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Flevy Management Insights Q&A
How can companies foster a culture of innovation during a turnaround to ensure long-term sustainability?

This article provides a detailed response to: How can companies foster a culture of innovation during a turnaround to ensure long-term sustainability? For a comprehensive understanding of Turnaround, we also include relevant case studies for further reading and links to Turnaround best practice resources.

TLDR To ensure long-term sustainability during a turnaround, companies must commit to Leadership, Strategic Vision, create an Innovative Culture, and invest in People and Skills, aligning innovation with strategic objectives and fostering an environment that encourages creative thinking.

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Fostering a culture of innovation during a turnaround is crucial for ensuring an organization's long-term sustainability. This process involves strategic planning, leadership commitment, and the implementation of systems that encourage creative thinking and innovation at all levels. By focusing on innovation, organizations can not only navigate through immediate challenges but also lay the groundwork for future growth and success.

Leadership and Strategic Vision

Leaders play a pivotal role in fostering a culture of innovation, especially during a turnaround. They must articulate a clear strategic vision that places innovation at its core. According to McKinsey, organizations with leaders who prioritize innovation and communicate its importance effectively are 5.8 times more likely to achieve breakthrough performance. Leadership must also be willing to take calculated risks and encourage a mindset that views failures as learning opportunities. This involves creating an environment where employees feel safe to experiment and propose new ideas without fear of reprisal. Furthermore, leaders should exemplify the innovative behaviors they wish to see throughout the organization, acting as role models for change and creativity.

To effectively embed innovation into the organizational culture, leaders should also establish clear goals and metrics for innovation. This includes setting aside resources specifically for innovation projects, such as dedicated time, budget, and personnel. Performance management systems should be aligned to reward innovative thinking and the successful implementation of new ideas. By doing so, leadership can create a direct link between innovation activities and the organization’s strategic objectives, ensuring that innovation efforts are focused and driven by clear outcomes.

Real-world examples of leadership fostering innovation include Google and 3M, where employees are encouraged to spend a portion of their time on projects outside their regular responsibilities. This approach has led to the development of new products and services that have significantly contributed to the companies' growth and market leadership.

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Creating an Innovative Culture

An organization's culture plays a critical role in its ability to innovate, particularly during times of turnaround. A culture that promotes curiosity, openness, and collaboration is essential for innovation to flourish. According to a study by PwC, 85% of CEOs believe that an innovative culture is critical for achieving success in their industry. Organizations can foster such a culture by encouraging cross-functional teams, facilitating open communication, and breaking down silos that hinder the free flow of ideas. Encouraging diversity in teams not only in terms of demographics but also in terms of experience and thought processes can lead to more creative solutions to problems.

Moreover, organizations should implement processes and tools that support innovation. This includes adopting agile methodologies, leveraging digital technologies for collaboration, and creating innovation hubs or labs where new ideas can be rapidly prototyped and tested. Recognizing and celebrating successes, as well as learning from failures, can reinforce the value placed on innovation. Creating forums for sharing ideas, such as regular innovation challenges or hackathons, can also stimulate creativity and engagement among employees.

A notable example of creating an innovative culture can be seen in IBM’s Innovation Jam, a collaborative event that gathers ideas from employees, customers, and partners worldwide. This initiative has led to the development of new business opportunities and solutions that address complex societal challenges.

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Investing in People and Skills

For innovation to truly take root in an organization, especially during a turnaround, investing in the development of people and skills is paramount. This involves not only hiring individuals with diverse and innovative skill sets but also continuously developing the skills of existing employees. Training programs focused on creative thinking, problem-solving, and digital literacy can empower employees to contribute to innovation efforts. According to Deloitte, organizations that prioritize the development of digital skills among their workforce are more likely to achieve high performance in innovation.

Mentorship and coaching programs can also play a significant role in fostering innovation. By pairing less experienced employees with seasoned innovators, organizations can facilitate the transfer of knowledge and encourage the development of new ideas. Additionally, providing employees with access to external networks and industry experts can broaden their perspectives and inspire innovative thinking.

