BuildingaCultureofInnovationDrivingLong-termProfitableGrowththroughOrganizationalCulturalChangebySorenKaplan&DerrickPalmer,ManagingPrincipals,InnovationPoint

Justabouteveryorganizationwantstobemoreinnovative.Butorganizationsdefineinnovationdifferently.Someseeitasintroducingnewproducts,whileothersmeasureinnovationsuccessintermsofnewservices,customerexperiences,businessmodelsorinternalpractices.Andwhilesomeorganizationsarewidelyreveredasinnovative(everybodywantstoknowthesecretsofApple,Googleandotherhighfliers),mostseemtocontinuallystruggletofindtheirstride.

Allcompanies,whethertheyaresuccessfulwithinnovationornot,haveonethingincommon:theyhavetheirownpersonalities,theirownparticularorganizationalculturethesharedexperiences,values,norms,assumptionsandbeliefsthatshapeindividualandgroupbehavior,andthat(forbetterorforworse)ultimatelyimpacttheirsuccess.

Mostleadersrecognizetheimportantroleofcultureinbusinesssuccess.Accordingly,therearemanypopularinterventionsforshapingculture:trainingprogramsthathelpgalvanizenewemployeesaroundvision,missionandvaluesstatements;leadershipdevelopmentprogramsthatprovidehighpotentialmanagerswithtoolsforbecomingbetterleaders;andchangemanagementinitiativesfocusedonnewprocesses,structuresandprogramsthatincrease

Whydoyouwanttohaveaninnovativeculture?Aswepeelbacktheonion,theanswerweeventuallygettois:Sowecandrivelong-term,profitablegrowth.Wetypicallyconcludethatgrowthisthegoal,andaninnovativecultureisacriticalenablerameanstotheend.So,aswerespondtothequestionofHowcanIbuildacultureofinnovation?wethentalkabouttheseveraldimensionsofthepuzzle,thelevers,thatmustbeviewed(andtweaked)holistically.

TheStrategicLeversofInnovationCultureChange

Cultureisasoftandfuzzyconceptthatmanypeopleconsidermysteriousandimpossibletoactuallygrapplewith.Butbylookingatthesetofstrategicleversthatinfluenceculturewecanstarttogetagriponit,andtoseehowwecanshapeit.

Thefollowingmodelshowsthatcultureisshapedbytheongoinginterplaybetweenseveralvariables,eachofwhichmayenableorinhibitinnovation.

ExternalEnvironment

Leadership

organizationaleffectiveness.

EnablingTechnology

Processes

Culture

TheRelationshipbetweenInnovation,CultureandGrowth

Strategy&BusinessModel

Metrics,Incentives,Rewards,Recognition

Structures

Results/Performance

PeopleOverthepastfewyears,therehasbeenwidespreadrecognitionthatinnovationisalsocriticalforbusinesssuccess.However,few

organizationshavebeenabletounderstandtheexplicitlinkagebetweencultureandinnovation,ortocreatestrategiesforreshapingcultureinawaythatenablescorporategrowththroughinnovationordrivesinnovativethinkingandbehaviorattheindividuallevel.Seniorexecutivesoftenaskus:HowcanIbuildacultureofinnovation?Beforewerespond,weask:

Thesevariablesare:TheExternalEnvironmentTheemergingtrends(e.g.,demographic,social,competitive,industry,customer/consumer,technology,environmental,regulatory,andmanyothers)thatinfluencetheorganizationandtheworldinwhichitwilloperateinthefuture

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StrategyandBusinessModelTheorganizationsexplicit(orimplicit)functionaldesign,andstrategiesforcompetingandgrowinggiventheexternalenvironmentLeadershipHowtheorganizationsleadersinfluencestrategicdirectionandday-to-dayoperations,boththroughtheirexplicitdecisionsandtheirmoresubtlebehaviorsProcessesHowstrategiesareexecutedandhowworkisaccomplishedthroughday-to-daypracticesandinteractions,bothinternally-andexternally-focused.Thiscanbeverybroad,andincludes:thewaysthecompanyinteractswithitscustomers/consumers;thewaysvariousinternalfunctions/departmentsinteractrelativetoinnovation;thewaysinformationisshared;thewaysemployeescontributenewideas;thewaysideasareprioritized,tested,developed,killedoff,andimplementedStructuresTheformal/informalorganizingprinciplesandfunctionaldesigns(bothinternalandexternal)thatenable(orinhibit)collaborationandguideemployeebehaviorPeopleTheskillsetsandmindsetsofindividualswhoworktogether,includingemployees,externalpartnersandsuppliers,etc.ThishasimplicationsforhiringandtrainingMetrics,Incentives,Recognition&Rewards

