Characteristics of an Innovative Culture

7/29/2019 Characteristics of an Innovative Culture

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Human Capital StrategieHuman Capital Strategiess

CharacteristicsofanInnovativeCulture

In todays fastpacedbusiness environment, innovation is a

prerequisite for success and perhaps even for survival.

Thatswhy innovation has found itsway to the top of the

agenda at organizations around theworld.Once considered

primarily an output ofR&D labs, innovationhasbecome a

corporate priority that touches every facet of and, indeed,

everyemployee

in

an

organization.

HHumanuman RResourceesource IInstitutenstitute5959 Central Avenue

Suite 201St. Petersburg, FL 33710

727.345.2226www.HRInstitute.org

Issue No. 292March 2006


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Introduction

Intodaysfastpacedbusinessenvironment,innovationisaprerequisiteforsuccessandperhapseven

forsurvival.Thatswhyinnovationhasfounditswaytothetopoftheagendaatorganizationsaround

theworld.OnceconsideredprimarilyanoutputofR&Dlabs,innovationhasbecomeacorporatepri

ority that touchesevery facetofand, indeed,everyemployee inanorganization.Externalconstituents, too

customers,academia, thegovernment,vendors,evencompetitorsareplayingagrowingrole incompanies

creativeprocesses.

TheAMA/HRIInnovationSurvey2005foundthatmorethantwothirdsofthe1,356globalrespondentscon

sideredinnovationeitherextremelyimportantorhighlyimportanttotheirorganizationstoday.Yet,those

impressivenumbersseemmodestwhencomparedwithrespondentspredictionsaboutthefuture.Abouthalf

ofrespondentsthinkinnovationwillbeextremelyimportanttotheirorganizationsin10years,and35%sayit

willbehighlyimportant.

TheAMA/HRI survey,combinedwith16 indepth interviewsandanextensive literature review,clearly

showsthataninnovativeculturehasvariouscharacteristics.Theabilitytofocusoncustomersisviewedasthe

toprankedfactorfordevelopinganinnovativeculture,accordingtothesurvey.Thisisnosurprise,giventhat

othersectionsofthesurveyshowthatcustomersarethenumberonedriversofbusinessinnovation.

Buttheinnovationliteratureshowsthatafocusoncustomersalonedoesnotguaranteethataculturewill

beinnovative.Currentcustomersmaynotseethepossibilitiesofmajortechnologicalparadigmshiftsandmay

havefewinsightsintohowcompaniescanexpandintonewmarketswithaverydifferentsetofcustomers.

So, organizations also need to have enough resources, teamwork, communication, autonomy and other

qualitiestoallowinnovationstoflourish.Thetablebelowillustratesarangeofinfluencesrankedaccordingto

theimportancethattheAMA/HRIrespondentsassignedtothem.Inthispaper,weexaminetherolethatmany

ofthesefactorsandsomeadditionalonesthatshowupstronglyintheliteraturereviewprocessplayinshap

inginnovationfriendlyorganizationalcultures.

Factors TodayIn TenYears

Customer focus 1 1

Teamwork/collaboration with others 2 2

Appropriate resources (time and money) 3 6

Organizational communication 4 3

Ability to select right ideas for research 5 4

Ability to identify creative people 6 5

Freedom to innovate 7 7

Ability to measure results of innovation 8 8

Encouraging both small ideas and big ideas 9 9

Innovation accountability/goals 10 10

Culture of risk-tolerance 11 12Organizational structures 12 11

Diversity 13 13

Balancing incremental improvements and breakthrough discoveries 14 14


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Both the AMA/HRI survey and the re

searchliteraturereviewshowthatteams

andworkgroupsarecriticalintermsoftheirabil

ity to encourage and support innovation. Of

course, not all work groups are created equal.

Theyremostlikelytobeinnovativewhentheyre

abletointegratepeoplewithdiverseperspectives

andallowthem toeffectivelyswap ideasandex

pertise (McLean, 2005). Crossfunctional teams

maybe especially good at arriving at new ideas

thatarebothinnovativeandpractical.

Teams probably wont be successful unless

they have the support of leaders who provide

CustomerCentricity

Currentandpotentialcustomershavealwaysdriveninnovationincompaniesinthemod

ernage,buttodaysorganizationsaretakingtheideaoffocusingoncustomerstoanew

levelbycapturingtheirideasoractuallyallowingthemtoinnovateintheirownbehalf.

Somecompanies

look

to

lead

users

or

luminaries

to

help

them

innovate.

GEs

healthcare

division,forexample,callsuponpublishedscientistsanddoctorsfromwellknowninstitutionsto

attendadvisoryboardsessions,wherediscussionsoftechnologicaladvancescanleadtonewGE

products.BMWhasreachedouttocustomersviaatoolkitonitsWebsitethatallowscustomersto

proposeandexpandnewideas.Notonlyisthecustomerking;nowheismarketresearchhead,

R&Dchiefandproductdevelopmentmanager,too,sumsupTheEconomist(TheRise,2005,p.

59).

Tappingintotheinnovativenessandimaginationofcustomerscangeneratetremendous

value, said Harvard Business School professor Stefan Thomke. He recommends encouraging

customerstodesignwhattheywantwithstateoftheartsoftware.Itcouldgenerateinnovations

thatsuppliers

simply

cannot

imagine

today

(Speeding

Up,

2004,

p.

