Corporate leaders often talk about creating a “culture of innovation” within their companies.
When having these conversations, they often act as if organizational culture is some mythical creature that comes down from the mountain to greet the people. Most leaders are unaware of their power to change the culture of their companies and instead find themselves imitating trends and fads.
Most of what is considered “innovation culture” is “innovation theater.” Having rooms with business model canvases, sharpies and sticky notes is not innovation culture. Neither is opening an innovation lab or working with startup accelerators.
Even after putting all these practices in place, executives are still frustrated by the lack of results. They have all the great innovation tools in their business, but no innovation.
What most leaders need to realize is that innovation culture is not some mythical phenomenon floating around their companies. Their company’s culture is created daily by what, they themselves as leaders, punish, recognize, celebrate and reward. The adoption of new innovation tools will not help a company if its leadership team is still hanging onto traditional management practices. So while executives lament the lack of innovation in their companies they are still unwilling to relinquish thirty-paged business plans and the calculation of bonuses based on annual sales targets.
If corporate leaders want the innovation tools they have adopted to have an impact on their company culture, they have to change the following three management practices.
A lot of companies want to innovate but the leadership team has no clear strategy around innovation. Instead, employees are given a broad and general remit to come up with great new ideas. This can lead companies to work on a number of unconnected products and services. In addition to this, innovation teams can find that some of the great ideas they come up with have no internal support from managers because they were never on anyones agenda to begin with.
What companies need is a clear innovation thesis that outlines the key trends impacting their business and how the company plans to use innovation to get ahead of those trends. This innovation thesis should provide a simple guide of the types of innovative ideas the company will invest in.
Innovation tools by themselves do not lead to innovation. Innovation starts with the strategic decision to pursue specific types of ideas. Innovation tools can then be deployed as best practice to deliver on the chosen innovation strategy.
Investment Decision Making
Corporate leaders can stifle innovation by how they make decisions to invest in ideas. In fact, investment decisions making is perhaps the most powerful lever managers have in transforming a company’s culture. If employees are still required to write long business plans before they get any money, the company will end up rewarding the kinds of people who are happy to write such plans. Such practices tend to exclude the creatives and leave them out of the process.
Furthermore, innovation succeeds through making several small bets and seeing what works. Business planning often involves five-year projections, detailed delivery plans and an ask for a large amount of investment money. After the large investment is made, innovation teams are then managed by whether their project is on time and on budget. Such large investments based on detailed plans limit the number of bets a company can make. Since most innovative ideas fail, increasing the number of bets is a good method for discovering ideas that work.
As such, what companies need is an investment process that allows managers to make small investments on a number of strategically aligned ideas, support employees as they test their ideas and then double-down investment on those ideas that demonstrate traction.
Incentives And Rewards
Another powerful lever for changing culture is incentives and rewards. Most companies calculate bonuses and make promotion decisions based on how well people perform in relation to revenue growth on the core products.
While managers pay lip service to innovation, they do not put any innovation goals in their employees annual plans.
As such, if people know that they will not be rewarded or recognized for innovation at the end of the year, they will not pay much attention to it during the year. Middle managers are often blamed for blocking innovation projects that are proposed by their direct reports. This is often treated as an ignorant responses from traditional managers.
After all, the top executives will be calling for more innovation within the company. Well, executives can pontificate about innovation all they want. But until they change how they incentivize their managers, they will not get the results they wish for.
Innovation cultures do not create themselves.
Furthermore, such cultures are not created by simply adopting Stanford d-school tools and artefacts. Cultures act as methods for coordinating the actions of various people in social or work settings. Such coordination is governed by a system of rewards and punishments that facilitate certain practices. So if traditional systems of incentives are still in place, introducing canvases and sticky notes will only increase the frustrations of both managers and employees.
Such cultural battles are often resolved by ‘following the money’, which in most companies is generated by core products.
To move beyond the sticky note, leaders need to change how they set strategy, make investment decisions and reward their employees.