J by Soren Kaplan & Derrick Palmer, Managing Principals, InnovationPoint ust about every organization wants to be more innovative. But organizations define
“innovation” differently. Some see it as introducing new products, while others measure innovation success in terms of new services, customer experiences, business models or internal practices.
And while some organizations are widely revered as
“innovative” (everybody wants to know the secrets of Apple, Google and other high fliers), most seem to continually struggle to find their stride.
All companies, whether they are successful with innovation or not, have one thing in common: they have their own
“personalities”, their own particular organizational culture
– the shared experiences, values, norms, assumptions and beliefs that shape individual and group behavior, and that (for better or for worse) ultimately impact their success.
Most leaders recognize the important role of culture in business success. Accordingly, there are many popular interventions for shaping culture: training programs that help galvanize new employees around vision, mission and values statements; leadership development programs that provide high potential managers with tools for becoming “better leaders”; and change management initiatives focused on new processes, structures and programs that increase organizational effectiveness.
Over the past few years, there has been widespread recognition that innovation is also critical for business success. However, few organizations have been able to understand the explicit linkage between culture and innovation, or to create strategies for reshaping culture in a way that enables corporate growth through innovation
– or drives innovative thinking and behavior at the individual level.
Senior executives often ask us: “How can I build a culture of innovation?” Before we respond, we ask:
“Why do you want to have an innovative culture”?
As we peel back the onion, the answer we eventually get to is: “So we can drive long-term, profitable growth.” We typically conclude that growth is the goal , and an innovative culture is a critical enabler
– a means to the end .
So, as we respond to the question of “How can I build a culture of innovation?
” we then talk about the several dimensions of the puzzle, the “levers”, that must be viewed (and tweaked) holistically.
“Culture” is a “soft and fuzzy” concept that many people consider mysterious and impossible to actually grapple with. But by looking at the set of strategic “levers” that influence culture we can start to get a grip on it, and to see how we can shape it.
The following model shows that culture is shaped by the ongoing interplay between several variables, each of which may enable or inhibit innovation.
External Environment
Strategy &
Business
Model
Leadership
Enabling
Technology
Processes
Metrics,
Incentives,
Rewards,
Recognition
People
Structures
Culture
Results/
Performance
These variables are:

The External Environment
– The emerging trends (e.g., demographic, social, competitive, industry, customer/consumer, technology, environmental, regulatory, and many others) that influence the organization and the world in which it will operate in the future
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
Strategy and Business Model
– The organiza tion’s explicit (or implicit) functional design, and strategies for competing and growing given the external environment

Leadership – How the organization’s leaders influence strategic direction and day-to-day operations, both through their explicit decisions and their more subtle behaviors

Processes
–
How strategies are executed and how work is accomplished through day-to-day practices and interactions, both internally- and externally-focused. This can be very broad, and includes: the ways the company interacts with its customers/ consumers; the ways various internal functions/departments interact relative to innovation; the ways information is shared; the ways employees contribute new ideas; the ways ideas are prioritized, tested, developed, killed off, and implemented

Structures – The formal/informal organizing principles and functional designs (both internal and external) that enable (or inhibit) collaboration and guide employee behavior

People
–
The skillsets and mindsets of individuals who work together, including employees, external partners and suppliers, etc. This has implications for hiring and training

Metrics, Incentives, Recognition & Rewards
– The formal and informal measures that drive the kinds of innovation-related behaviors an organization wants to see from individuals, teams and departments. An unhealthy tension often exists between longer-term corporate aspirations and short-term metrics

