Innovation

 

Corporate Culture

Creating a Culture for Innovation

Driving Innovation through Strategic Changes to Organizational Culture

 

Soren Kaplan

White Paper by

Soren Kaplan

Managing Principal

InnovationPoint

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. InnovationPoint’s clients include Hewlett-Packard, Kimberly-Clark, PepsiCo, Frito-Lay, Philips, Dial Corporation, Charles Schwab, Microsoft, Yahoo!, Alegent Health, Visa, Chase, Genentech, and SK Telecom (South Korea).

 

 

Just 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 or business models. And while some organizations are widely revered for their innovation capabilities, others seem to struggle continually to find their stride.

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What all of these companies have in common, whether successful with innovation or not, is organizational culture – the shared experiences, values, norms, assumptions and beliefs that shape individual and group behavior. Every organization has a culture; the issue is whether and how that culture inhibits or supports innovation.

Today most leaders recognize that “culture” plays an important role in an organization’s ultimate success. Accordingly, there are many popular strategies for shaping culture: training programs convey vision and values statements to help assimilate new employees; leadership development programs provide managers with tools for becoming “better leaders”; and change management initiatives help drive new structures and programs designed to increase organizational effectiveness.

Virtually all companies recognize intellectually that innovation and culture are both important to success. Yet few have explicitly defined strategies for linking and influencing culture and innovation to achieve specific business goals. Most companies have default innovation cultures in which various values, norms, assumptions and beliefs all compete for influence over employees’ actual behavior. The dominant ones that win out ultimately shape the culture.

The question for leaders today isn’t if culture is important for success but how culture can drive successful innovation – and what, specifically, leaders can do to influence the kind of culture that leads to behavior that’s truly innovative.

The Strategic Levers of Culture

One of the challenges in defining strategies for shaping culture is that culture is influenced by just about everything a leader does. From major organizational structure redesigns to “passing comments” that convey subtle value judgments, culture is dynamically created and re-created every moment of every day. Understanding the broad strategic levers that influence culture is usually the best starting point.

By viewing culture as the result of various explicit and implicit decisions, actions and events that have transpired over time, it becomes possible to identify the factors that shape and drive culture. The following model suggests that culture results from the ongoing interplay between several variables including:

  • The external environmentemerging trends, competition, customer, technology, environmental, regulatory and other factors that influence the organization from the outsideBusiness ModelInnovation MetricsOrganization and PeopleLeading InnovationBusiness ProcessesIncentive MotivationEnterprise StrategyCorporate CultureFactors that Shape Corporate Culture

  • Strategy and business model – the organization’s explicit (or implicit) strategies for competing and growing within the external environment

  • Leadership – how the organization’s leaders influence strategic direction and day-to-day operations

  • Processes – how strategies are executed and how work is accomplished through day-to-day practices and interactions

  • Structures – the formal (and informal) organizing principles that enable (or inhibit) collaboration and guide behavior

  • People – the skill sets and mindsets of individuals that work together to achieve common goals, including employees, partners, suppliers, etc.

  • Metrics & Incentives – the formal (and informal) measures that drive the behavior of individuals, teams and departments

  • Technology – Capabilities that provide the basis for providing and delivery value

 

The external environment influences an organization's overall strategy – as well as its culture and the results it achieves. While managing external forces is challenging if not impossible, an organization’s strategy and business model should ideally take into account these external influences that represent opportunities and threats. Once strategy is defined, the internal, organizational requirements for the appropriate execution can then be put in place (i.e., strategy must drive structure). Both culture and business performance result directly from the degree of alignment between the strategy and the organizational requirements. While this model may appear static, managing the levers is a dynamic process that requires ongoing attention.

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 strategic initiatives around organizational design and structure, innovation processes, innovation metrics, and other levers can make a significant difference in shaping the culture, and there are many practical approaches for manipulating each lever.

Managing the Mundane

This model of the strategic levers for driving innovation provides a holistic framework for taking action. But shaping culture, especially when it comes to creating a culture of innovation, is a daily task that involves elevating the mundane to the strategic.

