Monday, April 01, 2024

An innovation culture or a culture of continuity

 I've been reading and thinking a lot lately about what is described as a "culture of innovation".  While I would like to think that such an animal exists, the more skeptical side of me doubts it.  I think a culture of innovation is kind of like a unicorn:  it would be cool if it existed, and some people claim to have seen one, but when you get up close it's just a normal animal that happens to be missing a horn.  In other words, we see what we want or hope to see.

Every business has a culture.  Let's start with base principles and agree on that.  Another base principle is that most companies desire innovation in the form of new product and services to create new revenue and new market share.  There is a more powerful desire in most companies, however, and that is the desire to avoid variance, reduce risk and maintain consistent, profitable operations.

Culture conflict

What's challenging about creating a corporate culture steeped in innovation is the dichotomy between performance and disruption.  Most corporate cultures are established to continue the status quo, to create products and services for an existing market, at an existing price point and to generate a reasonable rate of return with as little variation and risk as possible.  This is the "culture of continuity" (I'm going to trademark that) that exists in most companies.  A culture of continuity is informally established to ensure that businesses can do the everyday things, regularly and consistently, to continue to exist.  That typically means avoiding risk and uncertainty, seeking to conduct familiar work more effectively and constantly, incrementally improve efficiency and profitability.  Risk, exploration and variation are not overly welcome in a culture of continuity.

Further, while most corporations will pay lip service to innovation, and would enjoy new revenues and profits, they view innovation as a project or an activity that is discrete.  Innovation is for creating one product or one service in an area of need, and once a new product or service is created, or the innovation project fails (which is the general expectation), normal business processes will resume. If innovation is not a permanent component of the operation, why change the culture of continuity for an activity that will have a very short lifespan and introduces risk and variation?

Switching on, or switching off, innovation

What companies fail to realize is that to innovate means to adopt a new way of thinking, to promote creativity and exploration, to brainstorm things that are likely to fail, to run experiments and test ideas, to gather ideas from customers and markets and to spot emerging opportunities.  To do all of this work effectively, innovation needs to be fully embedded in the regular, day to day operations.  It is not a capability or a project that you switch on or off, any more than you switch on or off a highly efficient supply chain.  People do well what they do often, and the infrequent nature of innovation work does not lend itself to learning and expanded capability.  Therefore, all innovation work is new and uncertain.

Cultures of continuity are built on well-known and practiced behaviors, norms and processes.  When a team tries to introduce new ideas, new methods, creativity, new perspectives, the culture naturally pushes back, like white blood cells attack a bacteria or virus in the bloodstream.  The best that management can do in a culture of continuity is to protect or wall-off the intruder or request good behavior from the existing culture for a short period of time, until the antibodies go to work.  This is why so many innovation activities are conducted in labs or greenhouses or separate locations, where the existing culture of continuity cannot respond.

This raises a few questions:

  1. Is it possible for a company larger than a startup to have an innovation culture?  Answer is:  probably not.  There are a few companies that demonstrate continuous innovation, and I wrote about them in Relentless Innovation, but they are the outliers.  An established corporation with existing products and market share, with a responsibility to the market and shareholders, cannot operate in a culture purely focused on innovation.  Efficiency and consistency must dominate.
  2. OK, if larger companies have a culture of continuity, how do they innovate?  This answer depends on how you want to innovate and what your desired outcomes are.  For example, even in a culture of continuity you can create incremental innovation, where you add new features to existing products, what is often referred to as Horizon One.  What becomes more difficult is Horizon Two and Horizon Three, more transformative or disruptive innovation.
  3. How does a company with a culture of continuity attempt disruptive innovation?  There are several ways a more conservative culture can do more disruptive innovation, at least in the short term:
    1. Acquire it.  A good deal of innovation in larger corporations is accomplished by acquiring startups or very small companies with great new ideas.  Then, the challenge is leaving the small company alone to the extent that the culture of continuity does not infect the acquired company.
    2. Partner for or license new insights or technologies created outside the organization - this is typically called "open innovation" and yes, ideas or technologies from the outside will face a significant "not invented here" resistance.
    3. Isolate it.  Just like Steve Jobs moved the Mac development to a different building, you may need to isolate new product or ideas from the existing culture.  This will make developing the new idea simpler and easier, but you will confront the existing culture when you develop or launch the new idea.
  4. Suppose we want to adapt the culture of continuity and introduce some facets of innovation.  What can we do?  There are ways to introduce more innovation capacity and to educate a culture of continuity to accept some risk and uncertain, some exploration and some variation. 

    This change requires investment in time from executive leaders over a period of years.  I am not joking.  You can get any culture to adapt momentarily to any demand, just like squeezing one side of a balloon will shift air to bulge on another side.  But when the management attention wanes, the air will shift back and the culture will snap back, with implications for the people doing the innovation work.  If you cannot or will not ensure executive involvement, engagement and explicit rewards over at least 18 - 24 months, don't talk to me about a "culture of innovation".  Be happy with periodic innovation projects.  

    Clayton Christensen and others wrote the Innovator's DNA to address some of these ideas.  The authors point to people (initially leadership and then cascading through the organization), processes and philosophies ("a culture that encourages everyone to innovate and take smart risks").

    If you can get management engagement, then focus on communication, compensation and rewards, funding for innovation activities and training.  Innovation will be a new activity for many people, and they will need training in creative thinking, problem solving techniques, exploration and a lot more.  It will take time for people to shift their perspectives and to re-awaken their creativity.  You'll need to fund that work and ensure people fully embrace the goals and the skills.  You'll also need to expect some investments and failures in the first activities.  After all, even the Olympic gymnasts fall occasionally.  New gymnasts fall a lot, and the innovators will get discouraged if their initial work and likely failure is greeted with disdain.
  5. Who should be responsible for the care and feeding of innovation attributes if we cannot have a culture of innovation?  There is no one person responsible for innovation in a company, although some have a "Chief Innovation Officer".  We would no more expect one person to manage all the financial transactions of a large corporation (the CFO for instance) than we should expect one person to be responsible for changing and educating and compensating and communicating the changes needed for innovation activities and innovation culture development.  The executive team needs to be on board and supporting these efforts.  Which means that innovation needs to be part of the corporate strategy, something the executive team is compensated and measured on.
If all this seems a bit dire or a bit "much", it is, but this analysis is based on 20 years of innovation involvement.  Yes, it is possible to create amazing products in any corporation.  Yes, companies can string together several innovations in a row.  But very corporations have anything approaching a culture of innovation, and for good reason:  the majority of their people drive day to day operations.  It's entirely possible to introduce more innovation thinking and capacity into a large organization, it just takes a lot of focus and time.  Large organizations will very rarely ever have a "culture of innovation" because that culture is too focused on new ideas, discovery, experimentation and not enough on producing products for tomorrow's sales goals.

I suppose it is possible for companies to balance two conflicting models - continuity AND innovation at the same time.  Roger Martin, in his book The Opposable Mind, says this is how business leaders SHOULD operate, but infecting the entire business and its culture with two relatively diametrically opposed ways of working and thinking is walking a tightrope.  I think you can have a culture of innovation with periods or exceptions of continuity, or a culture of continuity with periods, carve outs or exceptions for innovation, but few companies have tried to do both simultaneously.

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posted by Jeffrey Phillips at 7:51 AM


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