Fostering a Culture of Innovation

Most business experts insist (and most corporate leaders believe) developing a culture of innovation is essential for long-term success. They also know successfully doing so is difficult because there exists a natural tension between organization (i.e., standardizing business processes) and innovation (i.e., disrupting business processes). The larger the company (i.e., the more rigid its organization) the more tension exists. That tension can’t (and shouldn’t) be eliminated; which begs the question: How do you foster a culture of innovation? Vijay Govindarajan (@vgovindarajan), the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business, believes companies, both large and small, need to innovate to thrive. “Some business pundits today believe innovation ignites better in startups than in large, established corporations,” he writes. “They believe big companies are weighed down by their own success, too invested in the past to create and execute new ideas. They say, ‘You can’t teach an old dog new tricks.’ I disagree. In fact, a lot of big companies have proven they are better positioned than emergent firms to create and execute innovation, however on-fire a startup may be.”[1] He goes on to write, “Startups do have one advantage over long-lived, big companies. They have no past — or at least, very little past. Past success can trap companies into believing what they have done is a blueprint for what they should do. In that sense, the pundits are right about big companies. But not every big business falls into this trap.” Fostering a culture of innovation is essential to avoid that trap.

Fostering Innovation in Large Companies

J.P. Eggers, an associate professor of management and organizations at the Stern School of Business at New York University, and Aseem Kaul, an assistant professor of strategic management and entrepreneurship at the Carlson School of Management at the University of Minnesota, agree with Govindarajan that big corporations often get a bad rap when it comes to innovation. “Conventional wisdom suggests that these firms are less likely to create path-breaking new technologies,” they explain. “Some argue this is because established firms are less likely to pursue radically new ideas — they get complacent or they don’t want to cannibalize their own success. Others claim that established firms may try to innovate, but are too set in their old ways to succeed.”[2] They argue complacency does play a role. They assert, “Firms are most likely to pursue path-breaking innovation when their technological performance has fallen below their expectations. A firm that’s outcompeting its rivals may see no need to try something radically new; one that’s falling behind may be eager to look for a big breakthrough, especially if its performance is just slightly below expectations, so a big new discovery could push it over the hump.”

Govindarajan believes large corporations are best fit for innovation because they “have the assets, resources, and capabilities necessary to fuel innovation.” Eggers and Kaul agree. “Attempts to develop path-breaking new technologies are most likely to succeed when undertaken from positions of existing strength,” they write. “Organizations tend to perform better when they have strong capabilities — better scientists and engineers, effective product development processes, and strong brand names — and these advantages are not only likely to persist over time, they are also likely to be helpful even when pursuing more radical inventions.” So why do so many large companies seem to struggle to be innovative? Justin Reynolds (@umxoxi) reports, “According to a recent study by Tech Pro Research, 92% of organizations understand the importance of innovation. But for a variety of reasons, a vast majority of them have been unable to truly integrate it into their company culture.”[3] He explains:

“At some organizations, employees may routinely come up with would-be fantastic ideas only to keep them in their heads for fear of being rejected or drawing the ire of their managers who perceive their workers to be stepping on their toes. If a company truly wants to be innovative, it must support innovation to the highest degree. Employees should be thoroughly encouraged to come up with new ideas as often as they can and share them with management. Build a culture that celebrates innovation, and employees will undoubtedly think outside the box more often than they otherwise would.”

John Bessant (@johnbessant), a professor of innovation and entrepreneurship at the University of Exeter, agrees that culture plays a huge role in making a company innovative. He writes, “Businesses then need to create an atmosphere where creativity is welcomed, by making people feel like they can deliver an idea, and that it’s safe to share their own and link up with others.”[4] Coming with ideas, however, is not the hardest part of being innovative. Bessant notes, “Innovation means creating value from ideas.” To do that, he explains, “You need a roadmap for the journey to creating value, and a strategy that lays out where and how innovation is going to help your organisation get to where it needs to be.” Even with a good roadmap, he observes, “If it’s a business idea, you have to convince a lot of people — such as investors, suppliers and, most importantly, customers and end users — that it’s a good idea and, ultimately, that they will be happy with it.” That takes organization and, as noted above, whenever innovation meets organization, there is tension. A good corporate culture finds a way to manage that tension in a positive way. Matt Kingdon (@mattkingdon), co-founder of ?WhatIf! Innovation, suggests a combination of inclusiveness and support is required. “Let people know they won’t be marked down for trying things out, that if they put their hand up they’ll be taken seriously, and that you’ll put resources behind good ideas,” he states. “Establish a process for harvesting ideas, prototyping and implementation.”[5] He adds, “Encourage people to explore alternatives. Make sure the need for change is understood, try to inject a sense of excitement and get people to ask themselves whether your products and services are good enough.”

Summary

As noted above, the secret to fostering a culture of innovation is creating a positive way to manage the tension between organization and innovation. Niccolo Machiavelli noted there will always be tension (maybe even outright hostility) between people who want to maintain the status quo and those looking to change the world. In his famous book The Prince, he wrote, “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may well under the new.” Create an environment in which both types of people can work amicably together and you will have mastered the cultural conundrum that keeps many businesses from being more innovative.

Footnotes
[1] Vijay Govindarajan, “Stop Saying Big Companies Can’t Innovate,” Harvard Business Review, 6 June 2016.
[2] J.P. Eggers and Aseem Kaul, “When Big Firms Are Most Likely to Innovate,” Harvard Business Review, 19 October 2016.
[3] Justin Reynolds, “What Kills Innovation at Work?TinyPulse, 21 February 2017.
[4] Hajra Rahim, “What is innovation and how can businesses foster it?The Telegraph, 4 May 2017.
[5] Alexander Garrett, “How to create a culture of innovation,” Management Today, 14 May 2017.

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