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Strategic Alignment Chalennging Assumptions Shared Values Business Processes The Iceberg of Corporate CultureA 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.

As we look beneath the surface, however, we find clues as to “the way things are really done 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. It’s what’s beneath the surface that really supports or inhibits organizational culture and the ability to innovate.

Leadership behavior is arguably the single most important factor in driving culture. Leadership is certainly a shared responsibility – not simply the role of a single senior executive. While Apple’s Steve Jobs is an example of a visionary, innovative individual who possesses inherent traits that inspire, motivate and create new value on an ongoing basis, it would be a poor strategy to pin an organization’s hopes of success on having such a person at the helm. To succeed in the long term companies must foster the right kinds of innovation-focused skills with leaders who operate at various levels in the organization.

By developing specific innovation-focused behaviors – behaviors targeted at addressing the “below the surface” roots of culture – it becomes possible to shift an organizational culture away from risk aversion and toward risk taking, away from insular thinking and toward external exploration, and away from a “not invented here” attitude and toward one of “open innovation”.SMART INNOVATION (Ten3 Mini-course)

To foster sustainable innovation, today’s leaders must take a proactive role in crafting an organizational culture that supports the kinds of behaviors that help achieve their long-term innovation objectives. Three specific strategies can be used for creating a culture of innovation: Envisioning, Communicating and Sponsoring.

Strategic Intent Collectively, these strategies support both the strategic levers of culture as well as the more mundane and subtle sources of organizational culture.

Envisioning: Envisioning involves creating a vision of ideal future state that is creative, compelling and meaningful. This future state includes the traditional “vision statement” but ensures that the business vision is high impact and describes the unique long-term difference the company can make for its customers, the community and the world. But envisioning doesn’t stop with envisioning the business. Leadership must also outline a vision for innovation itself – a vision that describes the importance of innovation to the organization in achieving its business vision. In most cases, innovation will be a critical success factor for achieving the business vision, and this relationship should be clearly articulated as a rallying cry.

Communicating: Communicating for culture change goes beyond traditional “corporate communications.” While formal communications can certainly serve a role in driving culture change, creating a culture of innovation means becoming attuned to informal communications. Leaders can begin by first gaining sensitivity to the existing informal communications within their organizations. An understanding of the stories, folklore, symbols and rituals that implicitly direct employees, partners and even customers about “the right way”, “how things really work” and “what’s really valued” is essential for assessing the true nature of one’s organizational culture. Some of these will foster a culture of innovation while others may limit people’s ability to move beyond these restrictive messages and assumptions.

 

Once existing informal communications are understood, it becomes possible to identify opportunities for reinforcing positive messages and overcoming those that impede innovation. This includes 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 risk taking 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 accepting and proactively learning from failure as an essential element of the innovation process.

Sponsoring: Sponsoring a culture of innovation means taking specific and tangible actions in any or all of the strategic levers for culture change. The depth and breadth of this set of actions will vary by company, depending on the situation. While some companies are in dire need of a formal organizational structure to support strategic innovation, others may need to develop a more holistic set of innovation metrics to help create a better balance between short- and longer-term goals, and to influence how employees focus their efforts on meeting those goals.

The first step is to understand where the greatest deficiencies lie, and which levers will deliver the most impact. For many organizations, the most critical levers to assess initially include structure and metrics, though establishing innovation processes and providing employees with new skill sets are also critical drivers of culture. The act of visibly sponsoring (let alone personally driving) specific initiatives focused on creating new organizational capabilities that promote innovation serves to send a message and establish new symbols and stories that reinforce a culture of innovation.

Culture & Strategic Differentiation

As more and more companies recognize the power of culture in driving innovation, new practices are emerging that accelerate the culture change process. Companies that use technology to communicate the importance of innovation, gather ideas and share results can achieve in days what used to take months. By managing the strategic levers of culture, and by practicing the strategies of envisioning, communicating and sponsoring, it becomes possible to create a culture of innovation and drive long-term strategic advantage.

 

 

 

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