8).

Somecompaniesarealsoworkingtocreatenewproductsandservicesgearedmorefor the

individualtastesofcustomers.Inwhathasbeencoinedamassmarketmutiny,customersare

clamoring for thehostofpersonalizedproductsthatcompaniesallowthemtocreate.Suchcus

tomization hasbecome a trend in the clothing, music and telecommunications industries. Re

searchbytheconsultancyBrandKeyssuggeststhatbetween1997and2005therelationshipbe

tweencustomizationandbrandloyaltygrewfivefold(Laue,2005).

And then theres the trend toward design thinking, an increasingly popular notion for

boostinggrowthandinnovation.Theideaisthatweareevolvingfromaknowledgeeconomy

toanexperienceeconomy.Thisneweconomyisincreasinglycustomercentricandfocusedon

deliveringnotjustgoodsbutexperiencestocustomers.Successfulfirmswillbethosethatcan

deliverbettercustomerexperiencesbyusingempathyskillstobuildnewbrandsordevelopnew

consumerexperiencesusingestablishedbrands(Nussbaum,2005).

Thereslittledoubtthatasnewbusinessmodelsariseandnewtechnologiesemerge,organi

zationswillfindotherwaysofgainingnewcustomersandinvolvingcurrentcustomersinthein

novativeprocess.

1

TeamworkandCollaboration


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themwithcleargoalsandnecessaryresources.On

theotherhand,poorleadershipcanbeverydam

aging to teams.One recent studyexaminedhow

well crossfunctional new product development

(NPD) teams are supported. These cross

functional groups typically include representa

tivesfromR&D,design,engineering,manufactur

ing,andmarketingaswellaskeycustomersandvendors. A survey of 269 product development

managers at U.S. and Canadian manufacturers

foundthatNPDteammanagersoftenbelievethat

the teams will usurp their power, and theres

sometimesalackofcommitmentandcommunica

tionwhen itcomestosuchteams(Boyle,Kumar,

&Kumar,2005).

TheNeedforDiversityThemost creative teamsaredrawn fromdi

versebackgrounds, saysMichaelWest,professor

of organizational psychology at Aston Business

School.Westsayssuch teamsbringdiverseskills

andknowledgetoprojects,offeringmanycreative

solutionstoproblemsbecausetheyapproachsuch

problems with different perspectives (Glover &

Smethurst, 2003). Team diversity can also help

companies improve their focus on customers.

Whendiverseemployeesrelatetodiversecustomers, companies can tap into new product ideas

andmarkets(Lockwood,2005).

Tania Aldous, a manager in the global con

sumer design department of Whirlpool Corp.,

says that if employees are to work on cross

functional teams,Weneeddiversityof thought,

variousperspectivesandculturalheritages. It is

importantnottobringinallclones,saidRobert

Sutton,aprofessoratStanfordUniversityandau

thorofWeirdIdeas

That

Work:

11

Practices

for

Pro

moting, Managing and Sustaining Innovation

(Pomeroy,2004,p.50).

Michael West cautions, however, that teams

madeupofpeoplefromdiversebackgroundscan

generateconflict,andtheymustbewellmanaged

to make sure such conflict remains constructive

(Glover&Smethurst,2003).So,thebottom lineis

that teamsand teamworkare important to inno

vation,buttheyrequireskilledleadershiptomake

themaseffectiveastheyshouldbe.

InternalandExternalCollaborationsMore

innovation

occurs

through

collabora

tion and community than through the inventive

thinking of a single mind, according to Andrew

Hargadon, author of HowBreakthroughsHappen:

The Surprising TruthAbout How Companies Inno

vate.Hargadoncontendsthatmostnew ideasare

adapted from existing ones, a concept he calls

recombinant innovation. Whats more, ideas

can spring from even casual encounters that ex

pose one to a new perspective as easily as they

can from concentrated teamwork. His book ex

plores other theories that support the value of

community, too,suchas theconceptsofserious

play and communities of practice, in which

companies purposely create internalnetworks to

foster knowledgesharing and creative thinking

(Kleiner,2004).

Collaboration occurs both within organiza

tionsandamong them.Thesedays,only slightly

more than half (55%) of innovation is generated

internally.Organizations

are

tapping

academia,

the government and other firms for fresh ideas,

according to the 2004 Making Innovation Work

study by The Conference Board. That survey

foundthatorganizationsseekinnovationthrough

collaborationwithuniversities,privateR&Dlabs,

andgovernmentagencies,andthroughparticipa

tion with consortia. Such open innovation is

expectedtostrengthenasfirmscontinuetodiver

sifytheirinnovationportfolio(Troy,2004).

Companieswith

R&D

located

in

the

U.S.

seem particularly interested in collaborations

based on alliances. There have been relatively

large increases in participation in alliances and

jointR&Dventures inrecentyears. In fact,61%

of surveyed companies expect to increase their

participation in those endeavors in 2006, accord

ing to the IRIs 22nd annual R&DTrendsForecast

(Ayers,2006).

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Sometimes companies collaborate through

investment. Companies that do not want to risk

trying to achieve their ownbreakthroughs find

waystoinvestinothercreativebutriskyfirmsby

providingsomeoftheirstartupcapitalorbybuy

ingthesecompaniesoncetheyprovethevalueof

theirideas.Realoptionsreasoningprovidesvalu

ableinsightintohowflexiblecommitmentscanbe

made to fundbreakthrough research projectsby

taking the investments of large companies and

spreading them across many pathbreaking

smaller firms in thehope thatsomeof themwill

succeed(McGrath,1997).