internal,organizationalrequirementsfortheappropriateexecutioncanthenbeputinplace(i.e.,strategymustprecedestructure).Bothcultureandbusinessperformanceresultdirectlyfromthedegreeofalignmentbetweenthestrategyandthewaytheorganizationhascurrentlysetupitslevers.Whilethismodelmayappearstatic,managingtheleversisactuallyaverydynamicprocessthatrequiresongoingattention.

Itisbymanagingtheseleversthatanorganizationhastheabilitytoinfluenceitscultureandtoimpactitsabilitytoinnovate.

Leadershipshouldensurethatbothstrategicandtacticaldecisionsaroundtheseleversalignto(oratleastdontundermine)theorganizationsspecificgrowthandinnovationgoals.Creatingnewchangeeffortsthatimpactanyofthedimensionsofthemodelcanmakeasignificantdifferencetotheorganizationscultureanditsabilitytoinnovate.

BelowtheSurface:ManagingtheMundane

Thismodelofthestrategicleversofinnovationculturechangeprovidesaholisticframeworkfortakingaction.Butshapingculture,especiallywhenitcomestocreatingacultureofinnovation,isalsoadailytaskthatcontinuallyinvolveslookingattheaffectofthemundaneonstrategicissues.

Theformalandinformalmeasuresthatdrivethekindsofinnovation-relatedbehaviorsanorganizationwantstoseefromindividuals,teamsanddepartments.Anunhealthytension

OrgStructureProcesses

Vision&StrategyStatedValues

oftenexistsbetweenlonger-termcorporateaspirationsandshort-termmetricsEnablingTechnologyCapabilitiesandtools(e.g.,internet-basedcollaboration/communicationstools,ideamanagementorideacompetitionapplications,etc.),thatallowemployees(andexternalpartners)toconnect,shareknowledge,andinnovate

Theexternalenvironmentinfluencesanorganizationsoverallstrategyaswellasitscultureandtheperformance/resultsitachieves.Whilemanagingexternalforcesischallengingifnotimpossible,thewayanorganizationchoosestosetupitsstrategyandbusinessmodelshouldideallytakeintoaccounttheexternalinfluencesthatrepresentopportunitiesandthreats.Oncestrategyandbusinessmodelaredefined,the

Symbols&StoriesSharedAssumptionsUnwrittenRules

NormsValue

Acommonmetaphorforcultureistheiceberg.Icebergsfloatontopofthewaterandarevisibletotheeye,butbeneaththesurfacetheymayextendhundredsoffeetandcanbesignificantlylargerthanwhatsvisibleabovewater.Asametaphorfororganizationalculture,thepartoftheicebergabovethesurfaceisthevisibleculture,includingsuchthingsasthestatedvision,missionandvalues,organizationalcharts,policiesandprocedures,andformalprocesses.

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Aswelookbeneaththesurface,however,wefindcluesastothewaywedothingsaroundherenorms,unwrittenrules,sharedassumptions,takenforgrantedbeliefs,processworkaroundsandsoon.Whatsabovethesurfaceisntalwaysconsistentwithwhatsbelow.Often,itswhatsbeneaththesurfacethatreallysupportsorinhibitsorganizationalcultureandtheabilitytoinnovate.

Thebehaviorofleadershipisarguablythesinglemostimportantfactorindrivingculturechange.Cultureisinfluencedbyjustabouteverythingthataseniorleaderdoes.Frommajororganizationalstructureredesignstominorpassingcommentsthatconveyaleaderssubtlepersonalityandvaluejudgments,cultureisdynamicallyexpressed,createdandre-createdeverymomentofeveryday.Whileitistruethatleadershipstartsatthetop,itiscertainlyasharedresponsibility.Tosucceedinthelongterm,organizationsmustfostertherightkindsofinnovation-focusedskillsetsandmindsetsnotjustamongthemostseniorexecutives,butalsowithleaders(andfutureleaders)atvariouslevelsthroughouttheorganization.Infact,thereisoftenafrustratingdisconnectinwhichexecutiveleadershipisindeedwalkingthetalkofinnovation,whilemid-levelleadersaretoofocusedontheirday-to-dayactivitiestospendanytimeoninnovation.

