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Embedding a culture of innovation into the fabric of an enterprise – A prescriptive approach: Part 2

Empirical studies reveal that companies with higher innovation capability can achieve better business outcomes. Innovation has also become crucial for competitive survival in the rapidly changing environment. In the first part of this article, I used Hofstede’s “dimensions of culture” model to establish that cultural indices, especially Power distance, Individualism and Uncertainty Avoidance, are the most important influencing factors on innovation capability of an organization. Although the concept of innovation culture is a complex subject, a definite pattern of organizational traits and behaviour in innovative companies across the globe is noticeable. A framework derived from this pattern helps us to answer crucial questions around innovation – could we improve innovation capability in an organization and if so, what are the strategies to do so?
Organizations aspire to build sustainable capabilities and innovation capability is one of such capabilities. However, in reality, companies with innovation capabilities are still few as many companies do not have requisite innovation culture and, hence, cannot take innovation beyond their mission statement. They face multiple barriers when developing and commercializing innovation. Many companies focus on various processes to increase efficiency, but efficiency does not produce radical innovations. Few common barriers to disruptive innovation include:

  • Rigidity and over-reliance on previously successful patterns to create future business models, leading to risk aversion and organizational inertia
  • Mindset barriers and inability to unlearn and relearn
  • Efficiency-oriented management models and processes are not suitable for managing innovation and cannot produce innovative outputs

Subhojit Roy
Technology Consultant & Adviser, Ex-CIO
SBI Funds Management

It is quite evident that resources (or lack of it) are not the main barrier, but it’s the culture in large or mature enterprises, which acts as a barrier to innovation, especially disruptive innovation. Radical or disruptive innovation needs different models around people, structure, and procedure with different organizational mindset.

Based on empirical studies, researchers have been able to propose a framework for innovation culture to promote innovation. Among many researchers in this field, Brooke Dobni is one of the leading researchers, who has done extensive work on strategy & innovation. These studies, which include interviewing employees of leading companies on innovation culture, have found many organizational traits around values, heroes or champions and rituals or practices.

This well-researched framework for innovation culture has been grouped under five major dimensions – a. Innovation readiness, b. Creativity and Learning, c. Leadership and Entrepreneurship, d. Market orientation and e. Motivation and Relations.

Innovation Readiness

Resources and infrastructure are critical pre-requisites for innovation, but intention to innovate and ability to implement innovative ideas are necessary. Two indicators of these features are strategic intent and organizational expectations for innovation. Both traits need to percolate down to all employees through clear communications and encouragement for innovative ideas. Strategic intent and innovation readiness are revealed by companies’ actions about value of innovation and support for innovative ideas.. Organizational expectations are the signals about what the company expects from the employees and how new innovative ideas are treated in the company. Organizational expectations for innovation is more powerful than strategic intent in shaping innovation culture.

It is equally important to be prepared to develop & implement new ideas. While incremental innovations thrive in a culture focused on efficiency, low risk and meeting the demands of existing customers, radical innovations require a risk taking mindset, speed, flexibility, and experimentation and, often, restricted resources to inspire creativity.

All innovative companies allocate time for innovation as well as recognize the employees, who are passionate about new products/ services, as heroes within the organization. At the same time, individuals are expected to take time to explore possibilities for innovation in their everyday work. Too much formalization of innovation process can have a negative impact on innovation capability.

Creativity and Learning

Events, such as innovation jams, idea workshops or innovation days, are helpful in building a culture of creativity and learning. Managing creativity culture is a key challenge for most of the companies, especially for rules-based companies. Open communication, freedom, team-work culture, trust, respect for each individual and supervisory support are the key elements in promoting creativity culture. “Creative time” is found to be the most important resource for innovation, and companies, which provide free time to its employees to work on their own projects, have higher innovation propensity.

