Y6 Prelims 2017 CUEGIS

6) With reference to an organisation of your choice, evaluate the impact of culture on innovation.
Culture and innovation are two closely related concepts in business. Culture refers to the norms,
beliefs, customs and behaviour of an organisation, country, or other social grouping. Meanwhile,
innovation is the introduction of new or improved products, processes or ideas by a business. Hence,
these two concepts are closely linked as the internal and external environment in the form of culture
experienced by a business would undoubtedly shape business activity, such as through encouraging
innovation. In this essay, we would be studying the relationship between culture and innovation in
two aspects. Firstly, we would be discussing how a business’s corporate culture may shape
innovation within a company. Secondly, we would analyse how the culture of different market
segments the business targets could encourage innovation of products in a business.

For the purposes of this essay, Nintendo would be used as a reference for discussion. Nintendo is a
Japanese multinational consumer electronics and video game company headquartered in Kyoto,
Japan. It owns top-selling video game franchises such as Mario, The Legend of Zelda and Pokémon,
while selling products such as home and handheld consoles as well as games.

Firstly, an instance in which culture has an impact on innovation is where corporate culture of a
company affects how innovative a company is. Corporate culture is part of the internal environment
of a business which affects business activities, and may lend the business some strengths which may
enable its growth. A strong corporate culture of acceptance to change and risk taking may
encourage innovation and intrapreneurship among employees, which may be used as a strength for
the company to stay competitive for long-term growth and survival.

An example of how corporate culture impacts innovation can be seen in Nintendo’s Mario Maker,
which started out as a course-making tool for Nintendo's internal development teams under the
Entertainment Analysis and Development Division of Nintendo. Tools like these are constantly
developed by a dedicated team in Nintendo to increase efficiency of game developers. This is an
example of innovation as new tools specific to the development of Nintendo games that are not in
the market must be constantly innovated, designed and produced. As such, we see that the
corporate culture of Nintendo is one which encourages innovation, given that there is a special team
dedicated to innovating and coming up with new technologies from scratch to improve efficiency in
other parts of the company. The Mario Maker however, has been further developed into a game
called the Super Mario Maker, released in 2015, that allows players to design their own Mario
courses.

There are certain advantages associated with Nintendo’s corporate culture that encourages
innovation within the company innovating of tools for its in-house game developers. A main
advantage is that it allows game development teams in Nintendo to develop new courses quickly, so
as to constantly provide new content to gamers, to ensure customer needs are met and customer
loyalty is built, as new levels released through updates is a service that Nintendo provides which
gives further value-addedness to their products. In addition, in the specific case of Mario Maker,
successful new products may be serendipitously developed, as the Super Mario Maker developed
from the original Mario Maker was a hit and helped increased sales and profitability of Nintendo.

However, there are also certain disadvantages. Innovating new processes and technologies for use
within the company is costly and requires substantial investment in the form of salaries to the tools
team that innovates and designs new technologies to support internal games development teams. In
addition, results from such investment in the form of new innovations do not directly produce
revenue for the company, and their effects are rather indirect by increasing company efficiency.
Tatsumi Kimishima, CEO and president of Nintendo Co., benefits from increased efficiency within the
company, as well as better relations with employees who feel more involved and significant in a
company that encourages innovation. In addition, cases like Super Mario Maker springing up from
in-house innovative projects boosts Kimishima’s image as it shows that he is building on to the brand
image of an innovative and market-disrupting company. This is especially important since Tatsumi
Kimishima is a new CEO of Nintendo, and needs to build his reputation and secure the trust of
shareholders. As such, Nintendo’s CEO is supportive of the current corporate culture there, and has
maintained the culture which was passed down from his predecessor.

Meanwhile, a stakeholder group with vested interests in this area of Nintendo are the employees.
Employees benefit in a workplace with an innovative culture where intrapreneurship and innovation
is encouraged. On the other hand, another stakeholder group: the competitors, would have a
competitive disadvantage should Nintendo’s innovative softwares aiding its developers lend
Nintendo greater efficiency and productivity.

Secondly, another way in which culture impacts innovation is when multinational companies need to
innovate in order to adapt their content and products for marketing and sale in different regions
that have distinct cultures. This is necessary to ensure that customer needs are met. For adaptation,
extensive market research is needed, and multinational companies usually simply employ people
familiar with local culture of various markets to ensure their content and products are culturally
appropriate and understandable.

An example of this is Treehouse, the product development division of Nintendo, which includes a
localisation team. The localisation team translates the games, vets the game for cultural
appropriateness, often changing or removing certain parts of the game. This is considered as a form
of innovation as games often require major changes during the developmental and localisation
process, and new ideas are often needed when developing products so that they are compatible
with multiple cultures. The difficulty in doing so is emphasized by the fact that some games such as
Fire Emblem Fates are rather different in Japan and America, with scenes of the storyline being
altered, cut out, and even an entire mini-game and song track being removed.

There are certain advantages associated with innovating to suit products for different market
segments. Such innovation enables MNCs to more effectively penetrate new markets overseas, a
form of growth as laid out in the Ansoff’s Matrix. By opening new markets to a company’s products
through minor modifications of products, companies are open to more opportunities for expansion
and growth, as laid out in a SWOT analysis.

However, a possible disadvantage is that customers buying localised products may feel that they are
not getting the authentic product, creating backlash. For instance, there was substantial backlash
against localisation efforts for Fire Emblem Fate in America, with the hashtag #torrentialdownpour
used as the campaign hashtag against localisation efforts. This may affect customer loyalty and
brand image.

The CEO Tatsumi Kimishima benefits from increased opportunities for growth in new markets due to
innovation to tweak games for localisation efforts. Company growth and increased market share in
gaming industry globally leaves good impressions of the CEO, and helps cement his new leadership.

Meanwhile, the stakeholder group of customers in general worldwide benefit as they get access to
culturally appropriate games for entertainment, increasing their spread of choices for games.
To conclude, culture heavily impacts innovation, both in the form of internal corporate culture of a
business and external culture of various market segments. This can be seen through its impact on
innovation of in-house processes or softwares, as well as innovation of products to best meet
varying customer needs that are affected by their culture. The main way culture impacts innovation
is in the form of corporate culture, since a restrictive corporate culture will hinder any form of
innovation.