Establishing a Culture of Innovation

Creating a culture that encourages innovation should be the goal for both employers and employees. Harvard Professor Gary P. Pisano found that characteristics such as willingness to experiment, psychological safety, collaboration, tolerance for failure, and a nonhierarchical structure are seen as essential for an innovative culture. Much research has shown that these behaviors can lead to better performance. So why can these desirable traits, which are also perceived as enjoyable to be part of, be so difficult to implement and maintain?

Innovative cultures are often misunderstood because the positive behaviors that are often praised are only one part of the equation. To guarantee success, it is also crucial to have less desirable qualities. Pisano argues that permitting experimentation requires strict organization, establishing a psychologically secure atmosphere necessitates the capacity to be blunt, collaboration and individual accountability must be balanced, accepting failure necessitates an aversion to inadequacy, and a flat culture requires strong leadership. If the tension caused by these paradoxes is not managed correctly, attempts to create an innovative culture will not be successful. I'll summarize these arguments here.

Experimental but organized

Organizations that are willing to embrace new methods can embrace the uncertainty that comes with them. Rather than trying to make predictions and analyze the results, these organizations can leverage experimentation for learning. However, this does not mean experimenting without any structure or discipline. Instead, organizations should methodically select experiments based on their potential for providing insights and design them for maximum value. Clear criteria should be established from the start for deciding whether an idea should be pursued, changed, or dropped. Data from experiments should be taken into account, even if it means admitting that the initial hypothesis was wrong and that the project must be redirected or stopped. Investing the time to end projects that are not working makes it less risky to try something new.

A lean testing approach is a useful tool for firms looking to streamline their ideation process and abandon unproductive projects. This strategy encourages teams to prioritize the most critical technical questions and encourages quick turnaround for feedback. The idea is to quickly identify what went wrong and swiftly pivot to more promising initiatives. Capturing and interpreting data from experiments is essential, and should be taken seriously. If a hypothesis proves to be inaccurate, teams should be prepared to revise or discard their ideas. It is important to note that unexpected results are not indicative of failure, and teams should not be tempted to reframe data to keep their projects alive. Choosing to pursue a doomed venture means forgoing the opportunity to create or join a successful one.

To ensure successful experimentation, a blend of creative and analytical components must be carefully managed. Leaders should create a culture that encourages and provides space for novel and ambitious concepts. Demanding data for confirmation or rejection quickly can stifle the intellectual exploration necessary for creativity. Senior leadership should lead this process, being ready to end projects they have backed and prepared to modify their opinion when supplied with results from an experiment.

Safe but candid

Psychological safety is a workplace atmosphere wherein individuals feel free to express their opinions without fear of repercussions. Amy Edmondson, another professor at Harvard Business School, has conducted numerous studies on the topic, which demonstrate that safe environments not only help organizations avoid disasters, but also cultivate learning and creativity.

We all value the right to voice our thoughts without the worry of repercussions, and we should be heard. However, psychological safety requires both criticism and the acceptance of criticism, no matter one's rank or position. Open, candid discourse is essential to creative problem-solving and idea generation, as it allows ideas to be evaluated and refined. Depending on the organization, individuals may be more or less comfortable with direct criticism; some may welcome it while others may prefer a more diplomatic approach. Those who may be overly opinionated may not be seen as team players.

When it comes to innovation, the direct organization will excel over the polite one. Politeness and niceness are not necessarily synonymous with respect. It is possible to be candid and respectful at the same time. Honest feedback is a sign of respect in itself and the ability to graciously accept a critique of an idea is a mark of mutual respect.

Despite its promise of candidness, a blunt and honest work environment may be off-putting to outsiders and newcomers. Employees are pointedly vocal in their discussions of design, strategy, and market perception, with no deference to job titles. Every statement is subject to intense scrutiny.

Creating a culture of open discussion can be extremely difficult in organizations where people avoid disagreements or perceive debate as impolite. Senior executives need to set the standard through their behavior, being able to critically evaluate others’ ideas without being overly blunt. To help foster this type of culture, they must encourage criticism of their own ideas and plans.

Teamwork but with personal responsibility

For a successful innovation system, there must be a steady flow of information, input, and extensive cooperation between a variety of contributors. Those who work in a collaborative environment naturally seek assistance from their peers, even when the help they require is outside of the colleague's job description. They feel a sense of collective responsibility. Unfortunately, collaboration is often misinterpreted as consensus. This is damaging to quick decision-making and resolving the intricate problems of transformative innovation. In the end, somebody must make a call and take responsibility for it. An accountable culture is one in which individuals are expected to make choices and be held accountable for the results.

Collaboration and accountability don't have to be mutually exclusive; in fact, they can be complementary. When an individual is held accountable for their decisions, they are more likely to seek out and use feedback from both those within and outside the organization who can help them. Leaders can further foster this culture of accountability by setting an example and taking personal risks to demonstrate their commitment.