Creativity works at two levels – individual and organizational. Individual expertise (i.e., technical skill & factual knowledge), creativity skills and task motivation help creativity to flourish. However, there is always “something extra” needed for individual creativity. Appropriate management practices and rules along with organizational motivation influence creativity at the company level. It is not lack of creative employees, but lack of environment and rigid processes, structures and rules, which are the actual barriers to creativity. Creative employees are shackled by these barriers and creativity tends to die in rule-based hierarchical organizations.
We come across a few people in innovative companies, who come up with new ideas and are highly creative, but they also ensure that these ideas are realized. Organizations, which encourage and empower these kinds of champions, have naturally better innovation capability. Also, other employees can look up to these champions as role models and this, in the long run, helps to build an innovative culture in the organization.

Learning orientation of a company has significant impact on innovativeness, just like creativity. Organization’s commitment to learning, open-mindedness (allowing different opinions & new ideas to motivate individuals) and intra-organization knowledge sharing are the ways to create positive learning atmosphere. Informal learning through knowledge sharing and workplace coaching are more effective than formal learning at many times. Appreciation & support of learning by employees, encouragement to discuss and take part in decision-making and inter-departmental collaboration – these features go a long way in promoting innovation culture.

Connecting with external experts through formal & informal networks and regular internal workshops are also very important for organizational knowledge and new ideas. For a large company, lacking agility and creative environment, joint development with start-ups is a good strategy to find new competence.

Leadership and Entrepreneurship

Creativity does not equal innovation. For the journey from creative ideas to innovation to be successful, two inter-twined elements are central – leadership and entrepreneurship. Entrepreneurship is the heart of any innovation. It is a part of wider dimension of leadership, which also includes management support and participative decision-making. Instances where leaders allow decisions to be made by the most knowledgeable co-workers, are the finest examples of participative decision-making.

Majority believe that innovation culture is strongly affected by leaders and leadership. It is hard to drive innovative ideas forward without permission and support from the managers. Leadership also means being supportive, promoting trust and ability to involve all co-workers. The last factor is critical.
As it is difficult for one leader to be complete in all respects, it is important to build a culture where leaders act together with each other in unison. In many of the big companies, leaders do not act together and, worse, many act against each other to drive their individual aspirations.

Organization’s leaders need to create opportunities for entrepreneurship by promoting a mindset for innovation, risk tolerance and intrapreneurship, i.e., internal venturing.

Intrapreneurship has a big role to play in success of innovation efforts in large companies. Large companies have favorable conditions, such as, large networks, access to skilled individuals, abundance of new ideas, and resources, which can promote entrepreneurship. However, in reality, we find that the environment of large organizations is more often not conducive to intrapreneurship due to hierarchical structures, bureaucratic mindsets and rigid formalities. These factors drive away the intrapreneurs and negatively affect innovation capability. Large firms tend to set up a separate entity, either solely or in joint venture with smaller entities, to circumvent the problem of lack of intrapreneurship and pursue innovation.

Market orientation

Market orientation, through understanding customers and the environment, is an intrinsic part of innovation culture. “Customer focus” must be a central theme of any innovation today. We can think market orientation as the field of generating, disseminating, and responding to customer needs. Scanning the external environment is equally important for sourcing new ideas and trends. All innovative companies focus on understanding customers’ wants & needs (present & future) and what they value. Innovative companies, through ‘Need Seeker” strategy, can create innovative products & services for existing & potential customers. On many occasions, these companies address unarticulated customer needs and, thereby, can create new markets.

There is a subtle difference between customer needs and wants. Customer needs are not explicit and not connected to any technology and, hence, it makes it difficult to measure customer needs. Innovative companies go beyond explicit customer wants and focus on understanding the underlying needs of the customers, including future trends.
Among all the major ingredients of market orientation, responsiveness to intelligence is the most critical step. It is also linked to company’s innovation readiness and leadership & entrepreneurship dimensions.

“Voice of Customer”, where the company invites their customers, is a regular activity for all market-oriented companies. This is a collaboration between sales/marketing & R&D/ product development departments. This is a very powerful tool leveraged by big companies to improve, innovate, and create new products.

Motivation and Relations

Most of us assume that monetary rewards are the key for motivation, but many empirical studies have shown that the modes of working and recognition influence motivation to the largest extent. Communication and collaboration are intrinsic part of this dimension.