Enabling Technology
–
Capabilities and tools
(e.g., internet-based collaboration/ communications tools, idea management or idea competition applications, etc.), that allow employees (and external partners) to connect, share knowledge, and innovate
The external environment influences an organization’s overall strategy – as well as its culture and the performance/results it achieves.
While managing external forces is challenging if not impossible, the way an organization chooses to set up its strategy and business model should ideally take into account the external influences that represent opportunities and threats. Once strategy and business model are defined, the internal, organizational requirements for the appropriate execution can then be put in place
(i.e., strategy must precede structure). Both culture and business performance result directly from the degree of alignment between the strategy and the way the organization has currently set up its “levers”. While this model may appear static, managing the levers is actually a very dynamic process that requires ongoing attention.
It is by managing these levers that an organization has the ability to influence its culture and to impact its ability to innovate.
Leadership should ensure that both strategic and tactical decisions around these levers align to (or at least don’t undermine) the organization’s specific growth and innovation goals. Creating new change efforts that impact any of the dimensions of the model can make a significant difference to the organization’s culture and its ability to innovate.
This model of the strategic levers of innovation culture change provides a holistic framework for taking action. But shaping culture, especially when it comes to creating a culture of innovation, is also a daily task that continually involves looking at the affect of the mundane on strategic issues.
A common metaphor for culture is the iceberg.
Icebergs float on top of the water and are visible to the eye, but beneath the surface they may extend hundreds of feet and can be significantly larger than what’s visible above water. As a metaphor for organizational culture, the part of the iceberg above the surface is the visible culture, including such things as the stated vision, mission and values, organizational charts, policies and procedures, and formal processes.
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As we look beneath the surface, however, we find clues as to
“the way we do things around here” – norms, unwritten rules, shared assumptions, taken for granted beliefs, process workarounds and so on
. What’s above the surface isn’t always consistent with what’s below. Often, it’s what’s beneath the surface that really supports or inhibits organizational culture and the ability to innovate.
The behavior of leadership is arguably the single most important factor in driving culture change.
Culture is influenced by just about everything that a senior leader does. From major organizational structure redesigns to minor
“passing comments” that convey a leader’s subtle personality and value judgments, culture is dynamically expressed, created and re-created every moment of every day.
While it is true that “leadership starts at the top”, it is certainly a shared responsibility. To succeed in the long term, organizations must foster the right kinds of innovation-focused skillsets and mindsets not just among the most senior executives, but also with leaders (and future leaders) at various levels throughout the organization. In fact, there is often a frustrating disconnect in which executive leadership is indeed “walking the talk” of innovation, while mid-level leaders are too focused on their day-to-day activities to spend any time on
“innovation”.
By developing specific innovation-focused behaviors
– behaviors targeted at addressing the
“below the surface” aspects of culture – leaders can affect change in many ways. For example, they can begin to shift the organization away from a CYA mentality/risk aversion toward
“smart risk taking; away from an insular “Not Invented Here” attitude toward an open-minded curiosity and willingness to look beyond their usual four walls to embrace an
“Open Innovation” approach.
To foster sustainable innovation, today’s leaders must take a proactive role in fostering an organizational culture by pulling the levers that enable innovation.
Using the innovation culture change model as a basis, three complementary strategies can be combined to foster a culture of innovation:
Envisioning, Communicating and Sponsoring.
Collectively, these strategies tap into both the formal levers as well as into the mundane, less visible activities that shift innovation culture.
Envisioning
Communicating
Sponsoring
Envisioning: Envisioning involves defining a vision of the ideal future state for the organization that is creative, unique, compelling and worthwhile. This future state includes the traditional “corporate vision statement” but also ensures that the business vision is noble, high impact and describes the unique long-term difference the company can make for its customers, the community and the world. But
“Envisioning” is not just about creating a vision for the business. Leadership must also outline a vision for the role of innovation itself. This includes: a statement about why innovation is important to the organization; a definition of
“innovation”; what is expected of the employees as contributors themselves; the specific commitments that leadership will make to drive innovation; and metrics for measuring innovation successes.
