3 Drivers for Implementing an Innovation Culture

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Achieving the status of the Most Innovative Company of the Year is what most businesses aspire to.

Innovation-centric research by Boston Consulting Group (BCG) in 2014—comprising of over 750 businesses in 17 different markets—brought to light some striking insights, in addition to rating the most innovative companies of the year.

The organizations that grabbed top places in the Innovation ranking were clearly managing Innovation in a systematic manner.  The study implied culture as an important driver of breakthrough Innovation.  Organizational Culture was regarded as more significant than other crucial influencers of Innovation, e.g., people, financial resources, state, and even societal values and beliefs.

Organizational Culture is a shared regulatory system that encourages a specific set of actions.  Experimentation and consistent evolution (adaptation) were found to be the forte of the Organizational Culture of most Innovative companies.

An adaptable culture motivates behaviors that are integral to stimulate Innovation, e.g., ability to take initiatives and risks, ingenuity, prompt and sound judgments.

When developing a culture of Innovation, exploration and experimentation, organizations are bound to face some challenges, which include:

• Most companies have an emphasis on producing quality, bringing efficiency, and minimizing costs. These firms become susceptible to making too low an investment in exploration, essential to manage uncertainty, experimentation, learn from errors, and Innovation.
• Organizations reward certain shared values and actions that constitute their culture. They typically choose between 2 types of cultures that are strikingly opposite to each other:
  • A culture of exploitation, efficiency and predictability—embraced by large enterprises—marked by job excellence, team loyalty, teams of dependable people, and perfection.
  • A culture of exploration, variance, and uncertainty—embraced by startups—denoted by dreams, breaking rules, errors, and persistence based on learning from mistakes.
• Adopting either of these cultures would not cut it for organizations. Successful companies make use of both cultures, which isn’t easy to execute and sustain.

Business Transformation from exploitation to experimentation warrants embracing unique Business Models, trial and error, and iterations.  The integration of exploitative culture with an explorative culture necessitates the following obligations from the enterprise:

• Allow people to spend some time on explorative projects alongside their routines to incubate and develop ideas.
• Assign dedicated resources and establish an encouraging atmosphere.
• Sharing of skills, knowledge and ideas necessary to curb silos and create synergies.

“Soft” or people related challenges due to human nature create hurdles in developing an Innovation Culture.  Such as:

• People resist something they have not experienced or contemplated before.
• Domain experts repel ideas or ways that challenge their existing approaches.
• People prefer near term over long term and solutions over thinking and analyzing.
• People detest ambiguities and change.

The results of BCG’s research on most innovative companies of the year 2014 indicated that Disruptive Innovators blend together 3 drivers vital for radical Innovation.

1. Management
2. Governance
3. Organization

Let’s dive deeper into the details of the first 2 drivers of Innovation.

Management

• Senior Management is the foremost driver of Innovation. Uncompromising commitment from the management is crucial to embed Innovation at the center of an Organizational Culture.
• It is the management’s approval of revolutionary Innovation initiatives that enables an organization to achieve breakthrough Innovation and growth.
• BCG study underscored the key role that Management plays in monitoring radical Innovation initiatives through strategic KPIs; devising efficient performance management, rewards and recognition systems; and linking those systems with disruptive Innovation KPIs.

Governance

• Top Innovators were found to be clearly segregating Innovation projects based on the level of innovativeness (low or high).
• They were observed to employ distinct procedures to manage revolutionary and incremental Innovation projects.

Interested in learning more about the and how to communicate them across the organization? You can download an editable PowerPoint presentation on the Drivers & Challenges of Innovation Culture here on the Flevy documents marketplace.

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To be competitive and sustain growth, we need to constantly develop new products, services, processes, technologies, and business models. In other words, we need to constantly innovate.

Ironically, the more we grow, the harder it becomes to innovate. Large organizations tend to be far better executors than they are innovators. To effectively manage the Innovation process, we need to master both the art and science of Innovation. Only then can we leverage Innovation as a Competitive Advantage, instead of viewing Innovation as a potential disruptive threat.

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