Foreword

Today innovation is critical for the success of firms and the wealth of nations. But what causes or hinders innovation? Researchers throughout the world are trying to ascertain the principal driver of innovation itself. Through decades of rigorous research, Professor Gerard Tellis posits a powerful thesis: that the internal culture of a firm is the primary driver of innovation. His explanation based on culture contrasts with many others that have been proposed, such as size, open innovation, country of origin, or investment in R&D. In contrast to these variables that can be easily measured, culture is a soft, ambiguous factor. Moreover, culture is hard to control. Tellis shows that it is crucial.

I like the central argument of the book: success breeds complacency, lethargy, or arrogance—in short, a culture that embraces the status quo instead of the future abhors risk and protects current successful products. Because this culture arises from the success of current incumbents, Tellis calls it the incumbent's curse. He proposes a compelling antidote for this culture: three traits and three practices that promise unrelenting innovation and market dominance. His thesis is brilliant, simply developed, and powerful.

The three traits he proposes for innovation are a focus on the future, an embrace of risk, and a willingness to cannibalize successful products. These traits are tough to enforce in a firm, especially in a short time. That is why successful turnarounds are so rare, as Tellis persuasively argues. However, senior managers control three practices that can inculcate the traits. These practices are incentives, internal competition, and empowerment. Incentives are unquestionably the linchpin. As Tellis argues, set the incentives for enterprise and you have a vibrant, innovating company. Set the incentives for seniority or loyalty and you get an aging, stultifying culture. Tellis puts the onus entirely on senior managers of the firm to control the practices and set the tone and agenda of the organization. Besides these rich insights, this book offers valuable tools to implement the practices that foster the culture of unrelenting innovation.

Tellis is one of the few who moves seamlessly between the world of academics and the world of practice. He has won many prestigious awards from academic organizations for his groundbreaking research. He has presented with eloquence and conviction to executives from major corporations. This book is deep in theory and rich in insight. The theory is plainly accessible to managers. More important, it integrates findings from clever research on strategy with those from social and organizational psychology. The book combines the rigors of sophisticated models with interesting idiosyncrasies of human nature and practical tactics for change.

Tellis has woven his thesis with many examples. He shows that his thesis accounts for classic fumblings of innovations at Xerox and Kodak, with recent stagnation or decline at firms such as Microsoft, Sony, HP, Yahoo!, Nokia, and Research in Motion. The latter firms have had a reputation for innovation but have stumbled, declined sharply, or gone into bankruptcy—all afflicted by the incumbent's curse. Tellis argues that culture best explains the failures of these giants with the rise of the new stars such as Facebook, Google, and Apple, and the turnarounds of other innovative giants such as IBM and Samsung.

The lessons apply for large firms and young promising entrants alike: the incumbent's curse shadows success. A culture of innovation promises long-term market dominance. And there are lessons for government agencies and nonprofits, such as universities, who are threatened by new entrants and technologies that threaten to render their current businesses obsolete.

With his thesis of culture, Tellis has opened a whole new domain of discussion, research, and applications. Unrelenting Innovation is timely education for CEOs riding the wave of success. It is insightful reading for CEOs struggling to understand why their companies are in decline. It is a must read for all managers of innovations.

Vijay Govindarajan
Earl C. Daum 1924 Professor
at Tuck School at Dartmouth
Author, New York Times and Wall
Street Journal best-seller Reverse Innovation