Six steps to building a culture of innovation that will thrive in the Fourth Industrial Revolution
It is important to recognise that innovation does not happen because CEO sends a memo.
Innovation is like a seed. To achieve growth, you must do everything to create the right climate and environment. You put best fertiliser into the ground, you give it just the right amount of warmth and sunlight, but not too much. You give it just the right amount of water, but not too much or too little either. You take care to remove the weeds which might strangle fledging shoots. Growing new life is a delicate thing.
Your responsibility as a leader is to ask an important question: What is the "soil" and the "climate" in which innovation will grow best in my organisation?
The ideas and frameworks discussed here have been
Innovation is like a seed. To achieve growth, you must do everything to create the right climate and environment.
formulated from TTC's research and experience — of near 20 years, spanning nearly every industry with clients across more than 50 countries.
Six Areas of Focus
To build a culture of innovation that can rise to the challenges of the Fourth Industrial requires focusing on six areas
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Venerate problems over ideas
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Shared and sharp definition
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Everyone is an innovator
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Balance the ten cultural components of innovation
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Create capable and accountable innovation leaders
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Establish a cultural measurement matrix
Six areas of focus required when building a culture of innovation
1. Venerate problems over ideas
At the centre of every significant innovation is always a creative idea. Henry Ford’s idea for the production line revolutionised automobiles and resulted in the American middle class. Yet we shouldn’t confuse a great idea with where it came from. Truly useful ideas rarely arise from fancy techniques like hackathons, first principle thinking or out of the ether. The best ideas actually come in response to the identification of an important problem. Our research shows the most innovative firms are not actually more creative or even any better at solving problems than their peers. Rather, what makes them special is they are uncompromisingly assertive in their quest to discover new problems to solve.
Take Sebastian Thrun, the founder of Google’s innovation lab “X”, who asked the question: How can we end all road fatalities? This resulted in X exploring and developing self-drive cars. This was not a bright-eyed idea or a project to design a better functioning or disruptive car. No, Google’s self-driving cars are trying to address the very real and important social problem of deaths caused by automobiles.
It is clear that companies who set their people free to discover their customers’ most critical problems will be the innovators of the future. This is why audit and accounting firm EY has centred their culture of innovation on asking better questions - Better questions lead to the identification of real problems, many of which are hidden below the surface.
The 21st century is full of problems just waiting for innovative intrapreneurs and intrepid organisations to strike out and find new ground.. Research shows that finding solutions to the world’s biggest problems could open 60 “hot spots” worth an estimated US$12 trillion by 2030 in business savings and revenue.
Rather than focusing on coming up with innovative ideas — which is where most innovation programmes run out of steam — The focus should be aimed at being uncompromisingly assertive in the quest to unearth your stakeholders' most meaningful problems.
2. Shared and sharp definition
What does innovation mean for you?
It is important to identify a shared definition of what innovation means for your organisation. Without this confusion ensures with people pulling in different directions. Agree a definition for innovation a spend time reflecting. Can you see this definition working for your business, staff and customers? You do not need to agree or disagree with the definition immediately. One of the tasks going forward is to sense test and tweak the definition based on actual innovation examples across your business. In our experience, it can take several months for a company to iron out the idiosyncrasies in its definition of innovation. It is important to look back over several years to identify the sorts of innovations that have produced noticeable margin and revenue gains.
What is your Innovation Ambition?
An important part of finalising your definition is agreeing your innovation ambition. What is the purpose or end game? These can include: Transformation, Adjacent and Core (process) innovations. Do you want to disrupt or transform; does your strategy require entering new or adjacent markets; or, do you want to focus on core (process) innovations. You can do them all but deciding the ratio of your ambition will determine and drive the culture you need to build.
Which types of innovation?
When deciding your innovation definition, it is also useful to explore the 9 different types of innovation. These include: Business Model, Alliance, Structure, Process, Product, Brand, Customer Experience, Channel/Presence and Service innovations.
3. Everyone is an innovator
Any innovation programme that doesn’t start by helping individuals to see the world differently will almost inevitably fall short of expectations.
Too many leaders think that innovators are the Einstein-haired crazy thinkers who come up with genius ideas, while the rest can’t come up with anything worthwhile. Whilst the creative geniuses are certainly important to innovation, that’s not actually how innovation works.
Innovation is a team sport with different roles and responsibilities. We are always surprised that so few companies invest systematically in improving the innovation skills of their employees across all innovation roles. To build a culture of innovation you will need to actively encourage and provide your people with the key skills and mindsets necessary to achieve the network’s strategic innovation ambitions.
