Innovation culture - People and innovation in the conflict of corporate culture (Pt. 2/2: Culture)

The innovation culture

What is innovation culture? Let's not start off too scientifically. It is not part of this paper to distinguish between terms such as creativity, innovation climate, innovation culture, corporate culture, etc., especially since this is not always possible. In this respect, we will initially content ourselves with the following definition by Vahs and Trautwein:

"Innovation culture is understood to be all the norms, values and attitudes that shape the behavior of the people involved in the innovation process. Since innovation processes regularly involve cross-divisional procedures, the innovation culture functions as a kind of "cross-sectional culture" that is shaped and supported by all those involved in the process." [10]

"For example, while the innovation strategy determines what needs to be done and the innovation process determines how this task is to be accomplished, the innovation culture has a significant in-fluence on whether employees are actually able and willing to innovate. It is thus a part of the corporate culture whose contribution to corporate success began to be understood about 20 years ago." [11] In the following, for reasons of simplification, I will equate corporate culture and innovation culture as far as possible, knowing full well that they can be considered separately and are highly interdependent.

A culture of innovation is almost always associated with failure tolerance, a willingness to experiment, psychological security, a high level of collaboration and a non-hierarchically driven corporate culture. In short: freedom. Today, there is hardly a negative image of innovation. Well, among a part of the supposedly conservative population there is the cliché of the mate-sipping hipster startup-esoteric do-gooder who burns a lot of money in the incubator without generating relevant output. [12] But overall, the picture of innovation is a thoroughly positive one.

If you take a look at well-functioning innovation systems, you will find that the associations mentioned above are largely empirically verifiable. These systems are characterized by the provision of information, a disciplined, organized input process with focused questions and problems, a significant willingness to help on the part of a large number of participants, an open failure culture and, associated with this, the willingness to experiment and curiosity (which has already been mentioned several times), and, in addition, the will to think and act in the interest of the goal and thus in the interest of the company.

But the path to this perpetual motion machine is easier to formulate than to realize. Especially since such a state, if it can be achieved at all, threatens to collapse almost daily. So what are the typical pitfalls that a corporate culture can unexpectedly fall into when it comes to innovation? And how can companies avoid this?

The influence of corporate culture on the success and failure of innovation

Corporate culture plays a decisive role in the success and failure of innovation. People are undoubtedly at the center of all this and are the decisive factor, the impetus of the idea. Nevertheless, "Culture eats innovation for breakfast" is how one could rephrase Peter Drucker's famous quote. There are countless reasons why corporate culture has an influence on innovation. In the following paragraphs, I will take a look at the most important factors - here, above all, the failure factors - which, in connection with corporate culture, are shaped by managers themselves, the closely inter-linked values and the norms they live by.

A fundamental problem is often the misconception that people are fundamentally not innovative. [17] However, curiosity is an intrinsic human characteristic. If this intrinsic motivation is encouraged, then people are absolutely capable of being innovative. If the innovative character is imposed by appeals, then resistance is produced very quickly. Because a second intrinsic human characteristic is to want to preserve, which obviously contradicts curiosity. However, managers hope that loyalty alone and the common profit interest that automatically becomes second nature to the employee when the contract is signed would be enough to resolve this tension in the interest of the company's success. There is already a huge difference between whether the company simply proclaims innovation as a strategic element in order to remain relevant in the future, or whether a socially relevant, emotionalizing problem is to be solved. For the latter, people do not necessarily need to be sent on creativity training courses. To be fair, it should be added that not every worker in a company is intrinsically motivatable. This in turn depends on different individual human characteristics, such as the environmental conditions of the current phase of life, the identification with the company itself and its products, the attachment to and trust in the immediate management, etc..

Success: intrinsically motivating innovation / Failure: imposing innovation

A basic prerequisite for innovation is trust. Trust in the employees. In a trusting relationship between a manager or, more generally, between a company and its employees, people express their concerns, fears and, above all, problems much more easily and frequently. Accordingly, they ask for help more often. People who work in a collaborative culture take it for granted to seek help from colleagues, regardless of whether providing such help falls within their colleagues' formal job descriptions. They have a sense of collective responsibility. [7] In contrast, a culture in which this is not a given causes innovations to be artificially kept alive for too long because their persistence is too closely tied to individual success. Just imagine how much money is burned when an idea that is actually dead continues to be ridden because, for example, it is linked to individual, possibly even monetary goals or the failure of an idea would have consequences. Companies must not be sacrosanct in this respect, because the question may already have been wrongly formulated.

