Wednesday, December 5, 2012

MBAs, Innovation, and Organizational Performance

As Julianna Davies succinctly puts it in her post today, corporate culture is often one of the most essential parts of organizational leadership for small businesses. There Is No Chalk is no stranger to corporate improvements and “outside the box” thinking, and Juliana’s ideas dovetail nicely with things that have been talked about here in the past. Juliana writes full-time about the b-school experience and what makes a good MBA program, and has developed something of an expertise when it comes to planning for success after graduation.

Creating a Thriving Company Culture Requires a Little More than an MBA 

MBA programs can offer aspiring entrepreneurs the opportunity to study under experienced and intelligent business professionals while making valuable contacts, and most business school graduates enthusiastically recommend the experience. Yet, experienced entrepreneurs are also often quick to point out the limitations of the academic world. In order to build a successful startup, for example, an entrepreneur must first build a healthy comfortable culture. Those who have been through the painstaking process frequently assert that a successful company culture can only be learned through experience in the the rigorous and occasionally cut-throat global marketplace.

Despite frequent talk within business communities of “company culture,” in reality, many business professionals are still unsure of what the concept actually represents. “A company's culture begins with its founders,” says David Roth, technology entrepreneur and Forbes magazine contributor: “what they believe in, what they value and how they work.” Essentially, a company's culture is its DNA, and in an effective company, it informs all elements of business, from management and human resources to employees and even consumers. Much of the success of companies like Apple or Google, for example, can be attributed to their easily identifiable respective cultures. Apple's culture promoting elegance and simplicity of design and Google's well-known penchant for innovation and user-empowerment have inspired and appealed to billions of consumers around the world.

When Innovation is a Company’s DNA, Leadership Follows

While few company leaders will ever lead a company with the size and scope of Apple or Google, there are still many insights that can be gleaned from these giants. Over a decade ago, Jim Stengel, author of Grow: How Ideals Power Growth and Profit, embarked on a ten-year study of companies like Apple that are revered around the world. From his analysis, Stengel found that the most successful company cultures would “champion innovation of all kinds.” Stengel asserts that a company's portfolio should “emanate from dreams, not desperation”.

A tangible example of this is the recent crisis seen at Research in Motion (RIM), the maker of Blackberry. This is a company that disrupted and then revolutionized the cell phone market; it hasn’t even been a decade since the birth of the word Crack-berry, a term used to describe someone who was addicted to their cell phone. However, unable to compete with a host of emerging competitors, RIM began to see profits fall dramatically and in the first quarter of 2012, the company saw profit margins fall by $1.4 billion, a third of the company’s income. At that point, the company began a host of new campaigns designed to shake up their portfolio that were anything but innovative. In fact, many considered their new marketing tactics embarrassing and, for lack of a better word, desperate.

The experience of RIM demonstrates that a portfolio should be much more than just product improvements, and should include better business models, customer service improvements, as well as continuous process improvements. He also suggests company managers commit to “train all the time,” utilizing daily interactions with employees as opportunities for training and coaching rather than criticizing.

RIM’s experience also demonstrates that that innovation is present when new ideas are born, not when companies need to be saved. Unfortunately, the threat of unemployment (what befell 5,000 RIM employees) is not what sparks these great ideas, in fact, it may actually hinder them.

The Importance of Employees

Of course, a company's culture is only as strong as its employees, and companies that are experiencing rapid growth must be careful to ensure effective employee interaction isn't lost in the process. “These personal interactions often will set the tone for employee collaboration in finding solutions to work-related problems,” says Erik Markowitz, Inc. reporter on startups and entrepreneurs. “If your employees are located in different offices, one of the biggest challenges will be finding ways for your employees to stay in touch and learn a bit about each other.”

Culture, ultimately, is an employee driven venture. While companies can do their best to encourage culture by hiring accordingly, it is ultimately the people working for the company who perpetuate it. And it is inspiring, hands-on leaders are often what makes this possible. Leaders of this nature are not mico-managers, but rather those that promote open communication and honest feedback. Those who are able to take criticism without punishing their employees and, conversely, can critique employees in a helpful, understanding manner.

Open communication and collaboration are often the key to innovation. 

While building a startup always involves years of energy, stress and sacrifice, the development of a new and truly innovative business can be one of the most rewarding accomplishments an ambitious entrepreneur will ever experience. Though the lessons found in most MBA programs regarding finances and marketing can be greatly beneficial, it is all but impossible for any company to find lasting success without a culture that is truly inspiring for employees and consumers alike. By looking to companies that have weathered evolving market trends while still maintaining their ideals, aspiring entrepreneurs can bridge the gap between ambition and long-term success.

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