Tuesday, November 25, 2008

Corporate Culture: the enabler for innovation

If you've followed the innovation market for any period of time, you'll know that most innovators and innovation consultants will tell you that innovation can happen anywhere once or twice, but can be difficult to sustain. The difficulty in sustaining innovation over time in any firm relates to inertia, fear of change, avoidance of risk and the difficulty of constantly creating something new. In other words, the barriers are not necessarily about generating ideas or understanding trends in the marketplace, or the ability to convert good ideas into new products and services. No, we've maintained for years now that the biggest barrier to consistent, sustainable innovation in any firm is corporate culture. And, thanks to some new research from several noted professors, it appears that our contention has been proven correct.

Tellis, Prabhu and Chandy, writing for an upcoming Journal of Marketing edition, have published their research and findings into the critical drivers for innovation success. Their hypothesis is that other factors have been identified as the key drivers for innovation, rather than corporate culture. Those factors could include geography, national culture, government involvement and many others. However, after conducting surveys across over 700 firms and 17 countries, their finding bear out what many of us have always maintained. No matter where you are located, no matter what product or service you provide, innovation is first and foremost a factor of corporate culture.

At OVO, we've always believed that there are three important enablers to innovation within any organization: corporate culture, compensation and communication. By culture we mean the factors that enable innovators to work. The ability to take risks and fail without punishment. The ability to cannabalize or stretch the business outside of its expected scope. Whether or not the firm welcomes new ideas or has a "not invented here" mentality. Two other factors are equally important - compensation and culture. From a compensation standpoint, do we reinforce in the evaluations and paypackets what we say is important? Do individuals and teams have the appropriate resources to innovate? Are they rewarded and evaluated on their innovation efforts? Often, firms will tell their employees to innovate but will not change their evaluation schemes or compensation or reward structures, so people quickly revert to doing what they are evaluated on and paid to do. Finally, we believe communication is very important for innovation. What does innovation mean to the business? Does the senior leadership constantly reinforce the need and focus on innovation? How are these focus areas communicated and how frequently?

From a company culture point of view, the study looked at six variables or concepts to measure innovation:

  1. willingness to cannabalize existing products or services
  2. future market orientation
  3. Risk tolerance
  4. Product champions
  5. Incentives
  6. internal markets

These serve as good proxies for the willingness of the corporate culture to innovate. Their findings suggest that of these, risk tolerance, future market orientation and willingness to cannabalize were evidenced in innovative firms, as well as placing an emphasis on incentives (which we read as compensation).

OK, so if this study is at least one confirmation of the importance of a culture that encourages and embraces innovation, what can your firm do? First, use these factors as a gauge. Does your firm encourage risk taking and does it have a future market orientation? If not, can these factors be changed or influenced? Changing a corporate culture does not happen overnight, but it can happen through concentrated focus by the management team and rewarding/recognizing the behaviors that are sought.

There's really no excuse for failing to innovate. We understand the need to bring more new ideas to the market faster, and now we've got at least one clear data point that identifies the biggest barrier to something we all recognize we need to do. If your firm is already innovative, keep up the focus on the culture that supports that. If not, take the steps necessary to adjust the culture to meet your needs.
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posted by Jeffrey Phillips at 5:37 AM

12 Comments:

Blogger donald said...

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Blogger Jeff said...

It is culture that dictates success in innovation. The challenge is how do you create the culture that supports creativity and innovation. BQF had a nice recent post on creating cultures of innovation http://tinyurl.com/593uow

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Blogger K12 Blog said...

That link to the article does not seem to work.... Who are the authors exactly?

2:34 PM  
Blogger Jeff said...

Not sure the name of the people other than BQF but here is another link http://www.bqf.org.uk/innovation/2008/11/14/creating-a-culture-of-innovation/

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