Success: A healthy failure tolerance / Failure: Bonuses for ideas and intolerance of incompetence

The frequent lack of clear communication within an organization as to why one is innovating is also a major factor in success and failure. I have already hinted between the lines that innovation for in-novation's sake cannot be sustained over the long term. Campaigns and hackathons are launched, consultants are hired, and the number of improvement proposals and ideas is elevated to the truly "innovative" measure of things. [17] The hunt for igniting ideas in terms of the KPI can develop a dangerous momentum of its own. It is possible that products come onto the market that do not rep-resent a solution to an existing problem, but rather invent a problem that did not exist before. As a result, problems that could actually be solved through innovation are pushed into the background and out of focus. Furthermore, there is the danger of delusion. "There is a fine line between vision and hallucination," Steve Blank already recognized. Only if organizations deal with the right issues that are permanently relevant to customers and partners, and thus have a meaning that lies beyond the material, will effective solutions be created that make companies permanently relevant.

Success: Formulating meaningful questions and problems / Failure: Basing innovation exclusively on the number of ideas

Technology companies with a lot of engineering know-how often have the problem that the solution is at hand before the problem is even defined. This results in the justifiable and exceedingly prevalent concern for companies to develop something that no one needs. At around 36%, this concern was identified as the No. 1 "Business Mistake" in a survey. [13] In this context, it is also extremely difficult to understand that solving a single customer problem does not mean that there is a market for it. Companies often ask themselves afterwards why they were only able to sell the "product" developed as part of a customer project exactly once. "Who do we actually want to sell this to?" is then often the question asked too late.

Success: Early evidence that multiple customers are willing to pay for the innovation/ Failure: ?To fall in love with your idea”

Large companies have built up a huge administrative apparatus over the years of their existence. The pragmatism of the early days has given way to hierarchy and an organizational chart. Startups are characterized, for example, by projecting maximum working hours onto the minimum time corridor so that their MVP can be launched as quickly as possible. This resulting speed cannot be achieved in an established company. Culturally flat organizations can usually respond more flexibly to rapidly changing internal and external circumstances. An organization chart gives a fairly good idea of the structural flatness of a company, but says little about its cultural flatness. [7] This, in turn, is essential for innovation to happen at the appropriate time and speed. Paradoxically, flat organizations require stronger leadership than hierarchical ones, because chaos in experimentation, for ex-ample, requires clear priorities and directions. But beware: trying to establish an innovative startup culture in a company solely by dividing the organization into smaller units so that a more innovation-friendly culture miraculously emerges only works in the rarest of cases. These descendants tend to inherit the culture of the parent or original organization. This means that cultural shallowness can only exist in conjunction with strong leadership. If values, norms and behaviors are modeled and shaped accordingly by the leadership.

Success: less bureaucracy, more experimentation, cultural flatness / Failure: steep hierarchy and bureaucracy

There are countless other examples. And as we can see from this, it is not so easy to establish and maintain a culture of innovation. But to describe it in martial terms, the daily fight against precisely these cultural trenches can bring about something different, perhaps even more important.

Innovation promotes a different corporate culture

It is seldom reported how the culture of innovation affects the entire corporate culture. This is a completely underestimated force, for example as a building block for the change process. Especially if we make sure that the prospect of success in developing the idea into a business is extremely manageable. So one can justifiably ask: What is the point of innovation at all? And one answer to this question is: to influence the corporate culture. Of course, the motivation for change must be there, and ultimately innovation must be given the space, time, freedom and also the budget to develop. But if the environmental variables are right, then the established innovation culture will actually have a not inconsiderable influence on the entire company itself and the culture.

Cultures are intrinsic. Companies have a certain culture per se. Intentionally or not, it is there from the beginning. But you can always try to change and control it, e.g. to build up a more innovation-friendly culture of trust. Innovation culture is therefore a management task. "It is lived from below, but controlled and exemplified from above." [11]

But all cultural changes are difficult because they usually attack behavior patterns that have been built up and trained for years. And this is exactly the point. Specifically, organizational cultures are something like social contracts that set the rules of membership. [7] With a cultural change, the company in a sense breaks this social contract. Thus, it is not surprising that many people within the company resist. Especially those who were successful according to the established rules.

?Those who wish to introduce innovations have as enemies all who profit from the old order.“ (Nicholas Machiavelli)

And yet, innovation is one of the biggest accelerators in culture change. It is undoubtedly not easy, as the company's own culture to be changed and the successful employees of that culture often do not welcome the change with open arms. The un-corporate cultural initiatives fail exactly because of unaccepted individuality. As we have seen in the previous chapters, there are many causes and reasons why innovation in companies does not work in such a way that it can bring about lasting change. But if these causes and reasons are successfully contained, then far-reaching changes can occur.