An example of investing in people and skills is Adobe’s Kickbox program, which provides employees with resources and mentorship to develop their innovative ideas. This program has not only generated numerous new product ideas but also significantly enhanced employee engagement and creativity across the organization.

In conclusion, fostering a culture of innovation during a turnaround requires a multifaceted approach that involves leadership commitment, strategic alignment, cultural transformation, and investment in people and skills. By taking these steps, organizations can ensure their long-term sustainability and position themselves for success in an ever-changing business landscape.

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Best Practices in Turnaround

Here are best practices relevant to Turnaround from the Flevy Marketplace. View all our Turnaround materials here.

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Explore all of our best practices in: Turnaround

Turnaround Case Studies

For a practical understanding of Turnaround, take a look at these case studies.

Operational Excellence Strategy for Regional Hospital in Healthcare

Scenario: A regional hospital is undergoing restructuring to address a 20% increase in patient wait times and a 15% decrease in patient satisfaction scores.

Read Full Case Study

Cloud Integration Strategy for IT Services Firm in North America

Scenario: A prominent IT services firm based in North America is at a crucial juncture requiring a strategic reorganization to address its stagnating growth and declining market share.

Read Full Case Study

Telecom Firm Reorganization for Market Leadership in Broadband Services

Scenario: The organization is a prominent broadband services provider in the telecom sector facing market saturation and increased competition.

Read Full Case Study

Restructuring for a Multi-Billion Dollar Technology Company

Scenario: A multinational technology company, with a diverse portfolio of products and services, is grappling with a bloated organizational structure and inefficiencies.

Read Full Case Study

Turnaround Strategy for Telecom Operator in Competitive Landscape

Scenario: The organization, a regional telecom operator, is facing declining market share and profitability in an increasingly saturated and competitive environment.

Read Full Case Study

Organizational Restructuring for a Global Technology Firm

Scenario: A global technology company has faced a period of rapid growth and expansion over the past five years, now employing tens of thousands of people across multiple continents.

Read Full Case Study

Explore all Flevy Management Case Studies

Related Questions

Here are our additional questions you may be interested in.

How is the rise of remote and hybrid work models impacting reorganization strategies?
The rise of remote and hybrid work models is reshaping reorganization strategies, necessitating changes in Organizational Structures, Talent Management, and Operational Efficiency and Innovation, guided by insights from leading consulting firms and market research. [Read full explanation]
In what ways can artificial intelligence and machine learning be leveraged to streamline the reorganization process?
AI and ML can revolutionize business reorganization by enhancing decision-making with predictive analytics, streamlining processes through automation, and facilitating employee engagement and change management, thereby making reorganizations more efficient, data-driven, and adaptable. [Read full explanation]
What impact do emerging technologies like AI and blockchain have on the efficiency and effectiveness of turnaround strategies?
Emerging technologies such as AI and Blockchain significantly enhance Turnaround Strategies by improving efficiency, effectiveness, and stakeholder trust, fundamentally changing corporate restructuring. [Read full explanation]
What are the implications of blockchain technology on organizational structure and reorganization efforts?
Blockchain technology promotes Decentralization, enhances Collaboration and Innovation, and improves Risk Management and Compliance, driving organizations towards flatter, more agile structures and necessitating new skills and roles. [Read full explanation]
How do you measure the success of a turnaround strategy, and what key performance indicators (KPIs) should companies focus on?
Success of a turnaround strategy is gauged through Financial, Operational, and Market-Driven KPIs like Revenue Growth, Profit Margins, Cash Flow, Inventory Turnover, Customer Satisfaction, and Market Share, aligning with strategic goals for sustainable growth. [Read full explanation]
How can companies ensure that reorganization efforts align with long-term sustainability goals?
Discover how Strategic Planning, Change Management, and Culture ensure reorganization aligns with Sustainability Goals, boosting resilience and competitiveness. [Read full explanation]

Source: Executive Q&A: Turnaround Questions, Flevy Management Insights, 2024

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