But whether collaboration is among compa

niesorindividuals,thedifferingbackgroundsthat

partiesbring to the table can often produce fric

tion or conflict that erodes trust. Cultural differ

ences must be taken into account. If properly

channeled, such conflict canbenefit the innova

tionprocess.Thecollaboratingentitiesmustfocus

on their commonalities, such as goals and chal

lenges,rather thantheirdifferences,butproperly

managed friction can serve as a catalyst forpro

ductivechange(Hagel&Brown,2005).

3

TheRightResources

The 2005 AMA/HRI survey showed not

only

that

appropriate

resources

(time

andmoney)wasamongthetopfactorsfordevel

oping a culture of innovation but also that

insufficientresourceswasthemostwidelycited

barriertoinnovation.

TopRankedBarrierstoInnovation*

*Seenby10%ormoreofrespondentsasthe

numberonebarrierintheirorganizations

Its not true, however, that more is always

better.

Having

too

few

resources

hinders

innova

tion,buthavingtoomanymightalsobeakindof

obstacle (McLean, 2005). Employees with long

spans of time in which to come up with results

may losemotivation.Therightbalanceofmoney

is important, too.Too little,andemployeeshave

to put time and energy into seeking other re

sources.But toomuch (beyond thethresholdof

sufficiency)hasnotbeenshown tohaveaposi

tiveeffectoncreativity(Troy,2004).

Thisrule

applies

to

research

and

develop

mentaswell.ArecentBoozAllenHamiltonstudy

foundthatthereisnorelationshipbetweenR&D

spendingand theprimarymeasuresofeconomic

or corporate success, such as growth, enterprise

profitability and shareholder return (Jaruzelski,

Dehoff, & Bordia, 2005). On the other hand, the

samestudyshowsthatspendingtoolittleonR&D

canhurtcorporateperformance.

Barriers Rank

Insufficient resources 1

No formal strategy for innovation 2

Lack of clear goals/priorities 3

Lack of leadership/management support 4

Short-term mindset 5

Structure not geared toward innovation 6

Communication

Atrulycreativeculturetendstobedistin

guished by open communication and

the free exchange of ideas (McLean, 2005). This

means communication among different parts of

the organization, communication among team

members, and communication up and down the

corporate hierarchy. Communicating not only

means sharing ideasbutalso sharing the lessons

learned from failuresand successes.Ways toen

hance communication include more inclusive


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meetings,better online tools for sharing knowl

edge, crossfunctional assignments and more

brainstormingsessions(McGregor,2005).

The most suitable type of communication

e.g.,viatechnologyorfacetofacemeetingswill

oftendependonthetypeofcollaborationneeded

to

solve

problems

that

call

for

creativity

(Sonnenburg, 2004). In situations where an or

ganizationistryingtodevelopmoreradicalinno

vations (or find more radical solutions to prob

lems), collaborators are often friends or partners

who need to communicate on a more personal

level. In other situations, technologymediated

communicationisprobablysufficient.

Communication also includes storytelling.

Thismeanstellingbothinspirationalandcaution

ary tales. After all, stories about why ideas fail

mightbeasvaluableasourceoflearningforbusi

nessesas

stories

about

success.

Without

an

exami

nation of why ideas fail, valuable lessons that

mightbelearnedarelost,accordingtoJerkerDen

rell,assistantprofessoroforganizationalbehavior

at the Stanford Graduate School of Business

(Wagner,2005).

4

AnAbilitytoSelecttheRightIdeas

Fully96%ofallnewinnovationinitiatives

failtoatleastmeetreturnoninvestment

targets (A Creative, 2005). While having an

ideasharingculture inplace ispartoftheprofile

of innovative firms, thebigger challengemay lie

in having the right processes in place to quickly

cullthroughthoseideasandselectthosetoshep

herdthroughtofruition.

But there isnoobviousstrategy forselecting

orevenevaluatingideas.Nearlyhalf(48%)ofthe

AMA/HRI respondents reported that they dont

haveastandardpolicyforevaluatingideas,byfar

the largestresponse toaquestionon thissubject.

The next most common responses? About 17%

saidtheyuseanindependentreviewandevalua

tionprocess,while15%saidideaswereevaluated

by the unit manager where the idea was pro

posed.

PercentUsingTheseApproachestoEvaluate

IdeasinTheirOrganizations

Some experts contend that thebest way to

sort through multiple options in the pursuit of

innovationistocreateadefinedportfolioofinno

vationapproaches.Thisallowsacompanytobal

ancedifferenttypesofinnovationssuchasincre

mentalandbreakthroughinordertomaintaina

healthyrangeofselections.

Some companies vest their employees with

theresponsibilitytoselltheirownideas.Whirl

pool Corp., for example, encourages innovation

teamstopursuenewideasbycreatingabusiness

case and applying the $25,000 in funding to

quickly prove the ideas worth. The lowbudget,

quickturnaround method is a far cry from the

bigdollar projects of Whirlpools past and was

designedtogenerateradicalandlowriskideas

(Pomeroy,2004).Whirlpoolalsousesanipipe,

or online idea pipeline, where ideas are shep

herded through the process by trained i

consultantsandimentorswhohelpemployeesto

workaspartofaninnovationteam.Surveys,busi

ness plans, focus groups andbrainstorming ses

sionsarealltoolsthatmightbeutilizedtomanagethe project. Separate teams may nurture an idea

through the research, development and imple

mentationphases,aswell(Pomeroy,2004).

