Wednesday, October 24, 2012

Why corporate culture is important for innovation

A few days ago I wrote a post about why "environment" matters for innovation.  Today, in a continuing series of posts, I want to take a look at why corporate culture is such a vital barrier or accelerator for innovation.  I'm writing these posts to continue to expound on the Innovation Workmat series of articles Paul Hobcraft and I published a month or so ago.  Those articles suggest that executives have a key role to play in building an overarching framework for innovation in any organization that hopes to succeed at innovation.

Corporate Culture

Corporate culture exists at the intersection of corporate memory, corporate history, business context and operational effectiveness.  Corporate culture is what defines what a company is, why it does what it does, and in many ways sustains a presence and a facade to the outside world.  Corporate culture is what directs how people work and think, what creates tangible and intangible restrictions, establishes risk tolerances and sets attitudes and behaviors.  There's probably no more powerful intangible force in any business than corporate culture.

Corporate culture can be a positive, when it reinforces activities and thinking that matter.  3M survived a CEO who attempted to introduce GE style thinking, and remained fairly innovative in the face of stack ranking and Six Sigma efficiency focus, mostly due to a long organizational memory and a strong innovative culture.  They don't say "culture eats strategy for breakfast" in jest.

Toxic Culture

The challenge in many firms, though, is that the culture is not based on an organizational memory of successful innovation, but on an organizational memory of tooth and nail survival.  When the culture adopts and sustains short term thinking, incremental improvements and an aversion to risk and uncertainty, it can be difficult to introduce even modest incremental innovation concepts, never mind larger disruptive innovation or the risks associated with "open" innovation.  And, since corporate culture is largely intangible and made up of attitudes, behaviors and past experiences, it is exceptionally difficult to change.  That means that the firms that often need innovation the most face corporate cultures that are the least open to change.  Firms that have viable corporate cultures that help them sustain operations in a competitive space often find those cultures are resistant, or even worse, toxic when it comes to making the significant changes necessary to embrace innovation.

What is an "innovation" culture

A culture that sustains and supports innovation is one that encourages reasonable risk and uncertainty in the goal of larger, more profitable products and services.  It is a culture that is based on experimentation and discovery, because many good ideas or insights exist outside the corporate boundaries.  That suggests as well that innovative cultures have porous boundaries - people, ideas and concepts flow into, and out of, the organization constantly.  Innovative cultures understand that generating and developing new ideas is an iterative discovery process, which isn't perfect and certainly doesn't always create the product or service that customers want.  Innovative cultures also understand that when failure occurs, rather than sweep the failure under the rug, the firm attempts to extract learning and new insights so that the "failure" leads eventually to a new success.  Innovative cultures understand intrinsic reward systems, encouraging innovators to work on their ideas and to stay involved and engaged.  They don't "pay people for ideas" but recognize involvement is its own reward.  Innovative cultures sustain innovation as a way of operations, rather than thinking of innovation as an occasional, sporadic process.  Innovation cultures welcome different points of view, different perspectives and seek to association disparate ideas and technologies into new products and services.  It will be rare to hear someone in an innovative culture say "we've never done that before" as a way to shut down ideas - rather, it will be considered a challenge worth pursuing.

How do we shift an existing culture

Corporate cultures respect Newton's laws.  They like to remain at rest, comfortable in their inertia, and will remain that way until acted on by a powerful force.  Likewise, culture will resist the change force as a matter of course.  That means that to change a culture you need constant force in a positive direction for a long period of time.  This means that change to a corporate culture must be slow and steady, and the best change is change the culture wants to make, not feels forced to make.  This means change begins by creating a vision about the future and telling a story that the culture can adopt.  Once the culture and those individuals who keep and shape the culture believe the story, they will work to weave the new story into the fabric of the existing culture.  Factors like what is recognized and rewarded, what executives say, and well as what they do, matter.  Early in the shift, the culture will examine early successes and especially early failures to see what is rewarded and what is buried.  Actions speak louder than words.  Saint Anthony of Padua said it best:  Let your words teach and your actions speak.  Shifting a culture requires a significant commitment from senior leadership, but also buy-in from the people who are keepers of the culture.  These are the people who collect and tell stories about the culture and reinforce the culture through their decisions, commitments and investments. 

The three "R"s
We often talk about the three "R"s when shifting a culture:  reward/recognition, recruiting and retraining.  If we want people, and therefore the culture, to do new things, we need to improve the skills and capabilities of the people who are on board (training) and recruit new skills and perspectives to help the company and the culture think in new ways (recruiting).  Which is why your human resources or talent management team must be a vital contributor to the work of changing the culture.  Recognition, rewards, evaluation, training and recruiting are all activities they are actively involved in, and which influence the corporate team and the culture.

How long does this take?

We are constantly asked by clients - how long will it take to change the focus and intent of our culture, to make it more innovative?  This is not a change you can force in six months.  After all, your corporate culture has been constructed and reinforced since the business began.  You can't simply whipsaw a culture in a new direction and new focus in a few months.  GE famously attempted to shift from Jack Welch's priorities (Number one or two in an industry or out) to Jeff Immelt's (more innovation) by establishing corporate innovation funds to the tune of several hundred million dollars.  In the first year of funding, not one business unit accepted the innovation funds, because the existing culture that Welch left was so predominant. 

The answer is: it depends.  It depends on the continuity and focus of the executive team.  It depends on the vision you create and how the story associated with that vision is reinforced and propagated throughout the organization.  It depends on how the people who are the keepers and reinforcers of the culture are willing to change and adapt.  It depends on how risk and uncertainty is tolerated, on how open the organization is to change.  It depends on introducing new perspectives, new skills and new techniques.  It won't be fast, but it can be effective.

Corporate culture is the most powerful and most intangible barrier to innovation.  Place Thomas Edison or Albert Einstein in a corporate culture that resists innovation and we wait another decade for electric lights or special relativity.  A good idea in a resistant culture is a scream in a vacuum.  It simply won't be heard.  As an executive, a leader, a manager who wants more innovation, there's no more important aspect to focus on, and none more difficult to influence.  Nailing jello to a wall is probably an adequate metaphor.  But it must be done.  You can't sustain innovation without changing the culture, and your business can't thrive without sustained innovation.

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posted by Jeffrey Phillips at 6:03 AM


Anonymous Anonymous said...

I think improving the corporate culture of a business is key to improving efficiency and quality of work. I find that setting a certain tone each and everyday can be the difference between being an industry leader or an industry follower. I just did some corporate sales training and they really stressed how important creating a positive corporate culture is. This article really outlines some great points, I'll absolutely be using some of this information with my team!

7:40 AM  

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