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On culture and innovation

Updated: Feb 25, 2021

Companies are creatures with a purpose. What purpose, depends partly on your point of view. A narrow definition would be to increase shareholders value. An expansive view will encompass whatever you throw in it. From stakeholders value to ESG to “creating a better everyday life for the many” (Hello IKEA). Having a purpose defined, and maybe a strategy for implementing it, all that’s left is the small matter of getting your employees to do their part. This is where your corporate culture steps in. For corporate culture is the degree by which employees and the company share a set of common beliefs, purpose and destiny. If it were physics, this quantity might have been called resistance. It is a measure of the employees identification with the company’s aim and pliability to evolving (management) demands. The stronger the cultural fit, the stronger the attachment of employees to the company and the happier employees become in doing the company’s biddings. This article's interest in corporate culture is limited to its link to innovation. I'll touch on three aspects: Collaboration, empowerment and openness.

On the face of it, convincing employees to toe the line is a fairly low barrier to traverse. After all, employees are being paid for their trouble. So on the low side of the scale are companies where the only sense of shared destiny is the paycheck in the end of the month and an incessant fear of dismissal. Call it “The Apprentice” corporate culture. Employees are viewed as an expandable commodity. In return, companies and their managers are vilified and relationships are a fixture of industrial disputes. In the west, at least, such cultures were mostly confined to history books until the advance of the gig economy.

On the other edge of the scale are companies that resemble cults. The employees devotion to the company verges on psychotic. There is often an admired charismatic founder who can do no evil. Company lore is a continual eulogy to the founders struggles, ingenuity and Delphic aphorisms. Call it the Willy Wonka corporate culture.

In between these two extremes lies everybody else. Companies that are neither vilified nor revered.

It should be noted that corporate culture might not survive through the entirety of the corporate operations. There are growing accounts of industrial apartheid with pampered white and virtual collar workers being showered with any form of corporate comfort and much bleaker realities across the industrial divide.

I'd say nobody believes that “The Apprentice” corporate culture is conducive to innovation. And on that account alone its adoption is strongly discouraged. Neither, for all its virtues, is a founders cult required. There are much simpler actions and processes the company can adopt to improve the company’s innovative culture.

The first element is a collaborative culture. Innovation thrives on collaboration. From serendipitous encounters to ideation workshops the quality of ideas and solutions tends to improve upon information exchange.

Starting from within the company. Silos in the company (The tendency to run business units like independent principalities) perhaps make sense from complexity perspectives but they impede innovation. This could be innocuous as competing initiatives developed simultaneously by different business units or more pernicious such as direct hostility and covert sabotage. Technically, collaboration can be easily achieved. There is no shortage of tools fomenting information sharing across dissipate disciplines, divisions and districts. Harder yet, is instilling a will to impart insight with outsiders. Short-termism and risk averseness are too deeply ingrained to be obviated by a single swoosh. Companies may apply a combination of measures to coax, cajole and coerce internal collaboration. From townhall meetings through trainings and compensation schemes that reward team work above individual contributions. A favorite of mine is appointing a departmental collaboration ambassador that facilitates extradepartmental cooperation. In support functions (HR, IT, Finance) this person also simplifies the reporting process required from innovation teams that, at times, can hinder progress.

Collaboration with parties outside of the company also promotes innovation. Specifically open innovation competitions, where a company invites external individuals and groups to help solve a particular challenge. Similarly collaboration across the value chain with suppliers and distributers will increase the success rates of the innovation.

The second element is empowerment. This comprises of three components: Recognition, ownership and skills. Employees are empowered when their contribution is acknowledged and rewarded. For example, there must always be feedback to ideas generated by employees, even when it is negative. More importantly management should learn to challenge assumptions rather than impose solutions. This is easier said than done. Managers are often selected for their self-advertised reputation as problem solvers. It does not mean that managers may never suggest solutions. They may, so long as they leave space for underlings to make proposals too. Equally they should encourage underlings to deliver bad news as soon as possible.

Power to make decision should be delegated to the lowest levels possible. This increases the sense of ownership, and besides, often yield better decisions. Ownership is also obtained when core business teams are involved in innovation projects. And, finally, companies should invest in the employees skills. Both of subject matter and of innovation methods.

The third element is openness. Openness to new technologies, ideas, people and beliefs. Diversity in the workforce increases the range of ideas produced. If only because it better reflects the market, diminishing blind spots. From technological perspective, a willingness to embrace technologies before they are mature tends to deliver dividends. Partly because the company has a chance to shape the technology and might also enjoy a first mover's advantage.

Another aspect is tolerance of failure, accepting that many initiatives, despite best intentions, are bound for the bin. Viewed historically, approximately 65% of innovation investments lose money. And of the remainder only a small percentage become a success. Instead of hiding failures, companies should accept them (embrace - might be going too far) and learn from them. One thing they should never do is continue sponsoring a dud in order to keep face.

Encompassing all of the above is accepting that all assumptions irrespective of their origin, from CEO to new hires, should be validated by experiments.

All these elements increase the employees attachment to the company, and with it their willingness to invest in its future. Besides other benefits (Did anyone mention a lower turnover?) this is manifested in improved innovation and better returns to shareholders, stakeholders and all other purposes the company seeks.

So how does your corporate culture fare?

Two9six consultants have a (free) tool to evaluate your business and innovation maturity based on the strategy, corporate culture and processes. This can be used to assess your current maturity level and identify the gaps toward bringing your company to the higher maturity level. Also by applying design thinking and blue ocean mindset we developed a comprehensive tool to better identify unaddressed needs of stakeholders – and specifically consumers.

Feel free to contact me about this article or any of the issues raised. I’d be happy to hear your opinion.

Read more of my articles on innovation here

(photo by Markus Spikse on Unspalsh)

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