AmericanFamilyInsuranceGroup,too,gives

peergroupsthevotefordeterminingthefeasibil

ityofnewITprojects.ITcodewritersareencour

Approach PercentThere is no standard policy for reviewingand evaluating ideas 47.6

There is an independent review andevaluation process for ideas 16.5

Ideas are reviewed and evaluated by theunit manager where idea was proposed 15.4

Ideas are reviewed and evaluated by theunit that would be impacted by the idea 12.6

The employee is responsible for startingand managing the review process 7.6


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agedtodevelopprototypesquicklywithoutheav

ilyinvestingtimeandefforttodemonstratewhat

a new application might accomplish. Depending

on colleague reaction, the project might get ap

provedforcodedevelopment(Ulfelder,2005).

Technology plays an important role in idea

evaluationas

well.

Some

organizations

are

by

passing physical models and using Webbased

simulations or rapid prototyping to test designs

(Shelton&Davila,2005).Onepieceofadvicefrom

UKbusinessschoolHenleyManagementCollege

istousetechnologysolutionssuchascomputeror

mathematical simulations to evaluate ideas. And

when itcomesdowntodecisiontime,itsrecom

mended that companies ask questions from a

commercialperspective.Identifyingtheproblems

thatwillneed tobeaddressed inorder to imple

ment the idea is one of the key decision points

(Henley,2005).

All inall, theabilitytomakequickdecisions

andto

move

from

idea

to

action

appears

to

be

a

keydeterminantofsuccessfulinnovation.Accord

ing toPatrickKulesa,globalresearchdirector for

ISR, Successful innovation companies excel not

onlyatsettingthestageforgeneratingnewideas,

but also have thebusiness discipline and proc

esses necessary to take those new ideas to mar

ket(Kulesa,2005,p.41).

5

CreativePeople

Companies need creative people, of

course,but its a myth that innovation

stems only from a small cadre of

creatives(Breen,2004).Infact,whenitcomesto

creativity, there are few areas of human activity

whereweallstartoutsoequal,accordingtoKris

tinaMurrin,managingpartneroftheWhatIfcon

sultancy (Glover & Smethurst, 2003). Some ex

perts say that creativity is, to a large degree, a

trainableskill.

Still, its true that people who are prone to

inventiondotendtosharecertaintraitsorhabits,

notes Murrin in herbookStickyWisdom. For ex

ample, they have a stimulating life outside of

workthat triggerscreativity, theyuseprototypes

tobring ideas into reality, they often go their

own way, they communicate and are open to

ideas,and theyhave thecourage toexpressnew

ideas(Glover&Smethurst,2003).

Someoftheseobservationsmaybeborneoutbyhistory.CreativepeoplesuchasEdison,Shake

speare, Mozart, Einstein and Darwin had wideranging interestsand ideas thatallowed them to

innovateintheirfields.Theyalsohadthecourage

oftheirconvictions.Theysufferedvariousfailures

but eventuallybrought finished projects to frui

tion(Sutton,2004).

Ofcourse,thecorporateenvironmentplaysa

largepartinhelpingpeople liveuptotheircrea

tivepotential.The freedom to failwithoutheavy

penalty can, forexample,bea powerful support

toeventualsuccess.Socanphysicalenvironment

oftheworkplace.WhatIfresearchclaimsthatthe

physical environment stimulates eight out of 10

newideas,withcreativitytriggeredbysomething

immediately visible to the employee (Glover &

Smethurst,2003).

So,notonlydoemployersneedtorecruitand

retaincreativepeople,theyneedtoprovidetrain

ing in creativity and set up work environments

that

stimulate

creativity

in

all

employees.

FreedomandRiskTolerance

The autonomy to work toward goals is

an important feature of an innovative

culture.Thisdoesnotnecessarilytranslate,how

ever, to theautonomy todecide thosegoals.Re

search conducted by Professor Teresa M.

Amabile of Harvard University shows, in fact,

that employees creativity is enhanced when

their goals are clearly specified but theyre


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granted freedom to pursue those goalsby what

ever means they decide. Too much control can

impedecreativityandinnovation.

Laird D. McLean combed through the re

search of innovation experts and concluded that

several types of control can inhibit creative per

formance.Itcouldbecontrolindecisionmaking,

control of information flow, or even perceived

controlintheformofrewardsystemsthatputtoo

much emphasis on increasing extrinsic motiva

tion,McLean(2005)writes.

Organizationsmustalsobewillingtoallowa

certainamountofrisktaking.Riskimpliesadan

ger of failure, but innovative companies know

that failure is as essential a part of the growth

processassuccess.Organizationsthatunderstand

risktaking isnecessarymake thatmessagecome

alive through their employee communications,

their ideasharingandevaluationprocesses, their

recognitionprogramsandtheirrewardsystems.

