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What killed these companies – a culture of innovation is key

Inspired by  Stephanie denning (Twitter @stephdenning 


A Culture Of Innovation  is the invisible asset that is often credited for its success, and it has been seen that it is key for the growth and sustainability of a business. 

Kodak , NOKIA and  RIM (BlackBerry Xerox, HP and Sears Incr giants – failed – because they stopped taking chances – they stopped innovating!

Why would good teams, with excellent people and the best intentions, kill great ideas?

What changes the collective behaviour from innovation to survival 

Safi Bahcall a physicist, in a Harvard study identifies “A Cultural Tipping Point” – when the leader and employee would rather keep their “job” rather than take chances.  

Company-wide innovation is forgone for personal career advancement and safety. 

“In order for innovation to occur and for  ‘crazy’ ideas to turn into successful products, people across the organization need to be incentivitized to invest their time in moving projects―not themselves―forward,” writes Bahcall.

So how do you Overcome The Cultural Tipping Point? Bahcall has an algorithm…. The Bahcall Culture Equation

M = (E x S^2 x F) / G

Leaders can tip the balance and raise the value of M—ensuring that radical innovation continues in even the largest company—by tweaking four key control parameters. They are equity fraction ( E), fitness ratio ( F), management span ( S), and salary growth ( G). Note that none of these are elements of “culture.” They are better described as elements of structure: organization design. As the equation below illustrates, a higher M results from increasing E, S, and F (the parameters in the numerator), and decreasing G (the denominator).

Bahcall’s equation, includes the relationship between “a certain size at which human groups shift from embracing radical ideas to quashing them…the magic number M,” 

without going into great detail – the principal is 

The greater the increase in salary between levels, the more likely people are incentivized to pursue salary over innovation.  

It’s 4 p.m., should you focus on project work or on politics?  You need to decide how you’ll spend the final hour of the workday. Should you experiment a little more with your design, or should you use the time to network, currying favor with your boss of other influential managers? 

Such daily choices, says Bahcall, is what really determine the level of innovation at a company ― not cultural changes instituted from the top. 

The culture of innovation, says Bahcall,  is proportional to the perceived marginal return of an employee for an hour spent working versus politicking.

Bahcall’s culture equation, at its heart, is really a story of misaligned organizational incentives. How large organizations adopt structures that promote selfish behaviors and disincentivize innovation. 

Creating a culture of innovation – one needs to set up structures, policies and incentives that is defined and measured the longevity of a company is determined by the quality of its cultural DNA

There is a great article in HBR where Bahcall explains his formula  really well 


Posted on March 17, 2019

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