• March29
  • Dr Ogechi Adeola

Does Organisational Creativity Always Drive Market Performance?

Research news

Does Organisational Creativity Always Drive Market Performance?

LBS Hosts 2017 Africa Business Conference

The increasing complexity of global business activity characterised by unpredictability and turbulence has driven many scholarly works and organisational leaders to recognise the importance of organisational creativity for growth and survival. However, it is important to understand how relevant contingencies might moderate the relationship between organisational creativity and market performance. The need to understand how the indirect effect of creativity on performance, via new product development (NPD) capability, which is dependent  on the levels of environment dynamism and market responsiveness, is the core of the article “Does Organisational Creativity Always Drive Market Performance?” by Dr Ogechi Adeola, LBS faculty, and four other co-authors.

A contribution from this study is the finding on how organisational creativity dimensions that drive market performance is more complex than previously thought: it depends on whether or not organisational creativity components are first used to develop organisation’s process and product innovation capabilities, and whether target market environment conditions are dynamic and the organisation has the ability to respond to target market demands.

First, organisational creativity exhibited in the generation of novel solutions to marketplace problems provides a strong ground for a firm to develop new processes and products for its target market. A firm with a superior capability to introduce new processes and products is more likely to distinguish its market offerings from the competition and occupy a lucrative market position that is too costly for competitors to replicate. In short, if a firm is creative, it should be more effective in developing and commercialising new processes and products that are valuable, rare, imperfectly imitable and non-substitutable. Increased success in new process and product introductions heightens the chances that the firm would record superior market performance. Accordingly, this study hypothesises that Organisational creativity via NPD capabilities has an indirect, positive relationship with market performance. Second, in a qualitative interview with a senior product manager of an alcoholic beverage company in a large sub-saharan African market – Nigeria, it emerged that, “The Nigerian environment is unique in its own right. It’s a market that is difficult to predict which is why data is always very crucial. Local consumers are very unique: they are very price sensitive yet extremely averse to products that are perceived to be ‘cheap.’ At the same time, the way competition operates is different. Competition here takes the form of fake products and rival firms introducing brands whose sole aim is to undercut other brands and force competitors into a price war…it is important to anticipate and have contingency plans because there is so much uncertainty. Even now the exchange rate fluctuation is heavily impacting on business. So this business focused on introducing new products in one state to gauge demand and then set key performance indicators (KPIs) in terms of number of volume, salience, awareness, and top of mind. In less than four months the company saw that six month KP1s were surpassed. It is at that point that the company knew it was a winner.” The evidence presented above implies that changes in the external environment present challenges and opportunities for firms, especially those operating in turbulent market environments such as sub-Saharan Africa. The study argues that, “Environmental dynamism moderates the positive indirect effect of organisational creativity on market performance, via NPD capabilities, such that at high levels of environment dynamism, the effects of NPD capabilities on market performance are accentuated”.

Third, it is argued that some firms succeed because they have the ability to adjust their market offerings to target local market needs. Similarly, because locally-responsive firms invest in market sensing and monitoring activities, they are better prepared than less-responsive counterparts to explore, develop and commercialise new products that do well in the market. On the contrary, firms that ignore trends in the market and are slow in responding to changing market needs face the consequences of not being able to innovate to make those changing market needs. Accordingly, the study hypothesises that “Market responsiveness capability moderates the positive indirect effect of organisational creativity on market performance, via NPD capabilities, such that at high levels of market responsiveness capability, the effect of NPD capabilities on market performance are strengthened”.

Findings from this study provide a number of important implications for managers. First, results from this study support the view that novel and useful creativity activities are both vital in driving new product development capabilities. To this end, managers must understand that adding both novel and useful features to new NPD processes and products would help generate stronger market performance.

Second, findings from the study highlights the need for caution in the extent to which NPD capabilities are deployed in dynamic environments. The direct implication of this finding for NPD managers is that efforts should be expended to minimise the risk of decreasing performance outcomes by taking into account the peculiarities of target market conditions when deploying NPD capabilities.

In addition, given that greater responsiveness to local market needs strengthens firms’ ability to deploy NPD capabilities effectively to boost performance, it is important that managers invest efforts in understanding changing needs and preferences in key targeted markets to be able to continuously and accurately respond to customer needs with appropriate new processes and products that boost performance. This study was accepted for publication by the Journal: Psychology and Marketing.