Managing employees in a way that encour

ages innovation requires leaders to acknowledge

and reward risktakingbehaviors notjust suc

cessfuloutcomes.JohnSweeney,authorofInnova

tionattheSpeedofLaughter,suggestsmanagersuse

techniques such as initially welcoming all ideas

without first judging them, creating an atmos

phere where opinions canbe freely shared, and

reinforcing thevalueofemployeescontributions

byactingonthem(EmployeeInnovation,2005).

6

Ways

of

Measuring

Results

Innovationanditsimpactcanbemeasured

inanumberofways,thoughnoneofthem

isperfect.Thetoprankedmeasurementtype,cus

tomersatisfaction,isntamajorsurprise,giventhe

high ranking of customerrelated factors in all

partsoftheAMA/HRIsurvey.Butitsinteresting

to see how much more important respondents

consideritcomparedwithmeasuressuchasinno

vationasapercentageofprofitsorasmeasuredin

terms

of

intellectual

property.

On

a

1

to

5

Likert

scale, where5 isextremely importantand1 is

not important,customersatisfactionreceiveda

whopping 4.36, compared with just 3.40 for

innovationasapercentageofrevenuesandprof

itsand3.07forintellectualproperty.

RelativeImportanceofWaysofMeasuring

CreativityandInnovation

Itsinterestingtoseehowthisdatacompares

withthatofotherrecentresearch,whichlooksless

at the importance of innovation measures and

moreattheirdegreeofusage.Onlyabouthalfof

thefastgrowingU.S.businesses(48%)havetried

tolinkinnovationtomeasuresofsuccess,accord

ingtoresultsfromPwCsTrendsetterBarometer.Of

those that made the effort, the most common

measuresincludedoverallrevenuegrowth(78%),

customer

satisfaction

(76%),

revenue

growth

from

new products/services (74%), productivity in

creases (71%), earnings (68%), recruitment/

retention (34%) and market capitalization (17%)

(PricewaterhouseCoopers,2005).

A2004ConferenceBoardstudyfoundthatto

track the success of employee innovations, re

spondentsusedmeasuressuchastotalnumberof

employee ideas submittedannually (76%), finan

cial impact of implementing employee ideas

(76%),

and

percentage

of

ideas

implemented

(56%).

TheConferenceBoardsurveyalsofoundthat

respondentssaidmeasuresrelatedtoinnovations

(e.g., patents, R&D spending as percent of sales)

werethemostuseful,followedbyfinancialmeas

ures (e.g., sales,market share),processmeasures

Measurement Types RankCustomer satisfaction 1

Market share 2New products/services/processes produced 3

Financial impact of ideas submitted byemployees 4

Innovations as percent of revenues and profits 5

Spending on research and development 6

Spinoffs/new operations based on newproducts 7

Intellectual property (e.g., number of patents) 8


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(e.g., time tomarket, fulfillment speed)andpeo

ple measures (e.g., performancebased awards)

(Troy,2004).

Someexperts(Muller,Vlikangas,&Merlyn,

2005)sayinnovationshouldbemeasuredthrough

threedifferentlenses:1)theresourceview,which

analyzesinputs

such

as

capital,

talent

and

time

withfactorssuchaspercentofworkforcetimein

vested in innovation,number ofemployeeswith

entrepreneurial experience or percent of capital

dedicated to innovationrelated activities; 2) the

capability view, which measures inputs through

number of innovation tools, the percent of em

ployeeswithinnovationasakeyperformancein

dicator, and the percent of employees receiving

training inactivitiesrelatedto innovation;and3)

the leadership view, which measures inputs

throughpercentofexecutive time invested in in

novationversusoperationsorpercentofmanage

mentteamtrainedintheuseofinnovationtools.

Itsclear

that

companies

have

many

options

when it comes to trying to measure innovation.

Theirchoiceswilldependontheir industry,their

experienceatusingsuchmeasures,andtheirabil

itytomakeeachmeasureasaccurateaspossible.

Theliteraturesuggests,however,thatmanycom

paniescoulddomoreintheareaofmeasurement

thantheyarecurrentlydoing.

7

AnAbilitytoBalanceIncrementalandBreakthroughInnovations

While

radical

or

breakthrough

innova

tion can reap handsome financial

profits, the largest percentage of revenue is still

morelikelytocomefromincrementalinnovation.

Balancing efforts to capture the advantages of

bothcanbeawisebutchallenginggoalfororgani

zationstopursue.

Someresearchsuggeststhatexecutivesexpect

a growing percentage of future innovations to

come through breakthrough rather than incre

mental innovations (Troy, 2004). Thats understandable,giventhatcompaniesthatcanleverage

more radical innovations can realize huge finan

cialgains.ClaytonChristensen,authorofTheIn

novatorsDilemma,conducteda reviewof innova

tionsand found that, in2000,37%of thecompa

nies that were leaders in terms of providing a

disruptiveinnovation

such

as

computing

via

cellphonesexceeded$100million in revenues.

Incontrast,just3%oforganizationsattainedsuch

revenuelevelsiftheywereinalreadyestablished

markets(McLagan,2002).

And for firms in the hightech sector, while

nextgenerationinnovationsrepresentonly14%of

product launches and 38% of revenue, they still

bring in 61% of profits, according to a studyby

the Harvard Business Review. The study also

showed that while incremental innovations accountfor62%ofrevenue,theybringinonly39%

ofprofits.GregoryC.Tassey,senioreconomistat

theNationalInstituteofStandards&Technology,

said,We should invest more in nextgeneration

technology(Rovner,2003).

