Categorical boundaries constitute ideological fault lines in all industries, but particularly in cultural industries such as music, food, wine, and art. Innovators associated with a genre or a category run the risk of being perceived as inauthentic by their audiences when they break categorical boundaries. Consider for example, Bob Dylan, who was idolized by his fans as a prototypical acoustic music performer. His efforts to experiment with fully charged electric music earned him flak—and even shouts of “Judas” from the audience. It’s a classic example, says Professor Hayagreeva Rao, of the tension between categorical boundaries and innovation.
But categorical boundaries are hardly ever that impenetrable, says Rao, which should in fact give courage to managers who want to innovate. Authenticity, he says, has two sides: On the one hand, it means conforming to a genre, but on the other, it implies originality. The trick is to balance both.
Rao, professor of organizational behavior, and his co-researchers, Rodolphe Durand of the HEC School of Management in Paris and Philippe Monin of EM Lyon, observed how categorical boundaries can be blurred over time by studying one of the most categorically constricted industries in the world—the French haute cuisine restaurant business. They chose that area for study, Rao says, “because people in fact think more about food than about biotech.”
Here the worlds of haughty, old-fashioned “classical” cuisine (rich sauces and game) and upstart “nouvelle” cuisine (herbs and fresh vegetables) had not a snowcone’s chance in Hades of ever coming together, based as they are upon deep ideological difference. And yet, Rao discovered, the boundaries between those two diametrically opposed categories eroded as chefs began to borrow and exchange ingredients and techniques across categories.
Rao and his co-researchers initially interviewed world-class classical and nouvelle chefs, food critics, culinary science experts, plus the much-feared inspectors of the Michelin Guide, whose awarding of stars to gastronomic establishments can make or break egos and careers. The researchers then assembled a database of all elite chefs in France during the period from 1970 to 1997 and asked two questions: How was borrowing possible when boundaries were ideologically charged and authenticity was important? What were the repercussions of breaching boundaries?
Rao explains the dynamic. “Most of the boundary breakers were high-status chefs, and when the high-status person begins to break out, others begin to imitate him. That’s how categorical boundaries weaken,” he says. Since authenticity means both conformity and originality, high-status chefs have more leeway than others and can be more original. They need not adhere to all the conventions of the genre all the time.
Rao and his co-researchers measured the degree to which chefs borrowed cooking approaches across categories and analyzed whether it led to an upgrade or a downgrade in the Michelin ratings of their restaurants. In this rigid categorical atmosphere, they found, the first chefs who broke out and began borrowing across disciplines frequently were penalized by the establishment—they were demoted in the Michelin Guide. However, this effect diminished over time as more and more chefs joined in the big swap. By the late 1980s, nearly every chef worth his or her salt was taking something from the rival camp—and the worlds of classical and nouvelle cuisine began to merge.
Critics, Rao says, whose opinions originally went a long way toward determining the fate of chefs who dared to mix classical sauces with nouvelle-inspired herbs, or fish with meat dishes, became mere observers as the categorical ground began to shift beneath their feet and new boundaries had to be drawn. “Innovation corresponds with the weakening of the power of critics over time,” Rao says.
Rao’s study has numerous implications for business. One is that there is a strong link between innovation and authenticity. Dewar’s found that out the hard way when it tried to gain new market share by positioning Scotch as a beverage that could be mixed into fruity drinks. “Scotch aficionados were outraged,” says Rao, and “Dewar’s had to backtrack.”
Another implication is that diversification should not be thought of purely in technological terms but also in terms of its cultural dimensions. In the late 1980s, when pharmaceutical companies in Germany wanted to branch into biotechnology, German anti-biotechnology activists issued an outcry about the dangers of genetic engineering. Amidst reminders of Nazi abuses in the area of eugenics, public pressure was so great that the large German pharma firms could not commercialize their biotech knowledge and expertise. It was an example, says Rao, of an industry failing to take cultural and ideological factors into account when contemplating diversification that straddled categorical boundaries.
A third implication is that innovation can dissolve existing boundaries. “Mutual fund managers are constantly coming up with new portfolio mixes such that they force critics such as Morningstar to create new categories,” Rao says. “They have a better opportunity to become best in class in a new category versus an old one.”
Finally, Rao says, the study suggests that “the early bird can get the worm—but can also be killed,” meaning serious negative financial and personal consequences can hit early boundary busters. “When categories are rigid, people may not understand what you’re doing when you cross them.”
In many cases, says Rao, categories sit on ideological fault lines. In the Italian wine industry, for example, a battle is ensuing between entrepreneurs who are turning winemaking into a chemistry business and those who want to retain the old, slower way of production that reflects an entire traditional way of life. “What managers need to realize is that a lot of times they’re operating in cultural space,” says Rao. “If they don’t come up with new ways of doing things that take this into account, their businesses can sometimes be hit hard.”