Want to Innovate? Focus on Corporate Culture.

Stephen DeAngelis

September 13, 2019

In years past, articles about innovation primarily focused on techniques to help people unleash their creativity and/or how to put together innovation teams. More recently, I’ve been reading articles about the importance of having a culture of innovation that permeates an entire organization. Kumar Mehta (@mehtakumar), founder of Bridges Insight, asks, “Does your corporate culture support or hinder innovation?”[1] He adds, “Most companies have no idea. Worse yet, many companies who invest in innovation often face a scarier problem: they believe the investments they are making — such as increasing R&D budgets or creating an innovation department or appointing an innovation czar — are helping them create an environment to stimulate innovation. In fact, the reality is the opposite. You won’t generate breakthroughs by creating an innovation department. Innovation will only happen when you mobilize the creative power of your entire organization.”

According to Stephanie Denning (@stephdenning), “Culture is the invisible stitching of a company often credited for its success.”[2] She wonders, however, if culture is, in fact, a differentiator when it comes to innovation. She asks, “If culture is the primary differentiator, what happened to organizations that once succeeded and have since failed?” She cites an article by physicist and entrepreneur Safi Bahcall in which he asserts, “Organizations grow [until] they hit a cultural tipping point, a point at which preferences and behaviors shift from pursuing company-wide innovation to pursuing personal career advancement.” According to Bahcall, “When employees feel they have more to gain from the group’s collective output, that’s where they invest their energy. When they feel their greatest rewards come from moving up the corporate ladder, they stop taking chances on risky new ideas whose failure could harm their careers.” Such a shift in employees’ perspective changes the corporate culture. The goal should be to keep employee focus on the importance of the group’s collective output. The question remains: Can that objective be achieved?

Creating a culture of innovation

Culture is a pretty subjective and ill-defined term. Sandra Lim explains, “Corporate culture refers to the beliefs and behaviors that determine how a company’s employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires. A company’s culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction, and every other aspect of operations.”[3] In other words, creating an innovative environment is only part of what makes up corporate culture. Nevertheless, like Mehta, Abbey Lewis, Senior Product Manager at Harvard Business Publishing, asserts, “Organizations need to make innovation part of the fabric of their organizational culture.”[4]

Corporate culture can change as the people in the corporation change. Lewis argues companies can become more innovative by helping employees learn skills that promote corporate innovation. She explains, “While organizations recognize the importance of fostering innovation, few understand how to take the first step. … In today’s business environment, leaders are defining innovation as profoundly disruptive — the next big thing. However, not all innovation sparks from a significant transformation or a ground-breaking discovery. In fact, organizations who wait for a grand innovation may find themselves a step behind while competitors rise to the top. … With the right skills and capabilities, innovation can be driven from anywhere and by anyone within an organization. An innovation mindset inspires new thinking and supports ideas that are engaging and empowering — from the top down or the bottom up.” Lewis suggest there are four key skills that foster organizational innovation. Those skills are: curiosity, creativity, risk-taking, and collaboration.

Curiosity. Lewis writes, “It’s critical that employees have the opportunity to explore their curiosity and uncover new ideas that surprise and impassion them. Many organizations perceive curiosity as a detour around efficiency. However, curiosity allows employees to evaluate ideas that interest them, which may lead to new opportunities for the organization. It is important to allow time for this exploration, without fear of being penalized.” Albert Einstein once wrote, “Curiosity has its own reason for existence.” Most innovation gurus will tell you that innovative people are curious people. Curious people ask a lot of “why” questions and then try to find out the answers to those questions.

Creativity. According to Lewis, “Creative ideas build the foundation for innovation. Everyone has creative capacities that can be developed, so yes, creativity can be taught. Creativity exudes from employees when they are prompted to turn something they are curious about into an actual idea worth pursuing.”

Risk-taking. Lewis asserts, “Leaders should encourage risk-taking on the strongest ideas and tolerate exploration within reason.” I once read an article that included the story of Matt Buckley, an employee at Southwest Airlines. As I recall, Buckley recommended that the company expand into the maritime transportation industry. His recommendation was followed and the company lost millions of dollars. Instead of firing Buckley, the company praised him for his initiative. I believe the article went on to state that any out of the box idea presented by a Southwest employee was for a while (and may still be) called a “Matt Buckley.” IBM legend Thomas J. Watson once faced a situation in which an employee’s mistake cost the company ten million dollars. When the man was summoned into Watson’s office, he was asked if he knew why he was there. The man said that he expected that he was going to get fired. “Fire you?” Watson exclaimed. “I spent $10 million educating you. I just want to be sure you learned the right lessons.” That’s encouraging risk-taking!

Collaboration. According to Lewis, “Executing on innovation requires diverse talent, skill sets and ideation. Employees cannot work in a vacuum to drive organizational innovation. Instead, they must collaborate with a team — more importantly, a diverse team — who can bring unique perspectives as well as uncover any gaps and easily fill them.” In his very interesting book The Medici Effect: Breakthrough Insights at the Intersection of Ideas, Concepts, and Cultures, Frans Johansson talks about the value of creating a space in which people from diverse fields of expertise can get together to exchange ideas. The Medici’s were a wealthy and powerful Italian family who played an important role in the Renaissance. The family’s wealth permitted it to support artists, philosophers, theologians, and scientists, whose combined intellect helped burst the historical pall known as the Dark Ages. Collaboration is indeed a powerful tool.

Concluding thoughts

Mehta insists companies primed to innovate have a workforce that exhibits the following five qualities:

1. They believe innovation is core to the mission of the company.
2. They believe they are empowered to innovate.
3. There is a mindset of continual improvement in every area.
4. There is a system in place to support innovation. This means that if someone has an idea, they know what they need to do to test it or put it to work.
5. There is a desire to build meaningful products that provide value to society, as opposed to releasing products simply to make money.

He believes, “Few companies exhibit all five traits, and even the most innovative companies in the world exhibit them only for certain periods of time.” An innovative culture requires the right people, in the right environment, with right support. Denning concludes, “Too many organizations take their culture for granted in the early stages of the company without strategically thinking through what measures to put into place to maintain that culture. Some may even think it unnecessary or expensive. But culture is too ‘squishy’ to scale on its own. Structure is ironically what allows a culture scale. Longevity of a company is determined by the quality of the cultural stitching.”

Footnotes
[1] Kumar Mehta, “Is Your Company Primed For Innovation?Forbes, 12 August 2019.
[2] Stephanie Denning, “Cultural Tipping Points: Why Companies Lose Their Innovation Edge,” Forbes, 10 March 2019.
[3] Sandra Lim, “Corporate Culture,” Investopedia, 7 May 2019.
[4] Abbey Lewis, “Four Skills for Fostering a Culture of Innovation,” HR Technologist, 12 August 2019.