Leading companies innovate not just within their small innovation teams, but they have embedded a culture of innovation across the company.

This requires new skills and mindsets, but also new ways of working and different decision making flows. While it's not an easy journey, it's one of those fundamental shifts every organization needs to embrace.

As such, during The Innovator's Handbook Launch Event late November, we looked at best and next practices for building innovation culture and capabilities company-wide. Below you'll find a summary of the conversation by Martin Reeves, Chairman of the BCG Henderson Institute, Kaihan Krippendorff, Founder of Outthinker, Natalie Nixon, Creativity Strategist and President of Figure 8 Thinking, and Olivia Law, Commercial Director at Pollen8, moderated by Simone Ahuja, Innovation Strategist and Author.

What’s innovation culture and what are its key elements?

When it comes to innovation and more specifically, innovation culture, each of us talks differently about how it can help us get from A to B. It's crucial to start from a shared understanding what innovation culture actually is- and is not.

Martin: Innovation culture is what enables companies to harness human imagination.

The critical elements of that are:

  • External orientation and curiosity - to seek and be stimulated by surprise
  • Reflectiveness - the ability to work an idea and not be stuck in execution mode
  • Empirical culture - one that tests ideas and rejects ones that don't work.
  • Collaborative idea - that don't spread, remain private fantasies
  • Concrete - be able to industrialize the ideas as well as have creative concepts
  • Humble - being open to the fact that one's favorite ideas and business models need constant disrupting and renewing

Natalie: Innovation is an invention converted into scalable values – social, financial, cultural – where the conversion factor is creativity.

A great innovation culture is when we start with creativity to toggling between wonder and rigor to solve problems, and when we ensure that cognitive diversity, or orthogonal thinking, is deeply embedded in how we convene and in how we approach a challenge/opportunity so that people with different skill sets, backgrounds, levels of tenure and experience are part of the process.

Olivia: There’s no culture of innovation when innovation is seen as a secondary activity, as an intangible process. Oftentimes, it seems that innovation is the by-product of striking a balance between structure and direction, between creativity and inspiration. When we try to create a feeling of innovation rather than prioritizing its enablers, this can lead to an innovation theater.

Kaihan: I’ll sum up my idea of what innovation culture is by reporting the correlation I found in my research between innovation and the following four cultural values:
1. Encouraging innovative thinking and solutions
2. Having strong market awareness of customers and competitors
3. Taking the risk and viewing it as a learning opportunity
4. Allowing for autonomy and proactivity

What’s different today about the way large organizations build an innovation culture?

Over the last years, we've seen a lot of change in different organizations and some of their barriers to innovation have fallen – whether it was bureaucracy, centralized decision making, or something else. What are some of the trends we're seeing?

Olivia: I think the corporate world has witnessed the acceleration of the sustainability agenda and the focus on ESG sustainability goals. That will only become more prominent in tying innovation programs and activities to strategic priorities. This will empower employees and bring them into the conversation. What's different today is that businesses can leverage the power of that participation and help tackle challenges such as a sustainability challenge from the bottom up.

Kaihan: Employees are the primary innovators.

70 percent of society's most impactful innovations have come from employees, not entrepreneurs.

So companies need to enable employee-driven innovation. Also, during the pandemic, we’ve experienced and learned to do things differently and the system didn't break. Now we have the opportunity to maintain that agility and flexibility.

Natalie: I’d like to pose attention to the blurred boundaries – between work and home, home and work, work and learning, learning and play, play and work – that we’re all navigating today. That’s what is incredibly different. We now know we can work and learn from anywhere and only those organizations that work at the intersection of productivity, digital tech, and meaningful human connection by prioritizing creativity, will thrive.

Martin: It's mostly not different, innovation in large companies is a perennially difficult thing to do. But five vectors are a little different:

  1. Competitive fade rates - A companies competitive edge doesn't last as long
  2. Extended enterprise - Nine of the world's largest companies are now digital ecosystems. These are collaborative communities of hundreds of companies
  3. The rise of AI - This gives us new tools to help innovation. It also gives us a new imperative to focus on more uniquely human cognition, involving empathy and creativity
  4. The rise in the importance of the context - Emphasis used to be only the business's returns, stakeholders, employees, competitors, and suppliers. However, the scope of emphasis has expanded to include the social and ecological contexts
  5. Increasing humanity of employees - Employees must feel what they do is meaningful, purposeful, and socially contributing

Why do ideas get stuck?

Some issues are perennial: one of the main obstacles for innovation success is that too many ideas get stuck. Has that changed over the last couple of years?

Martin: There are a lot of ways in which ideas get stuck. The death of curiosity that precedes the realization of work and innovation in large corporations is a danger. Also, procedures are helpful but not if things become a matter of routine. Those are some of the blockages that I come across again and again. And I don't think that's changed with or because of Covid.

