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The Cultural Roots of Innovation: Why Finland blossoms and Japan, well ... doesn't.

April 13th, 2010 by Dean Foster

Recently, Finland (yes, little Finland!) has scored ... once again ... as one of the world's top three leading nations in innovation.  Once again, Japan, one of the world's top five economies, doesn't even come close.  And the U.S. is, well, somewhere in between. 

China, predicted by many to become the number one economy in the world in the next decade, doesn't even make the list.  The implications of this interesting stat are legion: for one thing, as the U.S. did and China will find out, you can sustain your economy based on size, influence, diversity of industry, political and economic policies, etc., for just so long, but without innovation, the steam, to use a term from a previous age, will eventually run out. 

But an even more important implication is that if we explore the reasons for a country's innovation ranking, we discover that the source of Finland's innovation (and the comparative lack of such innovation in places like China and Japan) is cultural.  And once we can identify those cultural drivers of innovation (and those that don't), we have a formula for maximizing the innovative possibilities at home.

I do want to back up for a moment and clarify some things before moving forward: first, let's not confuse industry and growth with innovation.  China has growth, Japan doesn't.  Both have plenty of industry.  Neither, at least when compared with Finland, have innovation.  The U.S. has a lot of all of the above, but doesn't necessarily lead anymore in any one of them.  How come?  The answer lies buried in the cultures of these countries.

The U.S., for example, is culturally a very "individualistic" culture, for example, and in such a culture, individual ideas, and new innovative solutions, can rise to the top quickly because institutional structures reward such behavior. 

Finland is culturally a very collaborative and consensus-driven culture, and innovative ideas can emerge in this kind of cultural climate because "the more brains working together (not apart), the better".

In both cases, innovation can thrive, as long as we don't mix up the values: we will have some problems if, in the U.S., we ask the innovative individual to first consult and conform with the ideas of others; additionally, in Finland, we will run into difficulties if we start rewarding individuals on the consultative team for non-consultative behaviors. 

In BOTH countries, innovation results because while one is individualistic and the other consultative, both value flattened, non-hierarchical organizations and relationships.  Finland is a hotbed of innovation precisely because its consultative and consensus-driven values are enhanced by a very flattened, egalitarian set of values, so that individuals-anyone, really-can surface an idea. 

It then gets put to the group.  Japan, while highly consultative and consensus-driven, is very hierarchical in its orientation around organizations and relationships, and diametrically opposed to the super-egalitarianism and wildly flattened organizational environment of Finland (with the U.S. not being quite as egalitarian as Finland in its orientation).

In both Japan and China, individuals do not surface new, innovative ideas which might not be approved by higher-ups: the Japanese cultural model has consultative teams devising the best ways to deliver on the already predetermined (hence, non-innovative) goals of the hierarchy, and the Chinese model has teams following lockstep the direction of the hierarchy (with even less innovative solutions surfacing). 

In both cases, hierarchy stifles innovation (but can enhance "improvement" on already existing, and pre-approved, ideas).  No surprise, then, that in Japan we excel at improving but not innovating; in China, we excel at replicating what already exists in volumes enough to generate growth, in the U.S. we are often innovating, but not necessarily improving. 

Finland, with a culture of both extreme egalitarianism and extreme consensus-orientation, excels at innovating AND improving.  (But, you ask, can it do so at the exponential levels of growth required to compete with the larger economic behemoths? Well, that's a question of growth, not innovation ... although growth without innovation, as we said earlier, will eventually run out of steam).

Apparently, therefore, the cultural "formula" for innovation and growth is a hyper-egalitarian, consensus/collaborative oriented environment. 

Mix it up with a large enough mass (population, market size, etc.) along with the political and economic policies that emerge from the above cultural formula (i.e., an open economy, as opposed to a closed command-and-control one), and you'll also have growth. 

In order for Finland and Japan to grow, in the absence of such mass, they both need to export, but in order for Japan to innovate; it must foster a more egalitarian environment.  In order for the U.S. to become more innovative, it needs to value collaborative consensus-driven, egalitarian environments, even more than it already does. 

And for China to sustain its already vaulted growth (based mainly on the hierarchy energizing mass), it needs to innovate: it cannot remain the world's factory forever, and in order to do that, it must create a more egalitarian and consensus-oriented culture.  Who's got the greatest cultural distance to go? 

The CultureCompass, an online tool that defines and compares different countries' cultural qualities, is a first step on the way to answering that question.

Israel & Innovation: Understanding the Cultural Roots

April 20th, 2010 by Dean Foster

ISRAEL & INNOVATION:  For the same cultural reasons as Finland...

Last week, we explored the cultural roots of innovation, discovering a connection between strong egalitarianism, and collectivist or collaborative orientation, as the cultural prerequisites for an innovation ethos. 

Alternately, a strong orientation to hierarchy typically produces a climate that resists innovation, while a strong orientation toward individualistic competitive and non-collaborative behaviors, while allowing the occasionally unique idea to surface, is usually not as productive in creating an abundance of innovative ideas as a collaborative, consultative, environment. 

The global evidence for this phenomena is revealed in global studies on innovation, with Finland and Israel consistently ranking on top, while global economic giants like China and Japan don't even make the list (and the US is near, though not at, the top). 

While we know that these cultural pre-conditions are fundamental, the political and economic policies that typically develop in these countries usually, no surprise, reflect these cultural fundamentals, further enhancing the blossoming of innovation, while the economic and political policies that emerge in hierarchically oriented cultures usually stifle whatever small seeds of innovation might be stirring. 

Israel mirrors these cultural requirements: like Finland, a small country, with a strong collaborative social ethos (i.e., the "kibbutz"), and an almost knee-jerk rejection of hierarchically-imposed authority, the cultural roots of innovation are in place. 

And the economic policies that emerge from being a small, innovative, socially collaborative culture require an emphasis on export, and a typically social-welfare based system, along with high taxes to pay for it all, at home. 

All countries, of course, bring their own unique aspects to these formulas, as we discovered when we compared Finland, China, the Japan and the US.  If we bring Israel into the mix, we need to also consider the unique Israeli cultural aspects, including the daily - if not hourly - requirement for continuous flexibility, with an accompanying sometimes manic effort to reduce risk and uncertainty. 

The fundamental cultural orientations of extreme egalitarianism and collectivist collaboration (as long as you are inside the group), coupled with the pressure for intense flexibility and control of uncertain situations, yields the remarkably innovative climate of Israel.