Bydevelopingspecificinnovation-focusedbehaviorsbehaviorstargetedataddressingthebelowthesurfaceaspectsofcultureleaderscanaffectchangeinmanyways.Forexample,theycanbegintoshifttheorganizationawayfromaCYAmentality/riskaversiontowardsmartrisktaking;awayfromaninsularNotInventedHereattitudetowardanopen-mindedcuriosityandwillingnesstolookbeyondtheirusualfourwallstoembraceanOpenInnovationapproach.Tofostersustainableinnovation,todaysleadersmusttakeaproactiveroleinfosteringanorganizationalculturebypullingtheleversthatenableinnovation.

Threecomplementarystrategies:Envisioning,CommunicatingandSponsoring.

Usingtheinnovationculturechangemodelasabasis,threecomplementarystrategiescanbecombinedtofosteracultureofinnovation:Envisioning,CommunicatingandSponsoring.

Collectively,thesestrategiestapintoboththeformalleversaswellasintothemundane,lessvisibleactivitiesthatshiftinnovationculture.

Envisioning

CommunicatingSponsoring

Envisioning:Envisioninginvolvesdefiningavisionoftheidealfuturestatefortheorganizationthatiscreative,unique,compellingandworthwhile.Thisfuturestateincludesthetraditionalcorporatevisionstatementbutalsoensuresthatthebusinessvisionisnoble,highimpactanddescribestheuniquelong-termdifferencethecompanycanmakeforitscustomers,thecommunityandtheworld.ButEnvisioningisnotjustaboutcreatingavisionforthebusiness.Leadershipmustalsooutlineavisionfortheroleofinnovationitself.Thisincludes:astatementaboutwhyinnovationisimportanttotheorganization;adefinitionofinnovation;whatisexpectedoftheemployeesascontributorsthemselves;thespecificcommitmentsthatleadershipwillmaketodriveinnovation;andmetricsformeasuringinnovationsuccesses.

Communicating:Communicatingforculturechangegoesbeyondtraditionalcorporatecommunications.Whileformalcommunicationscertainlyplayakeyroleindrivingculturechange,fosteringacultureofinnovationmeansalsobecomingattunedtotheinformalcommunications.Leaderscanbeginbyfirstgainingsensitivitytotheinformalcommunicationsthatexistwithintheirorganization.

Toassessthetruenatureoftheorganizationalcultureitisessentialtogainanunderstandingofthestories,folklore,symbolsandritualsthatimplicitlydirectemployees,partnersandevencustomers.Thisincludessuchtabootopicsas:thewaywedothingsaroundhere,whatthecompanyactuallyvalues,andwhatleadershipsaysvs.whattheyreallymean.

Forbetterorforworse,someofthesestories,folklore,symbolsandritualsmaybeverypowerful.Somewillhelpfosteracultureofinnovationwhileinothercasesthesemessagesandassumptions

maybeveryrestrictive,withaverypowerfulgrip,

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andmayseverelylimitemployeesabilitytostepupandmovebeyondthem.

Oncetheexistinginformalcommunicationsareunderstood,itbecomespossibletoidentifyopportunitiesforreinforcingpositivemessagesandovercomingthosethatimpedeinnovation.Thisincludesdemonstratingnewbehaviors,andcreatingnewstories,symbolsandritualsthatestablishafreshdialog,andthatpromotevalues,normsandassumptionsmoreconsistentwithacultureofinnovation.Forexample,onecompanyinterestedinaddressingaseriousdeficiencyinrisk-takingestablishedaGoldenTurkeyAwardthatwasgivenquarterly,withalight-heartedyetseriousspirit,totheindividualorteamwiththegreatestinnovationfailure.GivenpubliclybytheCEO,theawardbecameasymboloftheimportanceofembracingriskandproactivelylearningfromfailureasanessentialpartoftheinnovationprocess.

Sponsoring:Sponsoringacultureofinnovationmeanstakingspecific,tangible,andvisibleactionsusingany(orall)ofthestrategicleversforinnovationculturechange.Thedepthandbreadthofthissetofactionswillvary,dependingontheorganizationssituation.

