How to create a culture of innovation
Martin Hodges
Software Engineering Manager | Builder of strong, diverse teams | Inspired to deliver the next innovation
Most companies want innovation, promote innovation and require innovation. If you want to build a culture of innovation, you may be surprised at the changes you need to make.
I have held senior roles in many companies where I have lead innovative teams and I thought I would give you my insights into what it takes to create an environment that supports innovation by giving it space to germinate, grow and thrive.
TL;DR
Creating a culture based on innovation requires a commitment to a continuous innovation cycle:
This cycle must be clear, well communicated, driven and supported to make it work
Note that innovation may not qualify as R&D under Australian tax regulations but R&D is definitely part of the innovation cycle.
Why innovate?
The economic reality of your business is that if you are not going forwards, you are going backwards. Innovation leads to improvements in your top line (ie: increased revenues) and/or bottom line (ie: reduced costs). It helps keep you competitive and relevant.
Innovation is such an advantage that you can be sure your competitors are all doing it too.
If your company is moving forwards, the chances are that you are innovating but are you innovating fast enough?
I often have discussions about protecting Intellectual Property (IP) with founders. Whilst there are legal frameworks in place to protect your IP and your products, it is a fact that someone somewhere will decide to copy you and you may not be able to defend yourself. The fact is that the best way to protect your products from being copied is to innovate faster than others can copy.
Do not get caught up in innovation for the sole reason of creating new products. Innovation can serve you well by decreasing the cost per unit of making your product or lowering your overheads. If you can create the right environment, you will also attract and retain higher-skilled and experienced members for your team, reducing recruitment costs.
Innovation is not just about technology but is the result of 'doing things smarter'.
Ideation vs innovation
Often people mistake ideation as innovation. Ideation is the first step in innovation and is the process for generating the ideas that drive innovation.
If you are like me, ideas come quickly and you can soon end up with an extensive list of ideas. Some will be mundane, some great and some out of this world but without management the vast majority will never leave the page.
When seeking to create an innovative culture, people tend to think that ideation is the most important step and that it need to be given space for people to simply sit and think up new ideas. This is a fallacy though.
Ideation can be done anywhere at anytime. In the shower, on the train, watching TV. In fact, ideation happens all the time, all around us. How many times have you thought 'I had that idea!' So for a company to become innovative, they do not need to create space for ideation to occur.
What they do need is to capture the output of the ideation stage. I liken this to the pensieve that J K Rowling uses in her Harry Potter books. The pensieve is a bowl in which you can place thoughts and memories that you extract from your mind. You can come back to them later.
For a company to become innovative, it needs its own pensieve. Everyone needs to know where it is and how to access it. They need to be free to write down their idea in as much (or as little) detail as necessary. Typically I use Atlassian's Confluence for this but any Wiki technology can be used.
Prioritisation
In English there is a saying 'Necessity is the motherhood of invention'. It means that humans are very good at solving the problems they need to solve. The first step in prioritisation involves looking at the problem being solved. The most amazing solution that has no problem to solve, is not worth pursuing.
Once you are collecting your ideas in your pensieve, you need to regularly review and prioritise them. The priority is based on the company's current necessities. An idea for a machine in your kitchen for peeling oranges may be a good idea but if your company produces washing baskets, it may not be one that is a high priority.
The act of prioritising has to be done carefully. If ideas are simply rejected, then it can lead to your team not being motivated to bring ideas forward. Worse, they may leave the organisation to chase their own dreams of making an orange peeler.
Instead, it is better to keep everything on the list and simply prioritise based on company need. This does not need to have a force ranking (1..n) but could be as simple as 'Now', 'Next' and 'Later', with forced ranking only being applied to the Now ideas.
For anyone who has groomed an Agile backlog, you will see this is a similar process.
Prioritisation of the 'Now' list may require some effort to be expended to determine the business justification for the idea. At this stage, a full business case may not be possible as the exact nature of the solution has not been determined but sufficient work should be done to lay the foundation of the future business case. To be innovative, you need to give people the time and support for creating the business justification. This could require time and effort from people across your organisation, not just the person with the idea.
For a company to support innovation, this process of prioritisation needs to be a regular, visible and non-negotiable activity. By non-negotiable, I mean that the prioritisation process cannot be bumped by something deemed more important. Do this and you are saying to your teams that you do not value innovation.
Implementation
So now you have an organisation that can capture its ideas and can prioritise them. To truely embrace an innovative culture, you need to go further and make capacity in your program of work for implementing selected ideas. Without taking a conscious decision to create capacity, your ideas will wither and die and support for innovation will disappear.
The transition from prioritised list to implementation project must occur regularly so that people can see the support being given to innovation. It should not classed as a special project.
Implementation projects falls into two stages:
Proof of Concept
The Proof of Concept (PoC) is the stage where the solution to the idea is formulated, built and tested. The result is to prove feasibility and to build the business case. The aim is to invest the least amount required to determine if the idea will fly. Is there a solution? Is it feasible? Can it be demonstrated to work?
PoCs are messy at best. They should not be elegant and polished. If they are, you are probably investing too much.
You need to be prepared for the PoC to fail to live up to the expectations of the business justification. It should be stressed that failure of a PoC is not an innovation failure and certainly not a failure of the person who came up with the idea or the people who implemented the PoC. The aim of a PoC is to see if the idea will work. The old adage that 'you need to invest in 10 things to get one success' comes to mind.
Whatever we say our values are, our actual values only come out at the time of adversity and then our actions reflect out true values.
