Guest post by Holly Green

Does Your Culture Support Innovation?

There’s a lot of people talking about innovation these days, myself included.

The good news is that business leaders seem to be sitting up and taking notice of this important subject. The bad news is that once a topic becomes popular in the media, people have a tendency to see it as the next “management flavor of the month.” In other words, they perceive it as a quick fix solution rather than a long-term change in the way they do business.

Remember a few decades ago when everyone jumped on the continuous improvement bandwagon? Very quickly, companies of all shapes and sizes began implementing six sigma, lean manufacturing, and other types of process improvement programs. Many had no clue what they were doing or worked hard without a link to overall strategy and success. And most had very unrealistic timelines and expectations for the results they hoped to achieve.

Not surprisingly, the continuous improvement movement failed to produce any overnight successes. Companies that approached continuous improvement as a quick fix soon discovered the error of their ways, usually ending up worse off than before they started. Those that invested the time and effort in making continuous improvement a way of life are still reaping the dividends.

The same thing needs to happen with innovation. To succeed, it needs to become an integral part of how you do business. Innovation requires ways of thinking that must underlie all the process, systems, and management behaviors in an organization. Creating ongoing innovation in an organization needs to be thought of as a long-term process, especially if you are used to reacting to change rather than creating it. Most of all, innovation requires an organizational culture that nourishes and supports it as a way of life rather than as a short-term band-aid for current business problems.

To create a culture that encourages rather than inhibits innovation:

Create a Powerful Context

The strategic planning process starts with defining what winning looks like for your organization. Creating a culture that supports innovation begins the same way. Start by explaining why innovation is important and how it will help your organization win. Paint a picture of what your organization will look like when innovation becomes a way of life and how it will benefit all your key stakeholders. Always address the “why” before moving on to the “what” and the “how.”

Help People Learn to Think Differently

Most of us don’t really know how to pause to challenge our own assumptions, change perspectives, or even how to consider different angles. We are not used to slowing down just a little to consider options, balance the big picture with the details, or seek new data. As adult humans, we are not naturally prone to constantly test and update our mental models about our world, our customers, our peers, and our organization. Most of us need tools and support to learn these critical new skills and abilities. Make sure you set your organization up for success by providing the necessary support in the form of learning sessions, tools, and techniques to help people think differently.

Link Individual Effort to the Big Picture

Not only do employees need to understand why innovation is critical to the organization, they must also understand how the work they do fits into the overall effort. After giving employees the big picture, tell them how and where they fit in. Ask for their input on how to improve products, processes and workflow, and let them know they will have some degree of autonomy in how they perform their jobs. In addition, stress the importance of open communication up and down the management chain as well as across teams, departments, and work units.

Build and Encourage Diversity

One of the quickest ways to kill innovation is to surround yourself with people who think the same way, make decisions the same way, and tend to avoid conflict. Ask yourself questions like: Do we develop teams with diverse skills and analytical styles? Do we accommodate all styles in meetings and conversation, or do we favor one style over the others? As an organization, do we value contention, debate, and tension or do we constantly rush to consensus? Conversely, do we get stuck in analysis paralysis and avoid making decisions for fear of failure?

Use Supportive Language and Behaviors

Many organizations have built-in language patterns and behaviors that do not support innovation. Seemingly innocuous phrases like “Don’t bother, we’ve already tried that” or, “Nice idea, but management will never go for it” can instantly shoot down any good ideas that may arise. Instead, use language that encourages employees to contribute ideas and stay open to new possibilities. Do not tolerate gossiping, politicking or ridiculing new ideas, no matter how far-fetched. If employees don’t feel safe voicing their ideas and opinions, innovation will never happen.

Acknowledge and Reward Innovation

It’s one of the oldest axioms of human nature – people repeat behaviors they get rewarded for. Does leadership in your organization give employees continual feedback on the results of their efforts? Do you privately acknowledge the efforts of individuals? Do you recognize them publicly? Do you continually communicate your commitment to innovation at all levels of the organization? Most important, do you demonstrate that commitment by your actions and behaviors as well as the words you say?

Talking about innovation is good. Putting it to work in your organization is even better. For best results, link innovation to your strategy and think of creating ongoing innovation as a long-term process rather than a short-term goal. And make sure your culture provides the necessary context for it to thrive.

Holly is the CEO of THE HUMAN FACTOR, Inc. (www.TheHumanFactor.biz) and is a highly sought after and acclaimed speaker, business consultant, and author. Her unique approach to creating strategic agility, helping others go slow to go fast, will change your thinking.

