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Innovating Institutional Cultures

John Hagel is in a small category of thinkers who manage to routinely be thinking ahead of the curve ( he calls his blog, where he features longer but more infrequent posts than is typical,  Edge Perspectives). I want to draw attention to the core conclusion of his latest:

Challenging Mindsets: From Reverse Innovation to Innovation Blowback

Innovation blowback

Five years ago, John Seely Brown and I wrote an article for the McKinsey Quarterly entitled “Innovation Blowback: Disruptive Management Practices from Asia.” In that article, we described a series of innovations emerging in Asia that were much more fundamental than isolated product or service innovations. We drew attention to a different form of innovation – institutional innovation. In arenas as diverse as motorcycles, apparel, turbine engines and consumer electronics, we detected a much more disruptive form of innovation.

In these very diverse industries, we saw entrepreneurs re-thinking institutional arrangements across very large numbers of enterprises, offering all participants an opportunity to learn faster and innovate more effectively by working together. While Western companies were lured into various forms of financial leverage, these entrepreneurs were developing sophisticated approaches to capability leverage in scalable business networks that could generate not just one product innovation, but an accelerating stream of product and service innovations.

…. Institutional innovation is different – it defines new ways of working together, ways that can scale much more effectively across large numbers of very diverse enterprises. It provides ways to flexibly reconfigure capability while at the same time building long-term trust based relationships that help participants to learn faster. That’s a key breakthrough – arrangements that support scalable trust building, flexibility and learning at the same time. Yet this breakthrough is occurring largely under the radar of most Western executives, prisoners of mindsets that prevent them from seeing these radical changes.

Read the whole thing here.

Hagel is describing a mindset that is decentralized and adaptive with a minimum of barriers to entry that block participation or information flow. One that should be very familiar to readers who are aware of John Boyd’s OODA Loop, the stochastic/stigmergic innovation model of John Robb’s Open Source Warfare, Don Vandergriff’s Adaptive Leadership methodology and so on. It’s a vital paradigm to grasp in order to navigate and thrive in the 21st century.

Western executives (think CEO) may be having difficulty grasping the changes that Hagel describes because they run counter to cultural trends emerging among this generation of transnational elites ( not just big business). Increasingly, formerly quasi-meritocratic and democratic Western elites in their late thirties to early sixties are quietly embracing oligarchic social stratification and use political or institutional power to “lock in” the comparative advantages they currently enjoy by crafting double standards through opaque, unaccountable authorities issuing complex and contradictory regulations, special exemptions and insulating ( isolating) themselves socially and physically from the rest of society. It’s a careerism on steroids reminiscient of the corrupt nomenklatura of the late Soviet period.

As the elite cream off resources and access for themselves they are increasingly cutting off the middle-class from the tools of social mobility and legal equality through policies that drive up barriers to entry and participation in the system. Such a worldview is inherently zero-sum and cannot be expected to notice or value non-zero sum innovations.

In all probability, as an emergent class of rentiers, they fear such innovations when they recognize them. If allowed to solidify their position into a permanent, transnational, governing class, they will take Western society in a terminal downward spiral.

10 Responses to “Innovating Institutional Cultures”

  1. Lexington Green Says:

    Brilliant diagnosis of the cancer eating our country alive.   

  2. zen Says:

    Thank you! I hope I am wrong though.

  3. Joseph Fouche Says:

    Spot on diagnosis. To bad the condition is probably terminal.

  4. Eddie Says:

    At least campaign-finance reform is dead this year…. As well, the social and physical isolation by elites from the rest of society is far worse in most other countries than it is in the Anglo countries. "Off-worlds" are probably the best way to describe the new elite living arrangements from Seoul to Shanghai to Mumbai to Lagos. However, I agree with Lex… this is a phenomenal summary of much of what’s killing us.

  5. J. Scott Says:

    Zen, Nomenklatura, indeed. Excellent post. What many outside of DC fail to "see" is the size of the bureaucracy–it is connected, well-fed, well-paid, and marching in lock-step under the banner of PC. 

  6. JV Says:

    What happens to Rome when the bread & circuses run out?  Do the hungry barbarians outside the circle of light take over.The fear is that America may not have fallen far enough and hard enough to learn what it means to be hungry again.  

  7. onparkstreet Says:

    This post – which is phenomenal and I will so re-read when I get a chance – kind of reminds me of the interview series over at National Review with Thomas Sowell. He’s discussing his new book about society and intellectuals. This quote is funny, "Thomas Sowell explains how the demand for public intellectuals is largely manufactured by the public intellectuals themselves. " Naturally. Typical. Classic. Another book for the massive, towering anti-library book pile!
    – Madhu

  8. historyguy99 Says:

    vultus sicco pro nos insisto Rome ut ashheap of history

    Seven voices have already aluded to the same thoughts I share in the tongue of Ceasar.

  9. jhagel at 01/12/10 12:06:08 | Exectweets Says:

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