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Does organisational creativity always drive market performance?

Leaders in today’s business sphere now recognise the importance of organisational creativity for growth and survival. This is due to the intricacies of global business activity characterised by unpredictability and turbulence.

It is important to understand how relevant contingencies might moderate the relationship between organisational creativity and market performance. Therefore, understanding the indirect effect of creativity on performance, via New Product Development (NPD) capability, and its dependence on the levels of environmental dynamism and market responsiveness, is the core of the article.

Organisational creativity dimensions that drive market performance are more complex than previously thought: they depend 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 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. Summarily, 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 article 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 – Nigeria, it emerged that, “The Nigerian environment is unique in its own right. It is 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 volume, salience, and top of mind awareness. In less than four months, the company saw that six months KPIs were surpassed. It was 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 article 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 their 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 their inability to innovate to meet those 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 is strengthened”.

The findings provide a number of important implications for managers. First, results support the view that fresh and useful creative activities are vital in driving NPD capabilities. To this end, managers must understand that adding both these new features to NPD processes and products would help generate stronger market performance.
Second, the article 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.

In this article:
LBSInsightOgechi Adeola
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