Forward-looking organizations are those enabled to navigate disruption and own the future.

But to what extent is culture change is a direct objective in innovation work or solely a byproduct?

In order to figure this out, during The Innovator's Handbook 2022 Launch Event we hosted a discussion with Linda Hill, Professor of Business Administration at the Harvard Business School and chair of the Leadership Initiative, Greg Satell, Author and Innovation Advisor, Rob Wolcott, Adjunct Professor of Innovation at the Booth School of Business at the University of Chicago and at Kellogg School of Management at Northwestern, and David Kidder, CEO and co-founder of Bionic, moderated by Natalie Painchaud, Director of Learning at Innosight.

You'll find what they discussed below.

Should we have culture change on our objective list?

Should culture change be on our agendas, and part of our measurable outcomes or objectives?

Linda: It should be on the agenda of anyone who’s responsible for innovation. I've looked at people in all kinds of roles and mandates, and every one of them knows in order to succeed with innovation they need to behave in ways that are consistent with building a culture of innovation.

Greg: I'm skeptical about pursuing cultural changes as part of an innovation initiative since most organizations have multiple cultures. Basically, it makes a big difference where you start and who you start with. Culture change can't just be driven by one group within the company for real culture change to happen. It has to be something that's owned by a much wider group of leaders around the company. But I agree with Linda: culture has to change in order for our innovation efforts to succeed.

Rob: Culture is essential. It should be on the agenda of any innovation team. But I think the critical distinction is, should it be on your specific objectives list to lead the cultural transformation? Should that be something that you are measured against in terms of your success? People pay the most attention in businesses to metrics like new revenue, cost, reductions, etc. It's much easier to measure those. So whilst culture change has to be on your agenda you have to be very careful about how you're measured against it.

Ultimately, culture change can't just be driven by one group within the company for real culture change to happen. It has to be owned by a much wider group of leaders around the company.

David: Culture is an outcome of choices and the intentions of an organization. You need systems and incentives to produce that outcome; so it's impossible not to take culture into account.

What are some of the characteristics of a culture that is supportive to innovation?

Most of what innovators do can't get done unless the culture is receptive to it.

Linda: For about 20 years, I've been researching the connection between leadership and innovation. We found that it's easier to build the culture of innovation than it is to build the capabilities of innovation.

We see that decision-making is often broken, but you can't fix decision-making unless you fix what is referred to as creative abrasion. Meaning, have you unleashed and amplified your organization's different points of view, or have you minimized them. Because if you haven't strengthened and released them in the first place, you can't leverage them to figure out how to innovate. A business has to have a diversity of opinion, and it has to have an inclusive environment where everyone can contribute.

Rob: People often have a squishy notion of what they mean with “We need a better culture”. Once you understand what that might be, then you can start thinking about ways to change. There’s also the challenging topic of subcultures within a company: it's essential to understand what kind of culture change you want to achieve and in what contexts.

Greg: What I've found is that everybody loves change in general. It's the specific changes they don't like. More specifically, they tend to like their idea for change, but not so much anybody else's. It's essential to find people excited about your brand of change and who can help make it work. Because you always want to be selling success, and it's always easier to sell a success than it is to sell an idea.

David: Big companies need systems. If those systems aren't intended for growth, they will regress to the core. So let's draw a very clear distinction between planning and discovery. Planning is when you know what's happening; it's predictable. Discovery is where the surprise happens, and by definition, it's unpredictable. But if your systems are biased towards planning, they will kill discovery. There needs to be a balance between encouraging more discovery and at the same time being able to recognize and eliminate the bad ideas that come from this exploration. Creating a culture where failure is not penalized is essential to creating an environment where innovation can thrive. The culture has to be ingrained in the mindset and systems of the company.

Did you know that all of the returns around growth come from 6-7% of the capital deployed?

When you look at why do you originally invested in those fewest number of bets, you find out that those were supported by:
1. High conviction. That is code for the role of outside forces, market timing, and proprietary gifts.
2. Non-consensus. You make all of your money from the ideas upfront with the highest disagreement. So conversely, if you have consensus and you're trying to go for growth, you're basically screwed.

