Innovation has become a necessary component to any organization’s growth and future well-being. But just as culture can chew up a strategy pretty quickly, it can devour an innovation effort or program even faster.
William Malek has seen it happen. He’s spent over a decade bringing his Stanford high-growth innovation mindset and execution framework to companies in Thailand and other Southeast Asian (ASEAN) countries. During that time, he’s learned that even though innovation is brewing in ASEAN organizations, there are unique historical and cultural challenges they must overcome in order to thrive and stay relevant in a constantly evolving marketplace.
William said to us: “If an ASEAN organization isn’t ready for change or new ways of doing things, culture won’t just eat strategy for breakfast – it will eat innovation for lunch and dinner as well.”
We sat down with him ahead of his Innov8rs Bangkok session to find out what challenges these companies face, and what leadership needs to do in order to overcome them.
I think in much of the so-called “Western” world, we have an impression of Asian company culture being quite rigid and top-down, not really a culture that spurs innovation - though that seems to be changing. Is the company culture actually different and, if so, how?
There’s a social psychologist, Geert Hofstede, who is famous for his research of cross-cultural groups and organizations - how national culture impacts business. His framework is sometimes used to analyze the Global Innovation Index to look at the difference between the top ten companies and the bottom ten.
And what separates them, globally, are two indices of Hofstede’s factors. The first one is on the difference between individualism and collectivism. The second one deals with what's called PDI, the power distance index: How strong is my positional power in the hierarchy of the organization. People in societies exhibiting a large degree of Power Distance accept a hierarchical order in which everybody has a place, and which needs no further justification.
When we look at where the Asian countries stand in the GII, you see very few in the top ten (perhaps China is changing this with their ascendency in recent years) and you don't see them in the bottom ten either. But the middle of the pack is full of them, and there's generally not a lot of movement. The premise here is that in terms of the nationalistic culture, these two indices help determine how people think, decide, act, and implement.
Before I go on, let me emphasize that Asian cultures are not homogenous. Japan is not Korea is not Thailand is not China. I've trained and consulted in all those countries, and how culture actually shows up in the business environment is very different.
But generally, the impact of the power distance index is fairly strong due to deferring to the scalar chain of the hierarchy. They are also more biased to act on behalf of the collective versus themselves as individuals. That’s very different than typical “Western” culture.
If you take Silicon Valley as one microcosm of the American mindset, we’re highly individualistic. I’ve taught at Stanford University, I’ve been in the middle of start-up and unicorn heaven, and I can tell you that those folks were not motivated to achieve for the good of the collective. It was: I’ve got an idea, I'm going to make it happen and become a billionaire. America in particular is all about the underdog becoming a champion, about just going for it. Individuality triumphs.
Why such a difference in focus?
A lot of Asian companies are family-based. I think in Thailand around 70 percent of the GDP comes from family-based companies. Even if they're traded on the stock exchange, they have strong family elements in there - generational uncles are the business unit managers and their first born are the head of finance. So even in a business context, the collective mindset is biased towards what is best for the family, not what is best for me. The notion of respect for your elders and respect for the community has been embedded in the culture for a couple thousand years thanks to Confucius.
The challenge comes because this mindset, in practice, is played out in how you defer to the next level above you regarding what you collectively value in your decisions and judgments. In an environment where you are supposed to be disagreeing creatively, challenging assumptions, testing hypotheses, moving fast, learning from failures, exploring potential as opposed to analyzing it - you’ve got to get the family to buy in, but you’re going to be careful how you say things so you don’t upset your father, or mother, or uncle.
You end up with a bias towards seeking collective agreement, harmonizing, optimizing the status quo.
You’ve worked extensively in Thailand. How have you seen this mindset impact potential corporate intrapreneurs and innovators there?
In the Thai context there's additional complications. Say I’m a young I.T. worker with some serious Python skills and I've just been hired to do A.I. and machine learning. I walk into this company, which may or may not be family-based and generational, and I am excited about being a very creative individual there, making my mark, and bringing radically new ideas and skills to the organization.
But I have my power distance issue to contend with. I'm a low person on the totem pole. There’s eight layers of management bureaucracy because of the hierarchy and the structure around avoiding risk. And, now I've got to face what’s called Kreng jai – the act of respecting and honoring my bosses. Kreng Jai manifests itself as a general desire not to disrupt the happiness of others, even at the expense of efficiency, honesty, or one’s own interests. When you hear that Thai people as being “accommodating”, they are (perhaps unconsciously) describing the effects of Kreng Jai. So, as we can see, some of the young Thai Generation Z are just opting for start-ups…much more fun!
When I worked in Silicon Valley, me, being a CEO meant nothing. People came up to me all the time challenging me and asking questions: Why aren't we doing this and that? This sounds stupid! and so forth. My position in the U.S. did not grant me power. I had to lead others by influencing skills rather than authority to get things done even though I had a “position” on the org chart.
Here, you don't get that extreme debate with the boss. You have to defer to the boss or you will lose face with my team. God forbid you ever embarrass the boss in a meeting with others. Your job is to make sure that you protect the boss, that you make sure that the boss is getting what they need, that they look good - and when they look good, you look good. The collective is in harmony!
Seen these two factors, the bias towards collectivism and the power distance issue, combined with Kreng jai, I'm going to be guarded even if I’m in an environment where I may not need to worry about family hierarchy and company ownership. And this is not just internal - there's a certain deference even between companies. They each have their territory so to speak and there's a kind of politeness around stepping into the other’s businesses. All of this impacts how much innovation can occur, how much true creativity gets unleashed, whether disruptive ideas get uncovered. My desire to push the envelope, or to risk being disagreeable because I have a different idea, is hampered - unless the leadership is fully conscious of this possibility, because they play a role in this by reinforcing it.