Natalie: I agree with Martin about the role of curiosity. Most people get stuck because they think creativity is solely the wonder dimension when it also requires and involves rigor – discipline, focus, execution. Ideas get stuck and die because some corporations don’t lead with questions, they don't have leaders willing to cede control and, why not, even explore some coopetition with competitors.

How can we help managers say yes to change? We're not treating managers like people who need to be trained, guided, coached, and supported along the way on the innovation journey.

Olivia: We hear a lot about bottom-up or top-down innovation, while we rarely discuss middle innovation. The “middle level” is where innovation gets done within organizations and where it’s moved from strategy to execution. Managers must understand what's going on within the business and what the key strategic priorities are. I don't think it's about saying yes to change, as much as it is around how to move it forwards practically.

How do you break that down into tangible steps for them? How do you help them start by defining what that strategy is? Why are you doing it? How does it lead up to the company's goals?

You can do that through structured processes for evaluating ideas and opportunities. You can't just mandate it from the top down; you have to allow people to explore, incubate and experiment with their ideas. And then, of course, giving them the resources they need as well.

I think it's about setting up a system where middle managers feel like they can contribute and not just be told what to do all the time. A lot of managers might have been burned by innovation initiatives that haven't worked. There's a lot of legacy within organizations, there's a lot of pressure for them to do things right.

In that sense, structure and rigor – as mentioned by Natalie – could be helpful since it’s what often enables transparency, energy, and connections.

Kaihan: In my research, I found that there are seven primary barriers to innovation, and it starts with the fact that most mid-level managers don't know the company's strategy. Less than 55 percent can name two of their company's top strategic priorities. So they don't even know what's important.

The two main other factors I believe are big ones of the seven are:

  • Business model design. There are these extraordinary techniques for business model design. But suppose you've been working on a business model, and an idea pops up. In that case, inconsistent with the current business model, we need to enable people to rethink the business model around the innovation so that there's less rejection.
  • Organizational flexibility. There has to be a mechanism that allows this cohort of people excited about an idea to come together and swarm around the idea, even if they normally sit in finance, procurement, or marketing.

How can you harness the innovators inside your organization?

Do you always have to look externally to create innovation or can you harness the energy inside your organization?

Martin: We're on the verge of a very larger agenda for business, which is the re-humanization of business to compete for talent in an age of aging demographics. We need to engage and empower. But beware, collaboration is important, but antagonism can be very productive. Furthermore, don't mistake social engagement for innovation. We probably need engagement to be a broadly spread property of the organization while we may or may not wish extreme innovation for the same purpose. Both are important, certainly interrelated, but not the same thing.

Olivia: Transparency, asking the right questions, and providing the right education and inspiration are fundamental to creating a culture of innovation.

Employees fear that by participating in a corporate innovation program their ideas would be lost and so all that creativity, inspiration, and inquisitiveness just goes and, in some cases, innovators prefer to leave the organization and set up their ideas separately.

What matters when it comes to innovation culture is a clear direction: Why are we doing it? Where are we going together? This will help create a culture of intrapreneurs, or people who work with the company, rather than against it.

Natalie: People need to feel seen and heard, but they’re intimidated by the idea of improvising. We should design adaptive and fluid structures that open up the possibility for people to be more experimental, like a jazz quartet. And when we become an innovation-centric culture is because that capability is diffused throughout the organization.

What’s the one thing that leaders can do to build a meaningful innovation culture in 2022?

How can leaders build a meaningful innovation culture that moves people from working for their own advancement to working for the whole organization advancement?

Olivia: Humanizing innovation can bring the right culture needed to move the needle on important agendas. The questions should always be the same: What are the practical steps that we can take to make that transition a reality? How can we ask the right questions to get there? Where are we going?

Kaihan: There are 5 ways in which humans organize themselves: hierarchies, marketplaces, communities, ecosystems, and democracies. And when we look at organizations, we see the same 5 categories. The real opportunity is to think of those ways of organizing as colors we can use to paint new organizational forms.

Natalie: Leaders should mashup between asking people what they need and inviting them to pause to reflect. We all need to pause, which may seem counterintuitive, but there's incredible value in the pause.

Martin: Neuroscience says that the reason why we make changes in our mind, and we adopt different mental models, is that we notice surprise, and we notice things that don't fit. Large organizations are not very good at that.

One of the critical leverage points as a leader is to get people to see the world differently and to get them to adopt new mental models. The faster you can do that, the better.

Encourage employees to find those things that don't fit and pay attention to them because they're signals of change. Leaders need to create a culture where people are willing to feel uncomfortable and try new things.

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