I’m always staggered by the figures on the the development of China and India. Sometimes numbers are almost too big to comprehend but a McKinsey report from 2008 gave a nice summary of the projected transformations that will occur in China before 2025. This urbanization is the biggest migration of people in world history. Approximately 350 million people (the population of the US) will be added to China and about 1 billion Chinese will live in cities. To accommodate these people China will need:
* 221 cities with more than 1 million people (Europe currently has 35).
* 8 mega cities with more than 10 million people.

These cities will need:
*5 billion square meters of road.
*170 mass-transit systems.
*40 billion square meters of floor-space in over 5 million new buildings.
*50,000 of these buildings could be skyscrapers, the equivalent of building 10 New York cities.

China still has the reputation for being the world’s factory, manufacturing products at low cost. China’s car and truck manufacturing alone stands at about 20 million units per annum. However, the next phase of Chinese and Indian growth will be the shift to a knowledge based economy. When that happens, the world will be a fundamentally different place, both economically and politically.

This transformation may happen faster than we expect. Tim and I teach the innovation course in the MBA program at the University of Queensland and this semester we have been joined by visiting academics from Guangdong University of Foreign Studies. They like the innovation course and tell us that it is very different from what they have seen in other business schools. As far as I can tell, they are visiting several business schools around the world to put together a “best of breed” MBA program. These Chinese academics are smart, articulate and very capable with research and it won’t be long until we see many Chinese and Indian business schools in the top 100 in the world.

Is a world that is dominated economically by China and India a new thing? Have a look at the very confronting chart below. A world dominated by the “west” is a relatively new phenomenon. The rise of the “east” may just be a reversion to the mean.

One area of thinking around innovation that doesn’t get much attention is how ownership and governance affects the ability of an organization to be innovative. It’s an issue that’s been playing on my mind for a few years but a recent conversation has prompted me to write down some ideas. First. I’ll just outline the conversation and then I’ll put down a few thoughts about links between corporate goverance and innovation.

Andrew had been the innovation manager for a particular firm for a number of years. We never really collaborated on any projects but we often catch up over a cup of coffee to swap ideas. Earlier this year, I heard that he had left the company which suprised me because the company is known for its emphasis on innovation as a way of competing and generating new lines of business. Without appearing to be too blunt, I asked him why he left.

His answer was that he had gotten tired of banging his head against the wall and that there was no way that the company would really become innovative. There would always be a focus on small improvements and relatively short-term gains. When I asked him to explain what he meant by this, he said that the fundamental problem was the ownership structure of the firm. As a partnership, the way to become a partner was to sacrifice work-life balance for twenty years to get a substantial ‘annuity’. Asking partners to invest in more risky and longer term business proposals is really like asking them to risk their annuity for a return that they may never see. Getting short-term and incremental business improvements funded was no problem, but the partners were never going to have the necessary risk appetite for innovation.

I could see his point and I could also see the problem from a partner’s point of view. After years of stress and long hours to get the parnetrship, why would I be interested in the long-term future of the business? I have earned my reward, and nobody is going to take that from me until I retire. As an MBA student said to me in a class last night, becoming a partner is like a pie-eating competition and the prize is that you get to eat more pie.

In terms of the research, we really don’t know that much about ownership, governance and innovation. A colleague of mine, Kevin Hendry, has been doing some really nice work on how boards develop strategy. His research shows that boards behave very differently from each other because the legal duty of the director is quite ambiguous. While most people believe that the job of the director is to maximize shareholder value, Kevin points out that Australian law states that the duty of the director is to act in the best long-term interests of the company. The only time where there is a mandate to maximize shareholder wealth is when the company is subject to takeover.

I’d argue that innovation is in the long-term interest of every organization, but I suspect that most directors struggle with the concept. I’m not sure how many would be able to talk about the relelvence of innovation to different industries or how leading companies successfully manage innovation. According to Kevin’s research some boards are actively involved with management in shaping strategy while others are more of a ‘rubber stamp’. A lack of knowledge on managing innovation may not be too much of a problem for a rubber stamp board but an interactive board who don’t understand innovation will probably be a major obtacle to the firm becoming more innovative. We need to do a lot more work to undertand how board literacy and interaction with management shapes innovation strategy.

On the other hand, a lot of innovative firms that I know are owned by entrepreneurial people who have an appetite for risk and understand the innovation process. There may be a real advatage here for owner-operated firms.