It seems like despite this, there’s a lot more innovation going on now in China and other regions. Is the culture shifting? What other factors are at play?
I see significant pockets of innovation in some organizations in the Asian cultures overall. But in specific terms, each country has its own unique challenges with respect to its national culture combined with its organizational culture and what the leaders are doing to embed an innovation mindset. Take China: while they have many state run organizations, someone like Jack Ma is evidence they are open to individual action, entrepreneurship, in the business world. And Zhang Ruimin, the CEO of Haier - I could argue that he is far more creative and innovative than most CEOs anywhere when it comes to organizational innovation. He's literally fired ten thousand people in middle management at Haier to disrupt the idea of hierarchy.
For example, he’s localized innovation, so decisions about refrigerators in South America need to be made in South America, not in China. He's completely restructured governance and how resources are allocated, so Haier can innovate locally and move faster without decisions coming to China HQ. In that sense, Haier is way ahead of the curve.
Does that imply then that if the leadership, so the boss, communicates that innovation is important to the collective, teams and individuals will start thinking differently? Does that mandate need to be very explicitly communicated?
Communication from the leadership does have to be explicit. You have to be self-aware in order to tackle this, because these cultural biases are not completely conscious. They are at a certain level, but when you get in a team setting the social norms tend to take over. Leaders have to be open about it. They have to say: “Disagreeing with me is not disrespect. I'm okay with it. We can do this and a prototype failure is not losing face.”
And they need to create a safe psychological environment so people really feel it is okay, that they’re not dissing the boss or dissing the team. They're just expressing an idea, and that’s a good thing for everyone.
You also need processes, and rules of engagement around those processes, that allow the innovation mindset to flourish. That makes it safe to embrace risk and to fail. Historically, another embedded bias in Asian national cultures is avoiding high uncertainty - the idea that if we’re not sure what to do then we'd rather avoid the potential risks, as opposed to dealing with them, because it could harm or impact the collective.
A great example in Thailand was the 2011 flood. The floods were devastating because they hadn't built a significant water infrastructure system. They hadn’t planned for these long, uncertain, high impact, high cost infrastructure projects.
Because of this, though, people were incredibly good at adaptation and innovation in the moment. When the flood waters came to Bangkok, store owners built one metre cement walls around their stores, right in the middle of downtown Bangkok, with no regulations. It was just a way to survive and adapt to the context.
Being adaptable in the moment as a way of living and a way of thinking - it’s great and it works, but it doesn’t tend to lead to structural, highly disruptive, long-term solutions that need to be thought through and then executed. There's too much uncertainty in that.
Have you seen the needle start to move in Thailand?
Definitely. They're starting to partner with “outsiders” (people, foreign companies, universities, etc) who are experienced in innovation and planning with uncertainty and ambiguity. They’re starting to understand that if you don't learn fast, if you don't fail, you can't learn forward. You're not learning fast enough if you don't allow failure.
I know a company here that held an internal hackathon. They ran a two-day hackathon to define several problem sets and find creative solutions. The hackathon had fifteen winners (who all had some great solutions), and each got a trip to Stanford and some spending money. I asked a senior executive: “So what happened to the other 75 people?” He looked at me, confused: "What do you mean? We only have winners." I asked him: “Of those 75 so-called losers, how many do you think will show up to participate next year?” And this led to a long discussion about recognizing and rewarding failure because, in the Thai context, that isn’t done. I explained to him that what would happen is these 75 people probably wouldn’t come back to try again - they would hang back, keep to the status quo, avoid risk, avoid the “punishment”, so to speak, of failure and losing face.
I suggested a solution where the people who didn't win got one year of online learning for any courses they wanted - that was a major uptick for the “losers”, because even though they didn’t win, they were recognized and rewarded for their efforts. And, of course, that meant they’d be far more likely to keep participating in the next hackathons.
Creating a space where risk taking is okay, and failure is okay, is critical. If you don't understand this from a cultural standpoint you won’t have any innovation sustainability, you’ll have an innovation lab that shuts down because they can’t get any results in three to four years. At that point, people will be afraid to show up and they will want to go back to their secure jobs in the core business, or leave the company at worst.
And you’re going to share how to create this space with us at Innov8rs Bangkok?
Yes, because innovation effectiveness depends on it. Like Peter Drucker said, “Culture eats strategy for breakfast” and this is especially true when it comes to the success or failure of corporate innovation.
I first came here over ten years ago to help with strategic planning. So, I held a workshop and I got the part where we do a SWOT analysis - looking at strengths, weaknesses, opportunities and threats. You take a good, hard look at your current reality so you can close the gap between where you are and where you want to go.
So I had everyone in teams. When I asked the teams, with the CEO and the executives in the room, to talk about their company’s strengths, no problem - everyone was all over it. But then it came time for the weaknesses, and suddenly the volume in the room went down tenfold. It was like whispers. And when I asked each group to talk about what they’d found to the entire group? Nothing. I couldn’t get anyone to talk.
I called for a break and quickly went over to the CEO’s executive assistant, because I was stumped and had no idea why they would not talk. She said “Oh, it’s Kreng jai. The CEO is the founding family member, so no-one’s going to say anything bad while he’s in the room.” So, we quickly arranged to have him leave the room for an hour or so and, suddenly, everyone has a ton to say. They completely opened up.
Cultural attitudes are very powerful. If your people can't share their ideas, their thoughts, their feelings, their frustrations, then creativity and innovation gets marginalized. You're going to get uncreative, watered-down, safe ideas that do nothing but preserve the status quo. And in many cases, for companies in a global marketplace built on continuous innovation, that's not growth - that’s death.