When startups are imitated in a playful way in a company as part of innovation campaigns based on submitted ideas, and a team is thus formed from different roles and perspectives, then people are working together who previously had common ground in the canteen, if at all. The controller with the engineer and the salesperson. That breaks down silos. [18] And when the value proposition(s) are worked out as part of the idea development process, a different perspective is inevitably adopted, namely that of the potential user of the idea. This mitigates the risk of developing some-thing in the earliest phase of the innovation that is only to one's liking. The job-to-be-done becomes the focus. And if in the end the idea is not developed into a business and is thus buried, but nevertheless great learning successes are recorded that can also be applied, then this provokes a different view of failure. This creates a failure tolerance.

There are several more examples of how an innovation-friendly culture could positively impact the corporate culture. But the most important points in all this are still missing: sustainability and communication. All of this must be exemplified. It must not just be written down on paper as a corporate value and goal. Without exception, all managers of a company, up to and including the CEO, are almost obliged to exemplify and support the values and norms of an innovation-friendly culture. If leadership does not play along, it can be toxic to innovation and ultimately to change. There also needs to be communication, explanation, transparency. And the success and learning stories must be told in this context. A cultural change can only be realized in companies if a movement is started from it. And that is why it is important that these stories are spread through the company like wild-fire. [14]

The characteristics of innovation-friendly corporate cultures are almost identical to the requirements for remaining relevant as a company in the increasingly fast-moving world. And this brings us directly to the strategic corporate issue of our time: resilience. Allowing deviation, diversification, experimentation, learning, not being afraid of the new, disruption, creativity, improvisation, agility. These are all cornerstones and characteristics of resilient companies. 

From resilience

Successfully established companies are prisoners of their own success. Clayton Christensen al-ready knew this and described this phenomenon as the "innovation dilemma" in the late 1990s. Christensen's explanation is as follows: Established companies concentrate fully on constantly improving their similarly well-established technologies in order to differentiate themselves in a fiercely competitive market. At some point, however, a technology is so exhausted that the high development effort produces hardly any added value for the customer. These are times when disruption is imminent. [15] Because nothing is as dangerous to tomorrow's success as yesterday's success.

Christensen has found that the same success factors that made a company great are responsible for a company failing to notice and manage the threat of disruption. In the worst case, this leads to a threat to the company's existence. There are plenty of examples of this. He justified it with the danger of success itself. Why should one question oneself when one has reached the summit? This is deeply contradictory. Companies thrive on their tendency to ignore innovation, ideas and knowledge, because otherwise they would question themselves as an organization.

But precisely because their own offering is so successful, it becomes existentially important for the company, and the search for the new is neglected. All resources are focused on making the existing offering more efficient and cost-effective. With diminishing energy, the focus is no longer on trying out, going astray, learning and discovering.

?The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.“ (William Pollard)

So anyone who wants to prevent this success trap does not rest on his laurels. They are fundamentally open to the new and to an alternative that needs to be explored. And they also allow employees to try things out in their own way. This does not mean anarchy. Even think tanks must be challenged, equipped with goals and managed accordingly. Without a goal, even if it is only an iterative first step, innovation degenerates into irrelevant research. And that, in turn, is the death of innovation in the long run.

And with exactly this sword of Damocles existing permanently, not to rest on today's success and thus to become irrelevant for tomorrow, has the same requirements to fight against it as managing crises has. To adapt faster and better to the changing environmental variables is the secret recipe of crisis management. And not returning to the starting point.

In today's world, where there is basically a permanent state of crisis (financial crisis, climate crisis, Corona crisis, social crisis), and also due to this the pace of innovation is constantly increasing and thus also the competition, where in addition to this customer wishes are becoming increasingly individualized and pluralized, it is exactly in such times that companies must adapt more optimally to these permanently evolving conditions. 

"Central to this is an agile organization - and this is above all a question of culture. If you can innovate, you can manage crisis - and vice versa." [16] Those who remove temporary crisis management from the equation and replace it with a permanent, agile corporate task, and combine this with values and standards that go beyond the achievement of quarterly targets, will create a corporate culture that questions itself at the zenith of success without losing self-confidence and self-assurance in order to adapt to changing environmental variables and thus ultimately develop new areas of business.

?A company built for resilience is built for eternity. That's where it differs from a company built for stability.“ (Simon Sinek)

Now to some, this may sound idealistic. "But the true value of an organization is not measured by its success in terms of a set of arbitrary metrics for arbitrary periods of time. Rather, the real value of an organization is judged by how committed others are to contributing to the organization's ability to continue to succeed-not just at its tenure, but far beyond." [12]

And that is the essence that innovation-friendly corporate cultures must carry within them.

Quintessence

What is the conclusion to be drawn from the rather paradoxical interplay between people, companies and culture?

