Culture and Innovation


One of the keys to being an innovative organisation is culture.  The way that people within our organisation interact has a big influence on are ability to innovate.

I often hear from people that their organisation has a “risk-averse culture.” When I do, I remind them that we create culture – through our own interactions every day.  So if we want to change our culture, the first place to start is with what we do ourselves.

That is the theme that caught my attention this week.

Flat Organisations Innovate More

One of my posts at Harvard Business Review Blogs talks about how organisations with flat structures are more innovative.  That topic popped up a lot this week.

Clay Parker Jones reflects on Holacracy – one of the systems you can use to build flat structures. Clay’s firm UnderCurrent has been using holacracy for the past eight months.  He says that the approach is a bit formal and over-engineered (one of my concerns about Holacracy as a tool, too).  But he then points out that the approach makes UnderCurrent more democratic, through the use of tools like a structured decision-making process and defined task outputs.  The firm also re-organises monthly based on input from the whole team.

This increase in democracy is one of the things that improves innovation outcomes in flat organisations.  As people feel more involved with decision-making, they take more responsibility.  This helps put them in a position where they are more likely to try out new ideas themselves.

Harold Jarche then pointed out a great post by Lisa Thorrell – How Many Bossless Companies Exist Today?  Lisa finds 18 documented examples of firms that run on basically completely flat hierarchies.  The actual number that are around is probably higher, but these are ones that are well-documented, and demonstrably successful.  Check out her post for the whole list.

Here are her observations about this:

These are Not Just Small Companies

Of these, six were less than 100-person companies. Some 12 out of 18 companies were less than 1000-employee companies. One third of the companies had organizations over  1000 employees, with the largest being the Basque province’s Mondragno with 85,000 worker-members.

Not Just High Tech

While the majority (11/18) are in tech-related areas, over one-third were not, representing  industries as diverse as s automotive, aviation manufacturing, tomato processing to  a natural foods supermarket chain.

Not Just Young Startups

Some of these organizations have a long history. Mondragon has been around since 1956. France’s Favi is over 50 years old and has operated without a personnel department for over 30 years. GE Aviation’s self-managed teams began over 20 years ago.

When we talk about flat firms, the first response is “no, that’s impossible.”  Well, clearly, that’s not true.  The second response is “well, this only works in small, high-tech startups.”  Again, false.  Which means that we get into two more interesting questions: where does this approach work best? and how do make this approach more effective?

These are questions that a lot of smart people are starting to pay more attention to.  Aaron Dignan, also from UnderCurrent, outlines how they work with firms to help build these cultures and structures.  It’s a must-read article – and he uses this diagram to frame their approach:

UnderCurrrent's Philosophy


Another person that’s thinking about this a lot is Dan Pontefract.  Dan got in touch with after I wrote that HBR post, and we had a chance to talk on Skype this week about his work, which was great fun.

Dan wrote Flat Army an excellent book on the same topic – how do we make flat organisations work better?  The page that I linked to has a description of what is in the book, links to sample chapters, and this diagram, which illustrates his approach:

Flat Army

CV Harquail is working on a book that talks about how generativity plays an important role in the digital economy.  She is not talking only about flat organisations, but her ideas certainly help to explain how these work.

She has written an outstanding series of posts outlining the ideas in her book.  The most recent, Generativity, in General looks at some of the benefits of the generative approach:

Because generativity is focused on growth, generativity tends to look towards the future. That future can be broadly defined; it can mean contributing to the next generation, the next step in the process, or the next business in the network. Yet even while generative behavior emphasizes creating opportunity for the future, it also creates something good right now. Whenever we act with generative concern, we ourselves feel energetic and alive. Generativity creates an active sense of expansiveness and hope, because it lets us experience ourselves as having a positive, enduring impact today and tomorrow.

The Tricky Side of Culture

We create culture through our own interactions.  This is good, because it means that we have some control over the culture in our organisations – at least in the parts that we interact with directly.  But this is bad if we don’t stop to think about the assumptions that underlie these interactions.

I’m currently reading Status Update, the new book by Alice Marwick.  It’s a though-provoking book, based on several years of ethnographic research in Silicon Valley.  Marwick does a great job of looking at some of the assumptions that lay beneath the culture of the region, and of many of the firms that originate there.