Greg: Organizations that can repeatedly innovate have in common a systematic and disciplined process for identifying new problems to solve. Thanks to exploration you find new ideas: if you don't explore, you don't discover, if you don't discover you don't invent, and if you don't invent you will be disrupted eventually.

Linda: One of the leaders we've been studying is the man who runs the global supply chain for Pfizer. When we first began to study them, he thought it would take 3/4 years to change the culture of the group, while they got those trials done in 266 days. He started by convincing everyone that they should think about what they could do, and work on how to do that together. So it’s true that there are some critical elements and various subcultures, and there's a group doing the R&D side of innovation, but what was allowing us to be here today is that everyone has seen their role to play in solving our problems. That's what he did to start the change: “Now we're all patients, we're working on hope for all of us”.

What works in practice when it comes to overcoming resistance to change?

It’s inevitable: when you make changes, there's resistance. It’s crucial to anticipate that, but you don’t necessarily have to engage with the most ardent opposition. How can we make things work?

Greg: First, you need to acknowledge that change doesn't fail because people don't understand it.

Change fails because it's sabotaged. Anytime you ask people to change what they think, or what they do, there's going to be someone who isn’t going to like it and who’s going to undermine it. Once you internalize and understand that, you're ready to move forward.

But there’s also good news: you need a small part of an organization to embrace change – some put it at 25%, others at 3% – overall, I haven’t seen anything to indicate that it's anywhere near 51%.

Rob: For some reason, innovation teams think they have to get everybody to like them, and everybody to engage. Don't do that, especially at the beginning. Go find the people that really want you there, that really want you to help them become successful. I'd like to share with you the “organizational engagement plan”, a tactical strategy to follow when it comes to a new big objective:
1. Take your team off-site.
2. Write down any leaders and mid-level people of your organization that you suspect might be relevant.
3. Characterize what you think those people think about what you're doing.
4. Allocate each of those people to your team to report on individual issues.

That’s crucial because innovation teams always do tech plans and process maps, but they don't do a plan where the organizational uncertainties rise up.

Those whose livelihoods have relied on the status quo can be saboteurs. How do you navigate around them?

Linda: A problem in organizations is when they say, these are the executioners and these are the innovators. There’s the need to both have people who specialize in the present and the future, but we need more who know how to play in the middle.

I'd like to add that a significant factor that helps organizations innovate is positive deviance- the idea that there are always some people doing something different and better than everyone else in any population.

You find these people by looking at outliers; you look at those succeeding against all the odds. You study them to figure out what they're doing differently, and then you try to spread that behaviour throughout the entire organization. It's exciting to see how many organizations use this concept to drive change.

Greg: My research and an essential part of my career focused on political revolutions. People who successfully overthrow a country go through a very formal process. There are two tools called the spectrum of allies and the pillars of support. The way they always win is they get their opposition to discredit themselves. This is why you want not to engage, and you want to keep away from them. If you leave them alone, when they see you gaining traction, they will often lash out and overreach and discredit themselves. That's how they always lose, and that's how change always wins.

Rob: People don't have a clear idea of their business objectives translated into what it means to innovate. In a core business, a key objective for innovation is how do we continue to extend and become better at what we do. That's a version of innovating. But that's very different than what David said, which is building growth and brand new businesses.

Managing, leading, implementing, and exploring efficiency is very different than driving growth. They're related, but how I achieve efficiency gains in existing businesses is very different than how I achieve innovation-led growth. So if you help people understand what their business objectives are, then the ways we proceed to bring innovation becomes a lot more clear.

Linda: There's a certain resistance you can't overcome. With Procter and Gamble, we found that the person leading a particular effort was from R&D She felt that the BU heads were the ones who would decide whether the growth works paid off or not. So she asked each of them: “How do you want to be measured?”, and they put together a qualitative and quantitative mix that fits their business unit and had a conversation about why was that the right way to measure them. So rather than trying to force them, she wanted them to pay attention to the mix of present and future.

👉 What's your take? Feel free to share (one of) these articles and add your own experience and/or opinions on LinkedIn with #innovation2022