My pet theory

Friday 1st June 2001

Business creativity got lost in the filing department, floor three

I've had a pet theory for years now about the missing X-factor in New Zealand's business psyche. Like all pet theories it's a mixture of hunch and observation and so, while I promise to get around to addressing it properly one day, please cut me some slack for its lack of McKinsey-style rectitude. Many a crime has been solved by hunch.

The idea is this. Since the deregulation of the 1980s, corporate New Zealand has been ruled by one side of the brain: the left side, devoted to rationality, numbers, analysis and things that can be measured. Partly that's a result of having so many accountants and lawyers in senior roles. Partly it's a result of New Zealand companies discovering how horribly inefficient they were once their subsidies and props were whipped away. Cost-cutting, systems re-engineering and economies of scale have dominated corporate strategy. The spirit of the times was embodied by companies such as Telecom, Brierley Investments, FR Partners (in the form of, say, Tranz Rail), Fletcher Challenge Group, Air New Zealand, Carter Holt Harvey and GPG - all severe cost-cutters, all seeking profitability by efficiency and economies of scale. And all run by bean counters.

What has been missing is the right hemisphere stuff: creativity, innovation, inspiration - words, I submit, that would be met with leaden stares if mentioned in many boardrooms, even now.

Well, the lack of right-hemisphere behaviour has come home to roost. All of these companies have disappointed their shareholders. Senior business lobbyists continue to blame the government for losses sustained by companies such as these, whingeing that we've got the wrong public policy framework and so forth. Fiddlesticks! At the root of corporate rot is the missing right-hemisphere trifecta of creativity, innovation and inspiration.

My theory is, admittedly, a bit left field. But I can find at least four reasons for you to give it the time of day. First, it's not just me saying it. Saatchi & Saatchi boss Mike Hutcheson has been arguing the same thing for yonks. He traces the origins of this "process-driven" culture to the undervaluing of arts at school. A top scholar, he was once robbed of a high academic prize simply because his top marks were in the arts. "They shot all the creatives a long time ago," he says about business, in Nikki Mandow's excellent article about creativity on page 32. "Now we are left with a barren landscape of process-driven organisations, starved of creativity. And look where it's got us." Hutcheson is no flake, with some of our largest companies as clients. If I'm wrong, I'm at least in good company.

Second, the stagnation of left-brain thinking explains why Telecom and Carter Holt Harvey are turning on a dime. In the last 18 months they've changed management teams, reassessed their dividend policy (Telecom now reinvests), launched venture capital funds and are carving up their corporate structures (into 34 businesses, in CHH's case). They've reached rock bottom in cost-cutting. Talk to anyone within these organisations and they say the word is out: "Employees, we need your ideas!"

Third, internationally, ideas and innovation are being "got" like religion. A week won't go by without news of some conference, book or guru on creativity hitting the in-tray? There's a reason: creativity matters. In a 1999 study, US researchers Ronald Jonash and Tom Sommerlatte found that companies in the top 20% of Fortune's 15-year-old innovation ratings enjoyed double the shareholder returns of the other companies in their industries. Conversely, companies in the bottom 20% report shareholder returns less than a third of the other companies in their industries. In their book, The Innovation Premium, the researchers find 95% of all Wall Street analysts award innovative companies with a premium share price. Some 70% say innovation is a key driver of market value.

The final reason you should give my creativity theory more than a cursory glance is the triumph of Silicon Valley - or, more importantly, of Robert Noyce, founder of Intel and one of the valley's granddads. In a gripping essay about the birth of Intel, author Tom Wolfe chronicles the success of Noyce's radical US West Coast management style over the traditionalist East Coast. Where one focused on ideas, informality, youthful enthusiasm and merit-based rewards, the other excelled in tradition, procedure and inheritance. The result, concludes Wolfe in his latest book Hooked Up, is the wholesale victory of ideas, vision and creativity over command, control and tradition.

I admit that I want to believe that creativity wins over control. But I respectfully submit the evidence that not only is it true, but that New Zealand's corporate culture is modelled on the wrong side of Wolfe's America.

To discuss these ideas and read more about business creativity in New Zealand, visit unlimited.co.nz/innovation

Vincent Heeringa
vincent@unlimited.net.nz

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