LeadershipandAccountability

N

otonly is leadershipcrucial to innova

tion, the reverse is trueaswell. Inanother AMA/HRI survey, the LeadershipDevelop

mentSurvey2005, itwas found that theability to

fostercreativityand innovation isamong the top

competencies required of leaders today and that

thisabilitywillbecomeconsiderablymoreimpor

tantover thecomingdecade (AmericanManage

ment Association & Human Resource Institute,

2005).

So,whatarethemostimportantrolesleaders

play inspurring innovation?TheAMA/HRIInno

vation Survey 2005 found that the single most

widely selected action that leaders take is

developing an organizational strategy for inno

vation, followedbyredesigningorganizational

structureorworkflowandincreasingemployee

involvement.Leadersare,inanutshell,expected

toshapetheorganizationandtheoverallmanage

ment philosophy to make sure innovation can


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thrive. They must set up systems that regularly

encourageinnovation.

Toooften,however,leadershavetheopposite

effect in organizations, inhibiting or disrupting

innovations by setting up bureaucratic barriers,

quashingcreativeideasbeforetheyregivenafair

chance,or

trying

to

take

charge

of

development

teams insteadofgiving thenecessaryautonomy.

TheAMA/HRIsurveyfoundthatlackofleader

ship/managementsupportisasignificantbarrier

to innovation,as isno formal strategy for inno

vation, lack of clear goals/priorities, and, as

mentioned before, insufficient resources. In

eachcase,topleadershavethepowertobuildup

thesebarriersorremovethem.

So, who is responsible and accountable for

innovation in an organization? Some companies

have specifically designated leaders for this. In

fact,about40%of firmshave someone to fill the

roleofchief innovationofficer, though this re

sponsibilitymayresidewithofficerswitharange

of titles, from head of R&D to vice president of

globalinnovation(Troy,2004).

Butmore

and

more

organizations

are

seeing

that creativity and innovation are not the exclu

sive province of a small group of employees.

Manyareworking tochange theircorporatecul

tures to make innovation everyones job (Troy,

2004).This,ofcourse,means findingways toen

courage innovation and hold people accountable

without making them riskaverse. Figuring out

waysofdoing thiswell is likely to remaina sig

nificantorganizationalchallengeincomingyears.

8

MotivationandRewardSystems

What are the most effective means of

rewarding employees for innova

tion?Theanswerisamatterofdebate.Someex

pertsargue that ifcompanies focus toostrongly

on providing employees with extrinsic rewards

suchasbonuses,theyriskdestroyingemployees

intrinsicmotivation.Thisviewpoint isbasedon

empirical research showing that following re

ward,individualsoftenspentlesstimeperform

ing an activity and stated they like the activity

less, as compared to a control group that per

formedthetaskwithoutreward(Eisenberger&

Shanock,2003,p.123).Experimentshaveshown

thatthissometimesappliestocreativetasks.

On the other hand, other social researchers

havearrivedatcontraryconclusions.Inonecase,

forexample,

students

who

had

been

promised

a

reward for inventing creative story titles were

found tobemorecreative than thosewhowere

giventhesameinstructionswithoutthepromise

ofareward.EisenbergerandShanock lookedat

theresearchandconcludedthatencouragement

of creativity, in the form of tangible and so

cioemotionalrewards,strengthenscreativemoti

vationalorientation (p.128).This implies that

employerscaneffectivelyusetraditionalreward

systemstomotivateemployeestoactmorecrea

tively in the workplace and that rewards dont

necessarilyreduceintrinsicmotivation.

Thats good news in light of the fact that

manyemployersengageinsometypeofrewardand recognition systematwork.TheAMA/HRI

survey found that the most commonly cited

formsofrewardsarenonfinancial,asthefollow

ingtabledemonstrates:

RewardandRecognitionPractices

Type of Practice PercentInnovation is not rewarded in this organization 26.0

Innovation is recognized with nonfinancial rewards 20.9

Innovation often leads to more challenging workand/or autonomy 19.3

Innovation is rewarded by individual bonuses and/orsalary increases 17.6

Innovation is considered in promotion decisions 9.2

Innovation is rewarded through team bonuses 4.4

Innovation is rewarded with larger staff and/or budgets 2.0


11/16

If companies do decide to use financial re

wards such as bonuses for innovation, they

shouldrecognizethattheremaybeafinelinebe

tweentoomuchandtoo little.Stanfordprofessor

Antonio Davila says the issue canbe controver

sial.Someexpertssaythatthebonuscanbecome

a larger focus than the innovation itself forsome

employees,whileothersfeeltheabsenceoffinan

cial incentives will dampen motivation. In one

survey, Davila found that bonuses averaging

about30%ofpayseem tobeoptimal,depending

onthecomplexityoftheproject.All inall,recog

nitionseemstobeasimportantamotivatorasfi

nancial incentives when it comes to innovation

(Pomeroy,2004).

9

Conclusion

Manyoftodaysbusinessesfaceaconundrum:Theyreacutelyawarethatinno

vation is a growing imperativebut they see themselves as only moderately

successfulinnovators.AmongorganizationsrespondingtotheAMA/HRIsur

vey,theresnoconsensusonhowtoevaluateideas,andnearlyhalfofrespondentsdonthave

aclearunderstandingabouthowtheircompaniescanbecomemoreinnovative.Itslittlewon

der,then,thattheliteratureshowsmostinnovationinitiativesfailtoattaintheirgoals.