If your company is to embrace innovation, it must value it. To value it means that you do not kill a PoC by pulling resources from it for operational reasons. You must recognise that a PoC is the lifeblood of your future company.
There is another English saying 'Know when you are flogging a dead horse'. Do not expend effort on an idea that has no merit based only on status, ego or misplaced loyalty of the people involved. You must regularly, systematically and pragmatically assess your PoCs to identify as early as possible that it is going to fail. When that is identified, the project should be closed.
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Decisions should be carefully but widely communicated.
Again, this should be done without pointing the blame at anyone.
Change Implementation
Over the years I have worked in and on many change programs but I do not think of change programs beyond seismic shifts in the direction of the company.
I once had the pleasure of working with Ian Roughsedge who showed me that the capacity for change within an organisation needs to be managed along with its capability to change and that this is true of any change, regardless of its size.
An organisation without the capacity or capability to change, cannot embrace a culture of innovation as it cannot consume the result. Whether the innovation is inward looking (ie: decreasing the cost base) or outward looking (ie: increasing revenue), it will impact your organisation to a greater or lesser extent.
Earlier I said that every company needs to innovate to remain competitive and relevant. This includes your company and you will need to create the capability and capacity to absorb the change being generated through your innovation. This means creating the budget, surveying the ability to change, planning across the organisation and prioritising your innovation activities amongst all operational activities.
Still not convinced? Remember, you are constantly collecting ideas, constantly prioritising them and constantly undertaking PoCs. This means you will be constantly undertaking changes within your organisation and all you teams will have to absorb those changes. This may even stretch to making changes in your supplier's and customer's organisations and you may need to ensure they have the capacity and capability to embrace them.
And every change you implement will change the way someone works, what they have to do or what they need to know. This requires time to implement training, awareness and even policy changes. The implementation of any technology solution could be the smallest part of the innovation activity.
Feedback Collection
Once you have have your ideas, your PoCs, and your change projects, there is another important step into becoming an innovative company - feedback collection.
Feedback on the changes resulting from the innovation is highly valuable. It confirms that the idea met its aims (or not), whether more work is required or whether more opportunities are available.
As well as collecting feedback on the idea itself, you should also collect feedback on the innovation process itself so that you can improve your innovation cycle across the company.
When collecting feedback, it should collected freely and openly. It should not be down-played, excused or rejected. As it is said, 'perception is reality' and if someone provides you their perceptions about the change or change process, then that is their reality, regardless of what you may think.
Of course, collection of feedback needs to be an active process. You need to ensure that clarifications are obtained at the time the feedback is collected as people quickly lose their train of thought.
After feedback is collected, it should be categorised and analysed with any ideas for change being identified and placed back into the innovation cycle.
Intellectual Property
Your Intellectual Property (IP) is what makes you different to other companies. It is the knowledge you have acquired by taking risks and learning from the results (be they positive or negative).
To be truely innovative, you need to be able to manage your IP. Every company I have worked for has done a poor job of this. Some may be better than others but I am sure you have all worked in an organisation that has said 'We can't let that person go! They are the only ones who know how this works!' This is a sure sign of poor IP management.
No matter what stage you are at in the innovation cycle (ideation, prioritisation, PoC, implementation etc), you need to capture and manage your IP. This is especially true today as it always has been but it seems to be getting forgotten.
Now-a-days it is perceived that we do not have enough time to document our findings and that it will be out of date by the afternoon so why bother. You need to find a way for people to capture their findings, quickly and efficiently. Do not expect refined and peer reviewed whitepapers describing everything in detail. Instead settle for capturing the IP in a way that the authors can create and others can consume quickly and effectively. Remember the amount of time people can focus for is getting shorter each day and is now down to minutes.
This advice does not apply to certain disciplines and industries whereby full documentation needs to be provided, such as in many engineering and medical fields. In these industries, IP capture may be a regulatory requirement.
Research and Development
I thought I would add some notes on Research and Development (R&D). In Australia, there are attractive tax benefits for undertaking R&D, however, R&D projects must follow a scientific process to qualify. It is not sufficient to say 'we are building a new e-commerce site'. That is development without the research.
So how do you undertake R&D?
Essentially it is like a school science experiment. You have an idea, that leads to a concept. You design the experiment and undertake it to prove (or disprove) the concept. You record the result and then write up the conclusion.
More formally:
For example, you have an idea to rebuild your e-commerce site. This hits your innovation cycle and you decide to build it. Then you decide to claim it as an R&D project.
And hence, your innovation project does not qualify as an R&D project.
Or, you may decide that by adding Augmented Reality (AR) to your e-commerce site that the 3D representations of your products will increase your revenue by 3 times.
And hence, your innovation project is likely to qualify as an R&D project.
Before claiming your project as R&D, you should seek independent advice before assuming you can.
Summary
Building a culture of innovation requires a commitment to an ongoing process of ideation, prioritisation, implementation, feedback and the management of IP.
This commitment includes funding and risk taking. It requires values that embrace failure as a mechanism to move forwards, not to blame, and a realisation that only through innovation will the company succeed.
This commitment must be visible and real. Paying lip service to innovation will quickly see it flounder and stop. Staff will become disillusioned and turn over will increase.
However, embracing the risk and identifying the rewards gained will serve to strengthen the culture and enhance the innovation. A strong culture of innovation is likely to lead to greater staff satisfaction and improve retention. It will also attract a higher level of skills and experience in a virtuous circle.
The payback for innovation is s stronger business than you have today.