March/ April 2007

Looking forward to success

How CEOs approach innovation can make or break a company

It’s no secret that marketing strategies play a significant role in the success of a company. Research from Mays shows that looking to the future is vital for promoting innovation in a firm—and innovation starts with how CEOs think.

Some firms embrace change, while others are ambivalent about or opposed to change, says Associate Professor of Marketing Manjit S. Yadav. There are different reasons for that phenomenon, but in business, the behavior and success of a company comes back to leaders and how they perceive change.

Yadav’s article, “Managing the Future: CEO Attention and Innovation Outcomes,” represents an analysis of 176 public banks and their introduction of Internet banking services. To determine how a CEO’s thought process affects company innovation, Yadav used an approach from psycholinguistics—counting how many times a CEO used the word “will” in letters to shareholders as a signifier of forward thinking. Almost 1000 letters were analyzed from 1990 to 1995. The research looked at innovation outcomes over eight years, from 1996-2004.

“Our methodology creates a separation between the measurement of CEOs’ thought processes and when innovation actually occurs,” Yadav said. “Future focus of CEOs is found to be a very strong predictor of innovation in firms.”

With results of “will” usage ranging from 0 to 20 percent, Yadav found that the amount of attention a CEO devotes to events not yet occurring impacts three key areas of innovation—detection, development and deployment.

Companies must focus on the future beyond detection of new technology. They must create products based on new technologies and then deploy them further after launch. Attention is the chief bottleneck in organizational activity, Yadav said, and the bottleneck becomes narrower and narrower as we look to the top of organizations.

“CEOs should acknowledge the importance and impact of how they think. They should cultivate a broad, forward-looking posture. Once they exhibit it,” he said, “it sets in motion a similar attentional stance throughout the organization.”

Yadav’s research suggests that when future-focused thinking is employed by CEOs, managers and employees pick up on the idea. This creates an innovative organization that is ready to adapt to change, using new technology such as online banking to serve customers in innovative ways.

“We need to learn a lot more about how CEOs impact innovation, but this research begins to address the issue of leadership that is widely recognized as one of the central problems in the management of innovation,” Yadav said.

The article will appear this fall in the Journal of Marketing, in the Marketing Science Institute’s MSI Reports, and will be presented at conferences in Reykjavik, Iceland and Singapore. The article is co-authored by Jaideep C. Prabhu at Tanaka Business School, Imperial College, London, and by Rajesh K. Chandy of the University of Minnesota’s Carlson School of Management.

— Ashley N. Coker


March/ April 2007
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