Here is part of what she has to say:

Yet the myth of equality persists, since the technology industry considers itself a meritocracy where the “good” ones — for example, talented engineers and programmers — will rise to the top regardless of nationality, background, race, or gender. When considering the dismal numbers of women (as well as African-American and Latino men) in tech, the meritocratic presumption is that these minorities aren’t good at or interested in technology; otherwise, there would be more of them.

If we admit there are structural barriers to entry, and a culture that actively discourages women and men of color from participating, then it logically follows that technology is not a meritocracy. And this threatens many dearly held beliefs of technology workers: It suggests those at the top aren’t there because they’re the best, but because of hard work and privilege. It suggests that the enormous wealth generated by tech startups and founders isn’t justified by their superior intelligence. It requires change from a culture in which male normativity is, well, the norm — to a more inclusive one where penis jokes and booth babes are no longer acceptable (and the mere suggestion to discard them isn’t met with a hailstorm of protest).

This theme was also picked up by Zeynep Tufekci, writing about the launch of Nate Silver’s new version of 538.  Tufecki uses Pierre Bourdieu and Dr Seuss (reall – go check out the post!) to illustrate some of the gender issues in technology today.  Her main point is that the people that are succeeding in technology often were misfits when they were younger, which makes it difficult for them to see the drawbacks in the current culture.

And Lauren Leader-Chivée shows that this isn’t just a tech issue either as she examines the response to Mary Barra’s response to the recall crisis at GM.

Probably my favourite post of the week was by Charlie Lloyd – he looked at another Silicon Valley phenomenon – the fascination with seasteading.  He looks at the assumptions not just of the Valley, but of everyone that lives in Western Culture – particularly those that romanticise “self-sufficient” lifestyles.

Many of you will probably disagree with the main points in all four of these posts. But I think that they are issues that we must consider.  If we want to build organisations that are more inclusive, more democratic, more rewarding to work in, and more fun, these are the type of assumptions that we need to identify and deal with.

That’s how we’ll build a more innovative culture.

One last note – yesterday I got to speak at TEDxUQ, which was both a great honour and great fun.  I’ll tell you more about it soon, and post a video of the talk as soon as it’s available.  Strangely, just before I gave the talk, some friends of mine at WPRB unearthed a picture of me from last century – so here’s me playing some punk rock a lifetime ago, and giving a talk yesterday:


Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

Please note: I reserve the right to delete comments that are offensive or off-topic.

24 thoughts on “Culture and Innovation

  1. Great post Tim!

    One of the things that bothers me about Holocracy and other flat models is that I’ve never seen the leadership role well defined and, without leadership, it seems to me that purpose become difficult to define, especially over the long term.

    When you look at great, innovative firms they are always infused with a sense of purpose and usually have strong leaders. While there are exceptions, like W. L. Gore and they are instructive, most successful firms do not operate that way.

    When I ran an 800 person publishing company, I tried to keep it as flat as I could and came up with a number of ways to create connectivity across the company so that the hierarchy we did have became less oppressive. .

    I also created a training program which helped new employees try out different units and at the end of the training period, we had a drafting process where trainees and managers would choose each other. It worked amazingly well!

    But I still relied on my managers to provide leadership, develop talent and provide me with crucial feedback. I’ve yet to see a good model for where to insert leadership and where to keep things flat.

    – Greg

    • Thanks for that Greg. I think that you’ve hit on the key issue.

      In their book Scaling Up Excellence, Bob Sutton & Huggy Rao flat out say that the flat approach can’t work (this is clearly false, and it’s the one bad part in an otherwise excellent book). Their issue is similar to yours – where does the leadership come from?

      The related issue is that if you just have a vacuum, it gets filled with… something. So some have argued that without formal power, people use high-school style popularity building methods to build informal power. That seems to be what’s been going on at GitHub, for example:

      The firms that do this well seem to work out a way around this. When you read detailed cases about Gore, there are clearly leaders. Same with the tomato company that Gary Hamel talks about (Morning Star). It seems as though they both have structures designed to encourage healthier informal leadership development. The other thing is that they both hire specifically for that characteristic as well.