Freedom to control the ways in which one wants to solve his/her tasks is an important factor in individual motivation. Pride & passion in the company and the purpose of work have direct linkages with overall motivation.
Manageable tasks, making progress and an environment where one’s thoughts are valued, are key components of motivation. Companies with majority of the employees engaged in solving day-to-day problems is found to be low on motivation.

Agile methodology is good for promoting motivation as it allows empowerment and enables continuous communication about progress to team members. Consistent and continuous feedbacks are essential for motivation.
Relationships refer to working conditions in teams and collaboration and communication across different functions/ departments. Both team-work and cross-functional collaboration are facilitators to an innovation culture.
Organizational motivation, i.e., valuing creativity & innovation, is a big influencing factor on innovation culture. In many cases, CEOs are seen as the heroes to the organizations. By inspiring talks, both internally & externally, they keep the organizations innovative by motivating employees.

Key Takeaways for developing innovation culture in your organization

Leaders can use the following success factors and barriers in identifying the course of actions needed to develop innovation culture in their respective organizations.

Success Factors of innovation

  • Flexibility in deviating from pre-defined processes is a key to innovation capability.
  • Make innovation an organization-wide priority through clear communication about organizational expectations for innovation to all employees.
  • Freedom to experiment to boost creativity & learning along with mindset to accept that all tests may not yield results.
  • Focus more on implementation (through iterative processes) than initial ideas, especially with respect to large-scale idea-generation events.
  • Leaders must clearly communicate a vision and purpose to each employee, including strategic intent about innovation and participative decision-making.
  • Understand customer needs, not just in terms of current wants and technology, but in terms of values and future needs.
  • An open culture, where ideas and problems (even controversial issues) can be discussed.
  • Make innovation related activities voluntary as participants find them fun and engaging and, hence, produce better results.

Barriers to Innovation

  • Excessive emphasis on control and measuring. Using KPIs for measuring is fine but using them for control kills innovation.
  • Lack of flexibility in resource allocation, especially for radical innovation.
  • Inability to “unlearn” (i.e., breaking old patterns and letting go of old behavior to enable new learning) and challenge dominant logic existing in the organization.
  • Enacting too many changes at once diverts employee attention and hinders progress.
  • Focusing too much on current customer needs instead of future needs could lead to missing important trends and this, in turn, could risk missing out on radical innovation opportunities by the company.
  • Too many pre-defined tasks and time pressure reduces motivation to innovate.
  • Incentive structures, which lead to internal competition rather than collaboration.

Innovation really matters not only in private enterprises, but, also for public enterprises for policy formulation and public infrastructure & services. Innovation drives sustainable development and growth of industries and, hence, public policy which supports innovation culture, is also important for the country.

About the author

Subhojit Roy, Technology Consultant & Adviser, Ex-CIO, SBI Funds Management Subhojit Roy is a Technology Consultant & Adviser. He specializes in the areas of technology & digital strategy for business, product development, project management, info & cyber security consultancy & training. He has been CIO of SBI Funds Management, the largest Mutual Fund in India, for more than 14 years. He has vast experience in the Asset Management/ Mutual Fund domain in technology leadership role. He worked in software consultancy & services companies in different capacities. He also worked in the USA for one of the largest USA headquartered home loan mortgage company.

Subhojit Roy is a post-graduate from University of Calcutta. He has also accreditations in the areas of systems management, project management, information security and agile project management. He is certified PMP and CISSP. Subhojit has been visiting faculty to leading management institutes and also, he is a regular speaker in various industry forums.

He is passionate about writing on various current technology issues with social and economic relevance. Teaching and mentoring are some of his areas of interest.

Disclaimer: The views expressed in this feature article are of the author. This is not meant to be an advisory to purchase or invest in products, services or solutions of a particular type or, those promoted and sold by a particular company, their legal subsidiary in India or their channel partners. No warranty or any other liability is either expressed or implied.
Reproduction or Copying in part or whole is not permitted unless approved by author.

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