Permitting failure but not incompetence

Innovative cultures are often characterized by an acceptance of failure, as venturing into unknown territory carries an inherent risk of not succeeding. Despite this allowance, organizations that prioritize innovation still maintain a zero-tolerance policy towards incompetence. They only hire the most capable and talented staff and set high standards for their performance. While it is encouraged to pursue new and daring ideas, any signs of mediocrity, carelessness, or inadequate management are not tolerated. If an individual does not meet expectations, they will either be dismissed or transferred to a position that better suits their abilities. Furthermore, a thorough performance management system ensures that employees are in the right roles for their skill set.

It is a given that businesses should strive for excellence and set the highest standards for their employees. However, too often organizations come up short in this regard. The fact is, a lax attitude toward failure necessitates having a highly-skilled and competent workforce. Innovation, whether it be in technology or business operations, is a process filled with unknowns. You have to accept that you don't always have all the answers and that learning from your mistakes is a necessary part of the journey. In some cases, 'failures' can provide insight and direction, while in others they can be attributed to poor performance.

Creating a culture that supports and celebrates learning through both failure and success can be daunting for organizations that lack this history. To facilitate this shift, senior leadership must make a clear distinction between productive and unproductive failures. Productive failures, or mistakes that yield valuable data or insights, are worth the cost. This means that it is essential to recognize the lessons learned from a failure, rather than the failure itself. An example of a productive failure is when a prototype does not perform as anticipated due to an unforeseen technical issue. This type of failure should be celebrated, as the newly acquired knowledge can be used to inform future designs. On the other hand, investing huge sums of money in a badly engineered product should not be rewarded.

Organizations must strive to cultivate a culture of competence by consistently conveying and reinforcing clear expectations for performance. Without proper understanding, staff decisions can be misconstrued as punitive or biased. Senior leaders and managers should communicate these expectations continuously and decisively. Even if it impacts short-term business growth, hiring standards should be tightened where necessary. Managers may struggle to decide when to move or terminate staff, whose lack of competence may not be their fault due to rapid technological or business advancements. This part is hard. Re-training can help employees acquire new skills, but this may not be an option for highly specialized roles. While it is important to be compassionate, keeping employees with obsolete skills can be damaging to the organization. Balancing the allowance of productive mistakes and weeding out incompetence is complex. It can be challenging to determine the cause of failure, such as whether it was due to a technical error or a scenario that even the most experienced engineer could not have foreseen. It can be difficult to decide on the consequences for poor technical or business decisions. Everyone makes mistakes, but it is important to consider when lenience becomes acceptance, and vice versa when setting high standards becomes unkind.

Low power distance but active leadership

Organizational charts are useful for understanding a company's hierarchy, but they are not always indicative of its culture. Culturally flat organizations, in contrast, allow for more open dialogue, where decisions are made based on expertise rather than title. This type of structure can be particularly advantageous in rapidly changing circumstances, as decisions can be taken closer to the source of essential information. Furthermore, culturally flat organizations often bring more diverse ideas to the table compared to hierarchical structures, since they draw on the knowledge and experiences of a broader range of contributors.

For a successful flat organization, strong leadership is essential. Without it, chaos can ensue. Senior leaders, however, need to be able to do more than just create a vision - they need the capability to understand and manage the technical and operational aspects of the company. Employees must also demonstrate leadership qualities and be willing to be held accountable for their actions. This is a challenging balance to achieve, but when done correctly it can produce impressive results.

Changing your culture

Altering corporate culture can be a complicated process due to the implicit social contract that exists between the organization and its members. Those who are content with the status quo may be resistant to the changes that come with a culture shift. Creating and sustaining an innovative culture can be particularly difficult because it necessitates a blend of seemingly conflicting behaviors. Without a clear understanding of the nuances of a situation, such as accountability, transparency, and learning, people can become disoriented and suspicious of the leadership's purpose. Also, innovative cultures often require specific behaviors that may not be easy for everyone in the organization to accept. Some people may view discipline as an impediment to their creativity, while others may feel uncomfortable with an increase in personal accountability. Some individuals may be able to adjust quickly to the new rules, while others may not adjust as well.

Leaders must go beyond the typical methods of driving cultural change, such as verbalizing and displaying target behaviors, to create an innovative culture. It is important to be transparent with the organization about the potential difficulties that can arise. Although people often view innovation as a fun and exciting prospect, it comes with its own set of heavy obligations. It is much better to be honest and direct from the beginning than to face cynicism and doubt later on.

Leaders must understand that there are no easy solutions when it comes to creating an innovative culture. Often, like in my own research, executives believe that dividing up an organization into smaller units or establishing autonomous skunk works will generate a start-up-like atmosphere. But size does not dictate culture. Any divisions that are created can carry the same culture as the original organization. Autonomous units or teams can be utilized to explore a culture and incubate a new one, but it is important to recognize the challenge being faced and select the appropriate personnel from the parent organization.

Leaders should be aware of the delicate balance between stability and innovation in their organization. Being too lenient can result in a lack of focus, while too rigid a stance may suppress creativity. At the same time, too much collaboration can impede decision-making, while individual accountability can create a competitive atmosphere. Leaders should be mindful of their own behavior and endeavor to display a balanced approach and set the right example for their organization.