Manjit S. Yadav, Jaideep C. Prabhu, & Rajesh K. Chandy
Executive Summary
To a lay observer, it may seem logical, even obvious, that the people who lead firms have an important role in driving innovation within them. Chief executive officers (CEOs) such as Steve Jobs at Apple and Andy Grove at Intel are celebrated for their apparent success at promoting innovation in their firms. Surprisingly, however, the literature has mixed views on how CEOs affect innovation in firms. Some authors argue that CEOs are frequently so steeped in the past or in their day-to-day activities that they fail to recognize that the technological environment has turned on them. Others argue that CEOs are simply not very relevant in driving innovation in the firm. Perhaps the most charitable view is that CEOs have an effect on innovation but that this effect is at the project level, through their support of individuals and teams working on individual projects.
In contrast to previous research, the authors argue that CEOs have a direct, positive, and long-term impact on innovation outcomes in firms. Using longitudinal data (1990–2004) on the expansion of Internet banking and e-commerce capabilities in the U.S. retail banking industry, the authors find that firms with CEOs who attend to the future more are (1) faster at detecting new technological opportunities, (2) faster at developing initial products based on these technologies, and (3) superior at deploying these initial products. Specifically, based on an analysis of 876 letters to shareholders from 176 public banks, the authors show that CEO attention is a critical driver of innovation
•Even when the target of attention is not innovation per se, but simply future events in a generic sense;
•Even when the innovation outcomes occur far in the future (sometimes several years in the future); and
•Even in an empirical context—banking—which is not traditionally viewed as high-tech or, thus, as innovation centric.
To measure CEOs' attention to the future, the authors rely on a methodology from psycholinguistics that exploits a quirk of the English language; specifically, future-oriented sentences in English are likely to include the word "will" in them. As such, the authors simply count the number of sentences with "will" in CEOs' letters to shareholder as a metric of their attention to the future.
The findings have important implications for firms and CEOs. It may be tempting to think that the CEOs of most firms, recognizing the significance of the issues highlighted previously, already make a concerted effort to look ahead. In the data set of CEOs' letters, only 9.21% of all thoughts (sentences) are future focused. Moreover, the authors find considerable variance in the extent to which CEOs focus on the future; the percentage of future-focused thoughts among CEOs in the data varies from 0% to 20%. A significant implication of these findings is that CEOs can influence the process of innovation in their firms simply by spending more time attending to the future.
The findings emphasize the importance to firms of CEOs that cultivate and exhibit a generic focus on the future rather than a focus on specific events or opportunities in the future. The findings suggest that CEOs need not (and perhaps should not) involve themselves in attending to the nitty gritty of specific innovation activities, such as detection, development, and deployment. It is not that details are unimportant. Rather, the authors argue that by focusing on the generic rather than the specific, CEOs can be effective leaders (because, in this way, they lead their firms to successful innovation) while simultaneously achieving efficient management of their scarce attentional resources.
Biography
Manjit S. Yadav is Associate Professor of Marketing in the Department of Marketing, Mays Business School, at Texas A&M University. He obtained his PhD in Marketing from Virginia Tech. His current research focuses primarily on marketing strategy issues related to the Internet and the electronic marketplace. Dr. Yadav has published in several journals, including Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research, Journal of the Academy of Marketing Science, and Sloan Management Review. He is a member of the editorial review boards of Journal of the Academy of Marketing Science and Journal of Interactive Marketing. He is a recipient of the Davidson Honorable Mention Award for Best Paper (Journal of Retailing) and the Faculty Distinguished Achievement Award in Teaching (Mays Business School, Texas A&M University). Dr. Yadav cochaired the American Marketing Association's Faculty Consortium on Electronic Commerce held at Texas A&M University.
Jaideep Prabhu is Professor of Marketing in the Tanaka Business School at Imperial College London and has previously been on the faculties at Cambridge University, Tilburg University, and University of California, Los Angeles. He has a BTech from the Indian Institute of Technology (New Delhi) and a PhD from the University of Southern California. He has taught and consulted with executives from ABN Amro, British Telecom, EDS, Egg, ING Bank, Nokia, Oce Copiers, Philips, and Xerox, among other companies, in Colombia, Finland, Germany, the Netherlands, Portugal, Switzerland, the United Kingdom, and the United States. He has also consulted for the U.K. Department of Trade and Industry, for whom he cowrote a white paper on innovation. He has recently been awarded a midcareer fellowship from the United Kingdom's Advanced Institute for Management Research (AIM) to work on a large project on the off-shoring and outsourcing of innovation by the world's largest multinationals. His research interests include radical innovation and managerial learning, particularly in high-technology industries, such as pharmaceuticals and e-banking.
Rajesh K. Chandy is James D. Watkins Professor of Marketing in the Carlson School of Management at University of Minnesota. His areas of research include innovation, technology management, and marketing strategy. His research has received a number of awards, including the Journal of Marketing Harold Maynard Award for contributions to marketing theory and thought, the American Marketing Association's Early Career Award for Contributions to Marketing Strategy, and the Marketing Science Institute Alden Clayton Dissertation Award. Chandy teaches in the full-time MBA, part-time MBA, and executive education programs at the Carlson School of Management. His teaching awards include the Carlson School Outstanding Professor of the Year Award, the Carlson School Award for Excellence in Teaching, and the Outstanding Faculty Dedication Award. He has also taught at the University of Southern California, the University of California, Los Angeles, the University of Houston, Bocconi University (Italy), and the Warsaw School of Economics (Poland). Chandy currently serves on the U.S. Commerce Secretary's Advisory Committee on Measuring Innovation in the 21st Century Economy. He is also a member of the Academic Council of the American Marketing Association and the Knowledge Development Coalition of the American Marketing Association. Chandy received his PhD from the University of Southern California.
Journal of Marketing, Vol. 71, No. 4, October 2007
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