In my previous article, I deliberated upon a powerful force called Institutions, the rules of the game, that limits the latitude on how much and what all a nation can innovate. We focused on the formal nature of institutions, concerns such as private property ownership, regulatory measures, intellectual property protection, contract enforcement and economic intermediaries, and depicted that India is dismally weak on these fronts and that’s why we gravitate towards frugal or process innovation, than radical product innovations.
The hope is that with the new government showing intent of sharpening the executive and legislative machinery, we might see formal institutions evolving. However, there is a much stronger and resilient force at play -- the informal institutions. These are the customs, value systems, norms and notions of what’s appropriate and what’s not, which are deeply embedded in everyday social exchanges. They are the lubricants that enable societies to function by offering punitive measures for deviant behaviors and rewarding the aligned ones.
Think of tax evasion and inter-case marriages in India. Even though tax evasion is illegal and inter-caste marriage is legal in India under the law of the land, most Indians don’t feel guilty while evading taxes, but fear inter-caste marriages. These are the informal institutions in action that deter people from promoting inter-caste marriages, fearing social outrage or sanctions. The real question is -- how do these unstated, and even un-noticed rules shape innovation? Here’s my take.
One of the most famous researchers on country culture and inter-culture differences is Professor Geert Hofstede. Starting with IBM in the late 60s and later following his study of national culture across several organizations, Hofstede has developed a set of dimensions that depict national cultures. He defines culture as “the collective programming of the mind distinguishing the members of one group or category of people from others.” A study of cultures across 76 countries has revealed the following primary dimensions: Power Distance (PD), Individualism versus Collectivism (IDV), Masculinity versus Femininity (MAS), Uncertainty Avoidance (UAI), Pragmatic versus Normative (PRA), and Indulgence versus Restraint (IND). Let’s look at where India stands on these dimensions.
Figure SEQ Figure * ARABIC 1: India's national culture on various Hofstede's cultural dimensions
How do we interpret the results for India? High score on Power Distance reflects high inequality, indicating an appreciation of hierarchy and top-down culture in people with power. This could mean power is centralized in political parties, upper-castes, seniority at the workplace, or with regards to age.
Low score on Individualism versus Collectivism indicates that India by and large is a collectivist, consent based culture where individual’s will is overpowered by collective intent and action. Here group dominates individuals, and there is more of ‘we’ than ‘I’.
A high score on Masculinity versus Femininity reflects that Indian society is driven by male characteristics of competition, achievement and desire for success, which is visible by the kind of artifacts that we display, right from our dressing sense to celebrations.
Uncertainty Avoidance reflects people’s disposition towards the uncertainties that the future beholds and how they cope with anxiety. A low score here indicates that Indians have an acceptance for imperfection, and people are comfortable in living by the rules or devising workarounds for bypassing those.
On the Pragmatic versus Normative dimension, India scores high which reflects a rather long-term orientation and a pragmatic spirit, and indicative of not having an urge to explain the things. Finally, coming to Indulgence versus Restraint, we still remain a restraining society, controlling our desires and impulses, and educating our younger ones to do the same.
Where do these dimensions leave us with innovation? For that we need to draw a comparison between Indian culture and those across countries which are considered very innovative. Let’s take the US, Japan, Germany, India and China.
Figure SEQ Figure * ARABIC 2: Comparison of national culture on Hofstede's cultural dimensions
So what do we see here? Culture in the US (light blue) could largely be characterized as low on power distance, individualistic, masculine, avoids uncertainty, very normative (explanation seeking), and high on indulgence. Yet Germany (red), another innovative country, is quite similar to the US, except for its pragmatic disposition and low on indulgence. Japan (green) is similar to Germany on most accounts, except for the discomfort Japanese show with ambiguity and being largely masculine. China (dark blue) is similar to India (indigo), except that Chinese are much more pragmatic and collective than most nations. So, is there a cultural pattern to innovation? I would venture saying yes. It depends upon the stage of development a nation is in.
In India and China, both developing countries, we gravitate towards improvisations, imitations, and short-cut measures for our comfort with ambiguity and caution of not disturbing the order and collective will. The very tenets that help us improvise, render us incapable of bringing in disruptive changes or radical innovations, which say the US is very good at, for people think of themselves first and are more risk seeking. Even a high level of indulgence means that consumers are always looking out for the latest and the fastest, driving companies to innovate. Both Japan, and to an extent Germany, suffered a stagnating economy because their culture is out of sync with the stage of their economic development. If Japan needs radical innovations and breakthrough business models, a collectivist, perfection seeking disposition may not be ideal.
Casting the dimensions back to India, I offer a few propositions.
Startups have to pave the way for new innovations
Innovations, especially radical ones, call for breaking away from the familiar. With a dominant collectivist society, where power distance is enjoyed by those in power, large firms generally struggle to try radical stuff. These have to keep their investors, leaders, employees and even customer sane and comfortable, and hence the responsibility falls squarely on the ‘new guys in the town’. The startups don’t start from the natural position of pleasing the masses, as there isn’t much of an expectation anyone has from them, and hence they can take chances. Also with a rather high degree of comfort that people have with ambiguity in India, a miss or two won’t hurt all that much.
India has to go the distance from improvisations to innovations
While the comfort with ambiguity allows improvisations, they deter pursuit of perfection. The jugaad mentality of putting just enough efforts to make the things just work, doesn’t yield into any sustainable, scalable solution, and that’s where India doesn’t produce large innovations. Our efforts get dissipated around solving problems at hand, and not creating solutions for tomorrow. Startups need to behave a little more normatively, going into the root of the problem and addressing those, rather than assuming that that’s how it is, or worst still -- that we are destined to be like this. Certainly, we can draw a leaf from the Israeli model of innovation, where a constant threat and deprivation keeps people constantly seeking solutions that can serve them well into the future.
Knowing it all, we do understand that culture takes decades, if not generations, to change. However, there is a silver lining. Changes in formal institutions can accelerate the changes in informal ones. A good example is smoking in India. With rules against smoking in public places, people are seen to change their smoking ‘habits’. Or for that matter, with stringent penalties for not wearing seat-belts or helmets, people are now becoming more concerned for their lives, and those of others.
So the hope is that, with the growing support ecosystem for startups in India, we can see our behaviors becoming more tuned to innovation enabling, and that’s where we would be in a position to move from imitators, to improvisers, to innovators.
- Geert Hofstede