Whenleadershipvisiblysponsorsaninitiativefocusedonsupportinginnovation(suchasholdinganinnovationoffsite,orinvestinginideagenerationsoftware),thissendsastrongmessage.Itcanestablishpositive,newstoriesthatcreateenergy,enthusiasmandoptimismthroughouttheorganization.Thebadnewsisthatifthecommitmentisnot100%,ifthesupportingsystemshavenotbeendeveloped,oriffollow-throughislacking,thingsfallflat,whichcausesemployeedisillusionmentandacredibilityissue.Thebottomline:dontsponsorinnovationunlessyouarereallycommittedandfullypreparedtoseeitthrough.

GettingStarted:ConductinganInnovationCultureAssessment

Thefirststepistoconductacandidassessmentbasedontheinnovationculturemodeltounderstandwheretheorganizationisdoingwellinitsinnovationefforts;toidentifytheenablers/inhibitorsofinnovation;andtocapturesomestoriesoftheorganizationsinnovationsuccessesandfailures.Thisassessmentisconductedthroughinterviewswithabroadsetofkeystakeholders/leadersfromdifferentfunctions,businesses,etc.,andmayalsoincludekey

customers/partners.Sometimestheseinterviewsmaybesupplementedwithanonlinesurveythatengagesemployeesacrosstheorganization.

Theinterviewdataisusedtocraftasetofpreliminaryrecommendationsonwhichleversshouldbepulledandhowtodeliverthemostimpact.Formanyorganizations,themostcriticalleversareLeadership,Structure,ProcessesandMetrics.Forexample,arecommendationmightbetosetupanew,formalorganizationalstructure(e.g.,createanInnovationCounciltosupportenterprise-widestrategicinnovation;orestablishafundforsmall,accountableincubatorteamstopursuepromisingnewideas).Anotherrecommendationmightbetodevelopacohesiveprogramofinnovationmetrics,incentives,recognitionandrewardstohelpfostersmartrisk-takingandtodriveahealthierbalancebetweenshort-andlonger-termcorporategoals,ortomotivateemployeestoactivelyandfrequentlycontributeinnovativeideas.

EachsetofrecommendationsisaccompaniedbyasimpleRoadmapthatincludes:actions,milestones,roles/responsibilities,high-levelresources,successmetrics,nextsteps,etc.

Culture&Long-termProfitableGrowth

Byexaminingandpullingthestrategicleversofinnovationculturechange,andbypracticingthestrategiesofenvisioning,communicatingandsponsoring,itispossibletofosteracultureofinnovationthatwilldrivelong-term,profitablegrowth.

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AboutInnovationPoint

InnovationPointisanon-traditionalconsultingfirmthathelpsitsFortune1000clientstakeastrategicapproachtoinnovation.InnovationPointblendstraditionalandunconventionalmethodologiestoidentifybreakthroughopportunities,developgrowthstrategiesandconsumer-inspirednewproducts,andtoalignorganizationalstrategyanddesigninawaythatsupportssustainableinnovation.Clientsinclude:PepsiCo,Frito-Lay,DeanFoods,Kimberly-Clark,Cisco,Agilent,Hewlett-Packard,Colgate-Palmolive,Hill'sPetNutrition,Schwab,Visa,JPMorgan/Chase,MayoClinic,AlegentHealth,Kaiser,Medtronic,Hoffmann-LaRoche(Switzerland),Philips(Netherlands).

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Creating a Culture of InnovationPosted by Edward Goldman on October 11, 2013 at 9:36amView Blog