      Hiring becomes the biggest issue – and it’s where the challenge is if you try to make this shift in an established company (although, Ricardo Semler did it at Semco). Dan Pontefract’s stuff on this is good too – he talks a lot about leadership & how to encourage it in flat structures.

      So, it’s not impossible. But your issue is exactly the one that is most critical to address.

      • Yeah, I’ve really been struggling with it. As you know I’ve been working on a connected leadership/disruption framework for years (and recently published an article in HBR about it in context to the Ukraine crisis:

        I think that’s part of the answer and it points to some good guidelines for creating change (focus on passion, not influence, build in before you build out, focus on networks not nodes, etc.) Sutton and Rao also have some helpful ideas for scaling change, such as Catholic vs. Buddhist, etc.

        Yet there are no clear guidelines for where to insert except for the Dunbar principle, which is clearly inadequate.

        In my mind, until this issue is resolved, holocracy and other flat models are really just agile project management techniques in disguise and that’s a shame. I suspect they can be much more.

        – Greg

        • I agree that the potential of this approach is big. But, we’ll never figure out how to make it work until we start experimenting and figuring out how to make it work.

        • Hi gents. Tim, thanks for the reference(s). Greg, good to see you again!

          In my experience with Holacracy, the “Leader” role has been clearly defined. There are a set of expectations that are accepted by default – allocating resources, protecting the boundaries of the team, setting priorities, etc. – leaving the other parts of the “Manager” role up for grabs, or placed elsewhere. For instance, there’s a Representative (or “Rep Link” in the jargon) for each team that acts as an ombudsman of sorts. And we created a Mentor role to steward professional development, along with a Compensation role to set salary.

          I’m not sure those roles are the *best* expression of “a leader,” but I do think in practice it’s a better system. And I’m not sure the organizations of the future will have a single leader, or any group of individuals that act as “Leadership”. My hope, at least, is that we end up building something significantly more networked.

          • That’s useful to know – thanks Clay. I need to look into Holacracy as a formal system in more detail… in any case, thanks for sharing your thoughts on & experiences with it.

          • Thanks Clay. I was just talking to Aaron too!

            What I’m struggling with is to what extent is Holocracy a project management model and what is the potential to extend it further into strategic management.

            A few years ago a wrote a post about three levels of strategy: (

            1. Strategic Intent

            2. Strategic Moves (i.e. resource allocation)

            3. Operational Strategies

            I can see how flat models can excel at level 3 and handle number 2, but strategic intent really seems to be a problem. If that’s so, then there is a major gap to be filled.

            I have been working on a connected leadership model based on social networks, but it’s still a work in progress….

            Here’s an early version:

            • Greg –

              For us, so far it’s been highly strategic, insofar as it has pushed us to reorganize around the actual work of the business.

              We knew we needed to “get famous” in order to achieve our purpose, but we never did anything about it, really, until we created a team for “Reputation” work, filled it with roles, and made those folks accountable for spreading the UC name.

              Same thing with new business: we had incentives for selling, and explicit expectations that our Directors and Partners would shoulder the burden of bringing new work to the business…but we only got discipline when we made a *team* for it. And even then, at first it didn’t “take” – our Client-Service team was still doing new-business work with existing clients. It only really started to make an impact when we completely separated *the work* from *the selling of the work.*

              Because we’re constantly reorganizing, refining our structure, we’re always steering intentionally toward our goal: putting our operating system in every company in the world.

              At Undercurrent, I believe we have moved from self-conscious strategy (some well-researched, well-intentioned document that we craft, edit, shop around, and then act upon) to unselfconscious strategy (the strategy is the tactics is the strategy). I think it takes all the hot air out of the equation, and puts the focus on the operator.

  2. Thanks for this article. Ricardo Semler would argue that the role of leadership (formal leadership, at least) is to be a tie breaker. If you have a strong value system and sense of purpose clearly flat systems can work.

    The challenges grow as company size grows, but I suspect and hope that with technology making information much faster and easier to share, such systems have more potential than they did in the past. If your ability to spread a message was limited to people you were in close physical proximity to, then hierarchies are a natural result and based on information hoarding (knowledge is power).

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