First of all, it is important to accept that the probability of profitable ideas is low. However, the primal drive of many companies today is still the search for the "Holy Grail": the new business field or the new product that promises growth. Even if this goal is not proclaimed in the foreground, it is still lived as a hidden premise in many places. Innovation is always a reflection of the company's own guiding and value culture, namely the one that is lived and not the one that is written down on paper. You've probably heard it before: "What are we going to earn with this? After all, it has to be worth it for us in the end.". This is not to say that the economic part of innovation must be disregarded. But the definition of a result in the earliest phase of an idea is very often the death of that very idea. In-novation is, up to a certain momentum, a forward-moving wandering and learning. And basically it is foolish that without the evidence of one's hypotheses, number-crunching in the early stages of ideas decides victory or defeat. So, one could provocatively state: Innovators are those who do not prevent innovations.

However, the probability of winning ideas can be positively influenced by an appropriate culture and consequently by the leadership task and interpretation of the management. An innovation-friendly corporate culture means freedom, trust, failure tolerance, willingness to experiment, psychological security, a high level of cooperation, less hierarchy. This fosters social connections within the company and allows knowledge to travel and circulate. In a positive sense, it works like a virus. A nice side effect of this is, among other things, the breaking down of silos.

Ideas and innovations are not the reason why companies can remain relevant in the future. Rather, they are the result of the very culture that can strongly shape innovation, provided that the values and norms for it exist and are consistently exemplified. In this respect, the purpose of innovation (the why) should not actually be the search for the next "Holy Grail", but rather to build up the necessary innovation-friendly corporate culture. In extreme cases, this can even be the driver of cultural change, as part of a change process.

But in the end, and this is perhaps the greatest insight, the innovation-friendly corporate culture can be the basis for a resilient company. The requirements for innovation management are largely congruent with those for crisis management. If you can manage a crisis, you can manage innovation. And vice versa. If companies are able to understand innovation as a component of resilience, then they will be able to adapt quickly to the changing world. And in a time when the only certainty is that the future is unpredictable and therefore cannot be understood as a linear progression of the past, this will be the greatest factor for companies to remain relevant in the long term.

End of Pt. 2/2

Sources:

[1]         “Genius Dutch Company Creates Fake TV Packaging For Their $3,000 Bikes, Reduces Shipping Damage By 80%” on boredpanda.com (2019)

Link: https://www.boredpanda.com/bikes-company-tv-box-print-reduces-shipping-damage-vanmoof/?utm_source=google&utm_medium=organic&utm_campaign=organic

[2]         G. A. Stevens, J. Burley: “3,000 Raw Ideas = 1 Commercial Success!” (2016)

[3]         Dr. G. Angermeier: Serendipit?t (2004)

Link: https://www.projektmagazin.de/glossarterm/serendipit%C3%A4t

[4]         Link: https://en.wikipedia.org/wiki/Knowledge_spillover

[5]         E. Ortiz-Ospina: “The importance of social networks for innovation and productivity” (2019)

Link: https://ourworldindata.org/social-networks-innovation-and-productivity

[6]         UKEssays:  “Importance of innovation and change within an organization” (2018)

[7]         G.P. Pisano: “The hard truth about innovative cultures” in Harvard Business Review (2019)

[8]         S. Sinek: “Das unendliche Spiel” Buch (2019)

[9]         K. Schlenz: ?Ich komm nicht mehr mit“ in Stern Nr. 46 (11.11.2021)

[10]       D. Vahs, H. Trautwein: ?Innovationskultur als Erfolgsfaktor des Innovationsmanagements“ Buch (2000)

[11]       Dr. A. Blaeser-Benfer: ?Erfolgsfaktor 4: Die Innovationskultur“ (2014)

Link: https://www.rkw-kompetenzzentrum.de/publikationen/faktenblatt/erfolgsfaktor-4-die-innovationskultur/

[12]       Oh Gott. Das kann ich nicht ?ffentlich machen.

[13]       Alan Smith (Strategyzer): “Discussion: Top 10 mistakes every business makes” (2016)

[14]       D. Sivers: “How to start a movement” (TedTalk 2010)

[15]       C.M. Christensen: ?The Innovators Dilemma - Warum etablierte Unternehmen den Wettbewerb um bahnbrechende Innovationen verlieren“ Buch (2011)

[16]       S. Bendiek: “Innovation macht widerstandsf?hig” in Handelsblatt (2020)

[17]       R. K. Sprenger: ?Schwerpunkt Innovation: Lass gut sein“ in McK Wissen Ausgabe 15 (2005)

[18]       F. Vermeulen, P. Puranam, R. Gulatihttps: “Change for change’s sake” in Harvard Business Review (2010) (//hbr.org/2010/06/change-for-changes-sake)

[19]       Link: https://edition.cnn.com/2013/04/04/tech/post-it-note-history/index.html

[20]       Link: https://www.teflon.de/news-events/history