It is easy for many organizations to say that they support innovation. They discuss how they are going about it and how they are providing some resources towards the effort. But when you pull back the surface the support is lacking. Their reward systems that do not support innovation just stifle it. They have review systems designed to ensure only completed projects and programs are recognized and they only reward success. Lastly, they only look at today's results and not towards the future. The talk says "goinnovate," but the walk clearly supports only taking risks that will ensure success.By only supporting the incremental improvements within the organization, we take no risks. This will force teams to think about small next steps and will in turn hamper our organizations ability to drive innovative thinking. The answer is possibility thinking - starting with a clear definition of where you want to be and then spending time trying to figure out what has to happen to make it true. Not focusing on the next single improvement, but rather the whole picture first. This frees us from the constraints of the current system and processes and allows for a more open field of possible routes to get to a solution. I like to think of it as the difference between a great sprint hurdler and a fair one... A great one focuses on the finish line and the hurdles are where they know them to be; a fair one only focuses on the next hurdle.This helps set the mindset, but does not always lead to success. In order to drive towards innovative thinking, failure has to be an option. Understanding that the lessons that you learn from failure leads to success is the key to any learning organization. When you are a child, you do lots of things you should not, but through learning the hard way, you find the paths that work. Within companies, we need to do the same. If every project was exactly the same, every issue was exactly the same, all the same people were involved and no human error possible, then maybe we could follow exactly the same method to get to the same result. But in my experience, that is seldom the true. Budgets are different, new people come onto the projects, new businesses are being driven, new capabilities are desired, and these force us into coming up with new capabilities and solutions. Also, in my experience, any successful project or innovation is made up of lots of failure to achieve the results. Support of these failures is critical to their ultimate success. Innovation happens more frequently.Support of failure does not mean that you need to build out a new reward system that provides monetary compensation for each failure, Congratulations Bob that is your third failure this week, here is your bonus!" It means that you recognize it, don't spend time looking for who is at fault and penalize everyone, but focus on what was learned from the failure and how to overcome it. How can you avoid it in the future and strive for better results? This is one reason that small companies or newer companies caninnovate faster in many cases. They do not have the time to search for all the guilty parties and punish them in their reviews, they have to continuously evolve and deliver quickly, which forces them to adapt and learn from these mistakes. They are also very focused on the goal and not always married to the path to deliver. This frees them from the constraints and allows for more dynamic approaches.The hardest part of any innovation culture is to simply stop things. When innovationsare not panning out, delivering the results expected, or driving to the capability you thought, you need to stop the work and simply move on. This is much harder for people and organizations to do as any innovation begins with a passionate individual or group that truly invests in the direction. Stopping this is a bit like stopping an aircraft carrier in that it takes time and much directed energy to stop. While very difficult, it is a critical step in managing those critical resources you have directed towards innovation

Developing a Culture ofInnovationPosted May 20, 2014inChange,Culture

byAmanda Kaiser

Kodak, a once a $10 billion dollar company, failed. Just when they needed toinnovatethe most, they focused on optimization instead.Innovationand optimization are at either ends of the spectrum. Its hard to do both. The mostinnovativeorganizations dont optimize well, and the most optimized organizations dontinnovatewell.Some optimization projects work well for big manufacturing firms. ISO, Kaizen and EMAS help large industry remove inefficiencies from processes allowing them fewer employees, less waste and more profit per piece. We expect this type of thinking will benefit our non-manufacturing organization as well but this is not always the case.

Optimization is a trap.Optimization projects promise gains in efficiency but in a non-production based environment those gains can be really hard to measure. Was the work to do the project worth the gain in the long run? Optimization projects themselves create a lot of busy work and can make us feel productive even though were not getting a lot done. Its easy to sign up for and approve these kinds of projects; they feel safe. Additionally while staff is working on an optimization project they are not doing the work that adds value to customers, members or attendees. Finally some companies are so single-mindedly focused on optimization they ignore that the very products and processes they are optimizing are going extinct.

Optimization influences culture.It seems far safer to focus on doing what you are already doing faster, better or cheaper. When staff is in that safety zone for too long getting out of it becomes a monumental undertaking. Hierarchy, processes, bureaucracy are all established and firmly placed in the name of optimization. Optimization creates a special kind of culture, a culture resistant toinnovation.Innovationneeds a culture ofinnovation.Collaboration and openness are two essential ingredients forinnovation. To be able to collaborate you need trust. To trust you need time and some interesting projects for the team to work on. The bestinnovativeteams are able to generate tons of solutions to a problem and together come to a consensus about the handful of ideas that will move forward to be tested. This organic process can feel haphazard and risky not tolerated well by efficiency-driven cultures.

Moving from optimization toinnovation.You will have to make a choice. Do you want more optimization or moreinnovation? If you wantinnovationthe way staff think, work, interact and are rewarded needs to change. This will take time and constant determination.Had Kodak pulled back a bit from optimizing their already ridiculously profitable film business they may have been able to see that all those efforts were futile. That business was going away. Instead they could have spent their resources on changing their culture and embracinginnovationwhile they still had time.Amanda Kaiser is Chief Path Finder at Kaiser Insights LLC. You can find her atwww.SmoothThePath.net