Innovation Culture and Conflict

I've been thinking a lot lately about the organization and culture of many businesses, and the importance of a culture that supports and enables innovation. To create a simple example, let's group all firms into one of two types of cultures: sustaining and enabling. These are my definitions so let's get them out on the table.

A sustaining culture is one in which few new ideas are created, and the culture is all about sustaining existing products. My example in this regard is Texas Instruments. When I worked for Texas Instruments many years ago, the management team prided itself on driving down the cost of the products they created. Now, this is not to say that TI didn't create new products, just that the culture and the focus of the business was on driving out cost and scaling up production, rather than a significant focus on new product development. In fact TI spent money on new products, including a significant amount of money on microprocessors to compete with Intel and AMD. TI at that time just wasn't able to bring the innovation, creativity and culture to bear to win in markets where its sustaining culture wasn't helpful. TI became a more innovative firm when the Houston office, which was removed from headquarters, created a new product (the digital signal processor) and the management team that created the DSP took over. Even after that takeover, the predominant culture at TI is one of driving out cost and quickly reaching scale production, but TI has become more innovative.

By contrast, an enabling culture is one which identifies innovation as a critical function for differentiation and puts in place the systems, processes and culture to enable innovation on a consistent basis. Innovation and new product development are recognized as important to the organization and there is a corporate wide focus on these capabilities. To stay within the semiconductor industry, Intel was probably the most visible of the larger semiconductor firms as an enabler of technology. When your senior folks write books with titles like "Only the Paranoid Survive", there's a belief that the competitors are constantly gaining on you, and only through constant innovation and new product development can you differentiate. Other good examples of firms with enabling cultures are the pharmaceutical industry and the Consumer Packaged Goods industry.

However, over time it has proven difficult to maintain an enabling culture across the business. If we look closely at Intel, or pharmaceutical firms or CPG firms, what we'll see in most cases is a combination of the two cultures: an enabling culture in R&D and a sustaining culture in the rest of the business. After all, those firms still have to make next quarter's numbers. What falls apart somewhat in these firms is that "innovation" increasingly becomes "R&D", while the rest of the business focuses on its day to day operational issues. Clearly there are ideas and concepts to improve other parts of the business, but the sustaining culture creeps in.

What's interesting is how the cultures are bending back on themselves. Some new idea management systems in firms we've worked with are spawned by sustaining cultures trying to improve their efficiency through Lean or Six Sigma. By considering how they can become more efficient, these teams and processes are generating a lot of ideas which need to be considered and implemented, so a sustaining culture needs to become an enabling culture, at least for a while.

Where's your organization's culture on the sustaining - enabling spectrum? Outside of R&D, most firms are very focused on a sustaining culture, which is necessary but misses many opportunities. Also, as two cultures emerge in a business, there will be conflict at the intersections unless the "sustaining" folks and the "enabling" folks are working together cohesively.

Over the long term it may not be possible to maintain a truly enabling culture. As the firm grows, it may simply need to spawn small enabling organizations or teams and graft them to a sustaining manufacturing and fulfillment team. Size plays a critical role, as does the focus on the next quarter and the risk of failure. Quite possibly the hybrid culture is the best approach for a larger firm.