the U.S. Secretary of State, referred to a study by the National Academy of Sciences which reviewed six major countries and concluded that the biggest indicator of innovation success is culture. The Brazilian city of Porto Alegre has engaged my firm to help launch an ecosystem-building effort to design the right culture and catalyze innovative growth.
But all this raises a big mystery. If everyone believes in innovation culture, then why is there a problem? For example, I don’t know anyone who says they are anti-innovative or anti-creative. So why aren’t certain countries, companies, or communities more innovative, if they are all in favor of innovation culture? Why can’t they just do it?
Let me attempt to provide a new way to define “business culture” and explain why this mystery exists. Culture is about patterns of behavior. More specifically, it consists of the implicit social contracts that govern our lives. Legal scholars know that written laws are not nearly as powerful as the implicit rules that shape our actions, minute by minute, day by day. Social contracts are largely invisible, but they drive the destiny of nations and corporations.
Culture in business is primarily the conflict between two opposing social contracts. One social contract is based on values of production. The other is based on values of innovation. They are both legitimate in their own ways, but they are completely opposite in effect. Here is a simple chart I’ve put together about this clash of social contracts. Each rule on the left is paired with a rule on the right.
|Rules of the Plantation
|Rules of the Plantation
Each of the two columns above is a sound worldview. They are valid in their own way. However, upon reflection, you realize that the two columns are perfectly opposed, item by item. And they lead to opposite results. The rules on the right side lead to productivity, efficiency, and predictability. The rules on the left side lead to creativity, serendipity, and uncertainty.
Neither set of rules is wrong. The opposite of “trust” is not simply “distrust.” The opposite of “excel” is not simply “do a bad job.” People tend to see their own value choices as positive, not negative.
Successful companies must exist in both worlds – innovation and production – simultaneously. That’s hard to do. But ideas that live only on the left side are stillborn. Companies that live only on the right side become dinosaurs. Large institutions – whether corporations or governments – can easily get stuck on the right side. Thus, they slowly die.
Think about the business literature over the decades, and how it’s evolved. A few decades ago, the best-selling books focused on seeking excellence, getting a competitive edge, building tight teams – the values of production. Today, the best-selling books are about creative expression, unlocking serendipity, managing loose teams – the values of innovation. It’s not as if businesses can suddenly ignore the former, but they clearly lose if they don’t recognize the latter.
For those of you who like to geek out, my inspiration for dueling social contracts comes from legal scholars, such as Harvard’s Duncan Kennedy, who developed a body of thought called Critical Legal Studies. The “Crits” believe that all laws can be reduced to sets of opposites, that right and wrong cannot be separated from social context. Rules are merely practical tools we adopt as groups for achieving a particular purpose. As they say in Portugese, “Não há regra sem excepção!”
I believe that viewing business culture as the “clash of social contracts” explains many mysteries. It shows why good people can run companies badly. It shows why big companies often can’t innovate, and why little companies often can’t grow. It shows why productive communities and countries can eventually stagnate.
Perhaps most importantly, it shows that business culture is not as fuzzy as people might think. It can be reduced to a choice between opposing rules. Hopefully, making the invisible visible – making the implicit explicit – can be a foundation to catalyze innovation across companies and communities.
Victor W. Hwang is an entrepreneur, venture capitalist, and ecosystem designer in Silicon Valley. He is primary co-author of The Rainforest: The Secret to Building the Next Silicon Valley. His firm, T2 Venture Creation, grows startups and designs innovative ecosystems for companies, communities, and countries. He is an organizer of the Global Innovation Summit and Global Innovation Week, a celebration of the world’s rising innovation ecosystems on February 17-21, 2014, with participants from nearly 50 countries. Follow on Twitter and Facebook.