Organizationsmustgearupforanewerainwhichtheybecomemuchmoreeffectiveat

spurringandmanaginginnovation.Beforetheycanachievethis,theyneedtogetbetteratthe

basics,suchasunderstanding,communicatingandevaluatinginnovation.Untiltheydo,they

simplywontknowhowtoallocatetheproperresourcesorsetthebeststrategies.

Whatotheractionsshouldcompaniestake?TheAMA/HRIsurveyfindsthatrespondents

allover theworldbelieve that focusingon the customer is crucial to innovation.Thatsno

doubt true,especially inourageofmasscustomization. Insights fromcustomersaswellas

potentialcustomerscanleadtogreatnewproductlines.Butitsnotthewholepicture.Long

termsustainability

depends

on

successful

breakthrough

innovation,

and

this

is

less

likely

than

incrementalinnovationtocomedirectlyfromcurrentcustomers.

Thereisnosinglebuttontopush.Inthispaper,wevelaidoutavarietyofapproachesto

spurring innovation,butwe recognize thatnooneway isbest foreverycompany.Still,we

think thatbecoming an innovative company usually requires looking at the whole system,

from culture to process to strategy. Companies must forge an innovation strategy thats

alignedwithitsoverallstrategy,choosetheprojectswiththebestvaluepropositions,manage

the system efficiently so itdoesnt waste time or resources, and commercialize innovations

well,witheveryoneworkingtogetherasateam(Jaruzelski,Dehoff,&Bordia,2005).

Leadership, of course, is critical. Not only can excellent leaders influence culture over

time,theycansetthestrategiesandgoals,modelthedesiredbehaviors,demandgoodmetrics,

permit smart risktaking, reward creativity, cultivate collaboration and teamwork,andpro

videenoughbutnottoomanyresources.Innovationrequiresambidextrous leaderswho

cansimultaneouslycontrolandpromotefreedom.

Intheend, innovationmeansmorethanjustcreatingnewproductsandservices.Italso

means considering new management principles and challenging old orthodoxies in smart,

valueaddedways.Ofcourse,suchthingsarealwayseasiersaidthandone.Butnooneever

saidsurvivingintothefuturewasgoingtobeeasy.


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10

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AbouttheAuthors

PROJECTLEADER

JayJ.JamrogistheexecutivedirectoroftheHumanResourceInstituteanddistinguishedlectureratTheUniver

sityofTampa.Asafuturist,hehasdevotedthepast20yearstoidentifyingandanalyzingthemajorissuesand

trendsaffectingthemanagementofpeopleinorganizations.Jayistheassociatearticleseditorforthebuildinga

strategicHRfunctionkeyknowledgeareaofHumanResourcePlanning,hashadarticlespublishedinmajorbusi

nessmagazines,andisfrequentlyquoted inbusinesspublicationsandnewspapers.Heoftencollaborateswith,

andspeaksbefore,otherorganizationsandassociationsonmajorresearchtopicsrelatedtothefutureofpeople

management.PriortojoiningHRIin1982,Jayheldnumerousmanagementpositions,includingvicepresidentof

purchasingforalargeimport/exportwholesaler.Contactinformation:(727)[email protected].

AUTHORS

DonnaJ.BearistheCreativityandInnovationKnowledgeCentermanagerfortheHumanResourceInstitute.She

hasaB.S.degreeinbusinessadministrationandanM.S.degreeinmanagementandiscertifiedasaSeniorPro

fessionalinHumanResources.HerpreviousexperienceasanHRgeneralist/consultantspansthePEO,corporate

andnotforprofitsectors.Contactinformation:(727)[email protected].

MarkR.

Vickers

isafuturistandseniorresearchanalystattheHumanResourceInstitute.Hehasauthoredmany

HRIreportsandwhitepapers,isHRIsformermanagingeditor,andiscurrentlytheeditorofHRIsTrendWatcher

andTheFortnightReport.Contactinformation:(727)[email protected].

OTHERCONTRIBUTORS

WandaV.Chaves,Ph.D.,isanassistantprofessorofmanagementattheJohnH.SykesCollegeofBusinessatthe

UniversityofTampa.Shereceivedherdoctoraldegree in industrial/organizationalpsychologywithaminor in

crosscultural studies from the University of South Florida in Tampa. Her work experience includes training,

teaching,and consultingwithin theTrainingandDevelopmentand theOrganizationandExecutiveDevelop

mentdepartmentsattheWaltDisneyWorldCompanyaswellasworkasanexternalconsultant.Sheisaprofes

sorofleadership,humanresourcemanagement,internationalmanagement,andorganizationalbehavior.Contact

information:(813)

253

6221

ext.

3968

or

[email protected]

or

[email protected].

SusanConte,Ph.D.,hasover25yearsofexperienceasaconsultant,corporatetrainer,anduniversityprofessorin

strategicmanagement,organizationalchange,businessleadershipandpersonaldevelopment.Throughheredu

cationandexperience,shehasacquiredathoroughknowledgeoftheforprofitandnonprofitworldsandanabil

ity toanalyzeandevaluate individuals,groups,organizationsandorganizational systems.Susanreceivedher

Ph.D.inmanagementandstrategyandanMBAfromTheWhartonSchoolattheUniversityofPennsylvaniaand

abachelorsdegreeandmastersdegree inorganizationalbehavior fromYaleUniversity.Contact information:

(813)[email protected].