4. Balance the ten cultural components of innovation
At TTC we like to challenge the conventional wisdom that only disruptive, nimble start-ups can deliver sustained innovation. The acceptance that once a business gets bigger corporate arthritis sets in, is simply wrong. Our research reveals that by balancing ten cultural components of innovation large organisations can build cultures of sustained innovation. They just have to do things differently to their smaller more nimble counterparts.
Building a cultures of innovation requires integrating the following five components:
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Higher social purpose,
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Tolerance of failure
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Willingness to experiment
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Psychological safety
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Collaboration and cultural flatness
These are the cultural components made “cool” by the likes of Apple, Google and a plethora of other high tech innovators.
When we think about the culture of innovation at leading companies like Google, Apple and Uber etc. we tend to imagine foosball tables, bowling alleys, free food, slides and cosy meeting spaces with beanbags. In a copycat response, workplaces all over the world are creating similar breakout zones and gaming areas, where staff can chill out, chat, and stimulate their creative juices.
Yet most companies are finding that the implementation of all these “cool” cultural components do not result in an upswing in useful ideas. This is because what Google et al. are doing, is often misunderstood. These components alone can work well if you are a startup or high tech disruptor, but for larger complex organisations more is required. The reason innovative cultures in big businesses often fail to deliver the expected results, is that they focus too much on the cool components and overlook the below-the-deck “stabilising” cultural components of innovation.
The five stabilising components include:
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Innovate for profit
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Intolerance of incompetence,
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Brutal candour
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Individual accountability
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Strong leadership
By integrating and balancing the 5-cool cultural components with the 5 stabilising cultural components innovation in big businesses can thrive
5. Create capable and accountable innovation leaders
Too often innovation is seen as the responsibility of specialised units like the innovation lab or corporate R&D rather than being the responsibility of every leader at every level.
If leaders from project managers to the CEO are not formally accountable for innovation and do not have innovation-related targets that affect their compensation, a culture of innovation will be marginalised.
Naturally, it makes little sense to hold leaders accountable for innovation if they haven’t been trained and coached to encourage innovation within their own teams.
Companies that work hard to create a cadre of leaders, who are as adept at fostering innovation as they are at running the business, are the ones which succeed in building a culture of innovation.
6. Establish Cultural Innovation Metrics
Culture eats strategy for breakfast” said Peter Drucker; and it’s a truism that you get what you measure and reward. Yet very few companies actually measure their culture of innovation.
This is a massive oversight as culture is the critical element in delivering a sustainable innovation strategy. The importance of measuring and monitoring cultural change as you journey towards building a culture of innovation can not be understated.
Many organisations have failed to shift their culture as markets and competitors change around them. It is also clear that past success counts for very little when it comes to the future we’re facing. The onus now is on agility, nimbleness and the inherent capacity to respond to external and internal disruptions. Yet equally you cannot just flip a switch and change your culture.
To understand how firms evolve and develop, TTC has used the theory of natural evolution. Charles Darwin reputedly said: “It is not the strongest of the species that survives, but rather, that which is most adaptable to change” Cultural DNA is similar to biological DNA in that each organisation has a unique DNA defining three key parameters of performance:
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Who you are
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How you work together
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What you are capable of achieving
TTC's Organisational DNA Metrics uses these three parameters of performance along with nine-strategic and organisational levers to influence and evolve an organisation's culture.
Nine levers for building a culture of innovation:
A. Who you are
01. People
02. Environment
03. Purpose
B. How you work together
04. Structures
05. Processes
06. Decisions
C. What you are capable of achieving
07. Motivators
08. Development
09. Measurement
The paradox of innovation:
Too often, organisations seek out a single magical innovation formula. Leaders then lock themselves into one type of strategy and say: “This is how we innovate.” They mobilise resources, energy and commitment and for a while it works. But eventually – as articulated by Clay Christensen in the highly acclaimed Innovator’s Dilemma – the returns diminish. Companies then find themselves locked into mindsets and methodologies which are no longer relevant to the realities of a changing world.
Organisations can avoid this innovation trap by recognising that at its core, innovation is about solving problems.
The most innovative firms are geniuses at discovering problems where nobody else realised they existed.
If all you want to do is come up with a few innovative ideas, then there are numerous brainstorming and innovation sprint methodologies available for deployment. But to build a culture of innovation, then a systematic approach is required.
