Why Management Matters Most: When a Country or a Company Starts to Fall Behind in Innovation Performance and Productivity Growth, Its Leaders Should Focus on Developing New Managerial Skills Rather Than Chasing Promising New Technologies. the Current Dilemma Facing the Netherlands Is a Classic Case

Volberda, Henk W., Bosch, Frans A. J. van den, European Business Forum

Dutch innovation performance and productivity growth is falling behind. Dutch businesses are focusing on restructuring and cost reductions. Dutch politicians have been too concerned with short-term government expenditures. Research at Dutch universities is failing to fuel the knowledge economy. On top of these rather worrying factors, the position of the Netherlands in the Global Competitiveness Index of the World Economic Forum is disappointing. The Netherlands has fallen from the top ten - and this could have serious consequences for the Dutch welfare state.

The Dutch innovation debate so far has concentrated on technology-related macrovariables, like below-average private investment in R&D or the low numbers of available scientists and engineers. The central thought is that for a small country to innovate, it should invest in only a few promising core technologies, such as nanotechnology or biotechnology. Particularly striking is the strong bias towards technological innovation and the total ignorance of what Daft (1978) called "administrative innovation".

But there is strong evidence from around the world that managerial capabilities and organising principles, not just technological know-how, are key to innovation. One can think of Richard Branson's superior visioning ability, which has enabled him to understand the future evolution of markets and technology, and create new opportunities to serve both 1 current and new customers. Other examples are the superior "industry foresight" of Dell (direct delivery without intermedial aries in the PC market), Ikea (direct delivery and self-assembly by the client in the furniture market), Xerox (paperless office) 1 and Southwest Airlines (cost efficiency and focusing on a particular value chain in the airline business). These examples highlight how the ability of top management to imagine the future - and develop capabilities to meet that future - can lead to competitive advantage.

Expanding worldwide competition, fragmenting markets and emerging technologies are forcing established firms to renew themselves continuously by transforming stagnant businesses and creating new sources of wealth. Hamel and Prahalad (1994) contend that instead of "more of the same" or "try harder" approaches (how to be better), organisations should fundamentally reconsider their core activities (how to be different).

Building managerial capabilities

The first step lies in mobilising "dynamic capabilities". The key attributes of dynamic capabilities are (Volberda, 1998):

* Broad knowledge base: The ability to combine knowledge from across different core technologies often distinguishes …

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Publication information: Article title: Why Management Matters Most: When a Country or a Company Starts to Fall Behind in Innovation Performance and Productivity Growth, Its Leaders Should Focus on Developing New Managerial Skills Rather Than Chasing Promising New Technologies. the Current Dilemma Facing the Netherlands Is a Classic Case. Contributors: Volberda, Henk W. - Author, Bosch, Frans A. J. van den - Author. Magazine title: European Business Forum. Issue: 22 Publication date: Autumn 2005. Page number: 36+. © 2008 Caspian Publishing Ltd. COPYRIGHT 2005 Gale Group.

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