DonnaJ.Dennis,Ph.D.,isaleadershipdevelopmentprofessionalwithover30yearsofexperiencehelpinglead

ers and teams increase leadership and team effectiveness through coaching, strategic planning and team

building. She is known for innovative,businessfocused solutions to organization and leadership issues. She

holdsamastersdegreeineducation,aPh.D.inhumandevelopment,andcertificationinpersonalityassessment

andexecutivecoaching.Contactinformation:(609)[email protected].

JamesW.Forcade retired fromPepsiCowith30yearsofhuman resourcesexperience focused inChina,Asia,

Russia,CentralEurope,theMiddleEast,LatinAmericaandtheU.S.A.Theseassignmentsincludedstartups,re

structuringandrealignment toahighperformanceorganizationalongwith thedevelopmentofaprofessional

HRfunctiontoensuresustainment.JimholdsanM.B.A.fromTheAmericanUniversityinWashington,DC,and

aBSBAfromtheUniversityofNebraskainOmaha.Contactinformation:(727)[email protected].

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15/16

JackHipple,Principal,InnovationTRZ,isaninnovationandorganizationaldevelopmentprofessionalwithover

30yearsofindustrialexperienceleadingbreakthroughinnovationandnewbusinessdevelopmentprogramsfor

CabotCorporation,AnsellEdmont,andtheNationalCenterforManufacturingSciences,withresponsibilityfor

theDiscoveryResearcheffortattheDowChemicalCompany.He isamongthemostrecognizedconsultants in

industrialinnovation,focusingonthebreakthroughinnovationandinventiveproblemsolvingprocessknownas

TRIZ.HeistheinstructorinInventiveProblemSolvingfortheAmericanInstituteofMechanicalEngineers,the

AmericanInstituteofChemicalEngineers,andtheAmericanCreativityAssociation.Heisalsoafrequentwork

shoppresenter

at

the

Altshuller

Institute

for

TRIZ

studies

and

the

World

Future

Society.

In

addition,

he

is

certi

fiedinDeBonoandMichaelKirtonKAIorganizationalassessmenttools.Contactinformation:(813)9949999or

[email protected].

Dr.MaryB.LippittispresidentofEnterpriseManagementLtd.,afirmthatspecializesinleadershipandexecut

ingorganizational change. Herbook,TheLeadershipSpectrum:6BusinessPrioritiesThatGetResults, earned the

Bronze Award as the Best Business Book of 2002. The firms Leadership Spectrum Profile Web site,

www.leadershipspectrum.com,wascitedbyHumanResourceExecutivemagazineasoneoftheTopTenTraining

Productsof2000.HerworkhasappearedintheJournalofBusinessStrategy,HRExecutive,T&DJournal,ODPracti

tioner,andExecutiveExcellence.Contactinformation:(727)[email protected].

RickRiesenberg,Ph.D.,isanexecutiveinresidenceatHRI.Hehasextensiveexperienceinallaspectsofinterna

tionalanddomestichumanresources.HehasworkedasaninternalorexternalconsultantatDigitalEquipmentCorporation,AlliedSignal,AT&TWireless,Nextel,AdvancedMicroDevices,Corillianandothermultinational

companies.Hehas ledHRteamsrangingfromoverseasstartupbusinessesto largemultinationalcorporations.

HereceivedhisB.A.degreefromHarvardUniversityandhisdoctoraldegreeinpsychologyfromtheUniversity

ofMassachusetts.Prior toentering theHRprofession,Rickwasaclinicalsocialworkerandpsychologist.The

NationalCancerInstituteandtheHudsonontheHastingsInstituteacknowledgedhisworkatDartmouthCol

legeMedicalSchoolasoneofthetopfivetreatmentcentersforthephysicalandemotionalcareofterminallyill

childrenandtheirfamilies.Contactinformation:(206)[email protected].

Dr.GlenTayloristhedirectorofTheCenterforInnovationandKnowledgeManagementattheSykesCollegeof

Business,UniversityofTampa.Heteachesbusinessstrategy,innovationmanagementandstrategiesforacceler

atednewproductdevelopmentandistheacademiccoordinatoroftheMastersofSciencePrograminTechnologyand InnovationManagement.Heholdsabachelorsdegree inbusinessadministration, amasters inenviron

mental studies, amastersofbusinessadministrationanda Ph.D. fromYorkUniversity inCanada,wherehe

taughtandservedastheassociatedirectoroftheOntarioCenterforInternationalBusiness.Glenwasthedirector

ofAPECsprogramonsupplychainmanagement,whereheledworkshopswithhundredsofseniorexecutivesin

Chile,China,Mexico,thePhilippines,Thailand,andVietnam.HehasalsobeenanactivememberoftheWorld

ResourcesInstitutesworkinChina,whereheservedasatrackleaderforM.B.A.curriculumdevelopmentwith

businessschoolsatthetopfiveuniversitiesinChina.

13


16/16

HHumanuman RResourceesource IInstitutenstitute5959 Central Avenue

Suite 201St. Petersburg, FL 33710

727.345.2226www.HRInstitute.org

Inform ~ Educate ~ Promote Strategic Thinking

Characteristics of an Innovative Culture

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