Communicating: Communicating for culture change goes beyond traditional “corporate communications.” While formal communications certainly play a key role in driving culture change, fostering a culture of innovation means also becoming attuned to the informal communications.
Leaders can begin by first gaining sensitivity to the informal communications that exist within their organization.
To assess the true nature of the organizational culture it is essential to gain an understanding of the stories, folklore, symbols and rituals that implicitly direct employees, partners and even customers. This includes such taboo topics as:
“the way we do things around here”, “what the company actually values
”, and “what leadership says vs. what they really mean.
”
For better or for worse, some of these stories, folklore, symbols and rituals may be very powerful.
Some will help foster a culture of innovation
– while in other cases these messages and assumptions may be very restrictive, with a very powerful grip,
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and may severely limit employ ees’ ability to step up and move beyond them.
Once the existing informal communications are understood, it becomes possible to identify opportunities for reinforcing positive messages and overcoming those that impede innovation. This includes demonstrating new behaviors, and creating new stories, symbols and rituals that establish a fresh dialog, and that promote values, norms and assumptions more consistent with a culture of innovation. For example, one company interested in addressing a serious deficiency in risktaking established a “Golden Turkey Award” that was given quarterly, with a light-hearted yet serious spirit, to the individual or team with the greatest “innovation failure.” Given publicly by the
CEO, the award became a symbol of the importance of embracing risk and proactively learning from failure as an essential part of the innovation process.
Sponsoring: Sponsoring a culture of innovation means taking specific, tangible, and visible actions using any (or all) of the strategic levers for innovation culture change. The depth and breadth of this set of actions will vary, depending on the organization’s situation.
When leadership visibly sponsors an initiative focused on supporting innovation (such as holding an innovation offsite, or investing in idea generation software), this sends a strong message.
It can establish positive, new stories that create energy, enthusiasm and optimism throughout the organization. The bad news is that if the commitment is not 100%, if the supporting systems have not been developed, or if follow-through is lacking, things fall flat, which causes employee disillusionment and a credibility issue. The bottom line: d on’t sponsor innovation unless you are really committed and fully prepared to see it through.
The first step is to conduct a candid assessment
– based on the innovation culture model – to understand where the organization is doing well in its innovation efforts; to identify the enablers/ inhibitors of innovation; and to capture some stories of the organization’s innovation “successes” and “failures”. This assessment is conducted through interviews with a broad set of key stakeholders/leaders from different functions, businesses, etc., and may also include key customers/partners. Sometimes these interviews may be supplemented with an online survey that engages employees across the organization.
The interview data is used to craft a set of preliminary recommendations on which levers should be pulled – and how – to deliver the most impact. For many organizations, the most critical levers are Leadership, Structure, Processes and
Metrics. For example, a recommendation might be to set up a new, formal organizational structure
(e.g., create an Innovation Council to support enterprise-wide strategic innovation; or establish a fund for small, accountable incubator teams to pursue promising new ideas). Another recommendation might be to develop a cohesive program of innovation metrics, incentives, recognition and rewards to help foster smart risktaking and to drive a healthier balance between short- and longer-term corporate goals, or to motivate employees to actively and frequently contribute innovative ideas.
Each set of recommendations is accompanied by a simple Roadmap that includes: actions, milestones, roles/responsibilities, high-level resources, success metrics, next steps, etc.
By examining and pulling the strategic levers of innovation culture change, and by practicing the strategies of envisioning, communicating and sponsoring, it is possible to foster a culture of innovation that will drive long-term, profitable growth.
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InnovationPoint is a non-traditional consulting firm that helps its Fortune 1000 clients take a strategic approach to innovation. InnovationPoint blends traditional and unconventional methodologies to identify breakthrough opportunities, develop growth strategies and consumer-inspired new products, and to align organizational strategy and design in a way that supports sustainable innovation. Clients include: PepsiCo, Frito-Lay, Dean Foods,
Kimberly-Clark, Cisco, Agilent, Hewlett-Packard,
Colgate-Palmolive, Hill's Pet Nutrition, Schwab,
Visa, JP Morgan/Chase, Mayo Clinic, Alegent
Health, Kaiser, Medtronic, Hoffmann-LaRoche
(Switzerland), Philips (Netherlands).
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