By Candace Coleman, CultureWise Content Manager
“Because we’ve always done it that way” is a death knell. That doesn’t mean historical processes are always wrong or standard operating procedures aren’t necessary. But no company can sustain success—even if things are going reasonably well—by being unwilling to examine the present to consider better possibilities for the future.
If the goal is to stay ahead of the competition and sustain a winning market share, company leaders need to think outside the box and encourage their staff to do the same. They must also make sure their employees rigorously follow best practices to maintain quality and production continuity.
In other words, a highly competitive company should operate in an environment that is both creative and process-oriented.
Wait, aren’t those two things contradictory?
On the surface, “a creative, process-oriented business” might sound like an oxymoron. In fact, innovation isn’t sustainable without efficiency, and vice versa. These two performance pillars are like the yin and yang of corporate culture. When properly balanced, they are powerful complementary forces that generate organizational success.
What is Innovation?
Tony Bond, EVP and Chief Innovation Officer of Great Places to Work, succinctly defines innovation as “the mindset of possibility that allows the seeds of change to take root.” He goes on to explain that innovation can be expressed as an if/then proposition:
“If we can explore these markets, change these offerings, build these products, improve these processes, etc., then our efforts will result in measurable gains for the organization.”
Innovative companies encourage their employees to have open minds and consider all options while they work. This kind of staff always thinks of how things can be better going forward while maintaining the discipline to execute effectively in the present.
Conversely, in a workplace where people never think beyond the status quo, nothing will change. The market will pass their company by—no matter how well they follow the rules.
Two Kinds of Innovation
In Lead and Disrupt: How to Solve the Innovator’s Dilemma, Charles O’Reilly and Michael Tushman list two categories of innovation: exploration and exploitation.
- Exploration: This kind of innovation has an outward focus and is primarily a function of leadership. Explorative innovators regularly examine new markets, products, and unfamiliar business models to plan changes that will enhance their company.
- Exploitation: Exploitative innovation has an inward view and can be practiced by an entire workforce. It involves looking for ways to make existing products, processes, and relationships better. It is about improving things that already exist in a company.
O’Reilly and Tushman recommend that organizations engage in both kinds of innovation to stay competitive in their industries.
“Regardless of a company’s size, success, or tenure, we argue that their leadership needs to be asking: How can we both exploit existing assets and capabilities by getting more efficient and provide for sufficient exploration so that we are not rendered irrelevant by changes in markets and technologies?”
The authors argue that this “ambidextrous” approach will prevent any size company from falling prey to the kind of stagnation and success-inertia that toppled giants like Blockbuster, Kodak, and Radio Shack.
Innovation Starts at the Top
Business leaders who think from an innovative perspective know an unlimited source of imagination is waiting to be tapped within their staff. Their challenge is to develop the kind of company culture that allows employees to think creatively while also working effectively.
To do this, leaders must help their team practice innovation—it should be a standard component in the way their company does business. Drew Boyd, Professor of Marketing and Innovation at the University of Cincinnati, lays out a four-cornered framework for this in Psychology Today.
- Innovation as a Competency
Innovation is a skill, not a gift. It can be learned by anyone on the staff and applied companywide. Leaders can promote this concept by defining innovation competencies and including them in employee training.
- Innovation as a Competitive Weapon
Executives should use innovation as a differentiator by including it in planning and strategy initiatives.
- Innovation as a Process
Treat innovation not as a special activity but an ongoing “stream of effort” along with other constants in the company, such as quality and productivity. Leaders should connect innovation to all key processes, including financial, commercial, and technical.
- Innovation as Both Systematic and Opportunistic
Boyd echoes O’Reilly and Tushman in saying that companies should deploy different innovation styles, including internal and external efforts, to maximize opportunities.
Gary Pisano, Professor of Business Administration at Harvard Business School, takes a more cautionary stance. In “The Hard Truth About Innovative Culture,” he agrees that innovation is good for the bottom line and makes the point that people value the opportunity to think creatively, which boosts employee engagement.
But he circles back to the need for the balance of behaviors discussed at the beginning of this article. Maintaining this equilibrium requires leaders to have a firm grasp on how innovation is deployed in their organization and to define parameters.
The guidelines Pisano suggests are:
- Tolerance for failure, but not for incompetence
Because innovation inherently includes some risk, people shouldn’t fear failure—it is part of the learning process. But the failure has no merit if it is due to mediocre skills, sloppy habits, or poor management. Leaders should stress high performance standards coupled with innovative thinking in the company’s culture.
- Willingness to experiment while remaining highly disciplined
Without discipline, even rash or careless decisions can be branded as creative experiments. The decision to think innovatively should be based on the potential learning value. And when undertaken, innovative experiments should be carried out with criteria and a way to measure results.
- Psychological safety
Psychologically safe work environments are places where people feel they can speak openly about problems without fear of retribution. They are essential for companies that want to lean into innovation. But many people find candor hard to accept, especially if it involves concepts they’ve put forward. Leaders need to set a tone where people can constructively critique ideas without being abrasive.
- Collaboration plus accountability
Innovative companies thrive on collaboration, but Pisano notes that collaboration often gets confused with consensus. That, he says, “is poison for rapid decision making and navigating the complex problems associated with transformative innovation.” The key is to maintain a policy that ultimately someone must make a decision and own it. Leaders should model this.
- Flat but strong leadership
Pisano makes the case that innovative companies do better if they don’t have a rigid hierarchy. With a “flat” internal structure, people can respond faster to rapidly shifting circumstances. That’s because “decentralized decision-making is closer to the relevant information.”
But this level of autonomy doesn’t preclude the need for strong leaders who know how much leeway to provide. The flat model positions leaders closer to operational details in many ways, making it easier for them to give direction as needed.
Some innovations, like breakthroughs in research and development or expansions to vast new markets, are game-changing. But not all effective innovations have to be big ones. In fact, new ideas that lead to small, incremental changes can make a huge difference over time.
Incremental innovative changes act much the same as compound interest on a bank account. The daily increase is negligible, but over time a meaningful profit develops.
For instance, innovation can begin when someone notices that a small change would improve something. They make a tweak, and if it works, they continue to perform minor adjustments that eventually add up to a much better product, service, or process.
Incremental changes are evolutionary as opposed to revolutionary—slow burns rather than explosions. But if every employee looks for little ways to continuously innovate—these changes have a cumulative effect and can be just as powerful as the “next big thing.”
Incremental innovation works in industries not known for creativity as well as those like technology that wouldn’t exist without it.
For example, an accounting firm must adhere to strict regulatory guidelines, but its staff can think innovatively about linking various client services to create uniquely tailored financial plans. A health-service provider needs to follow medical protocol, but clinicians can constantly look for ways to improve workstream processes.
The key is for company leaders to help staff identify innovative ways to make their particular business grow.
Create a Culture that Supports Innovation
In a 2021 Boston Consulting Group study, 75 percent of surveyed executives said innovation ranked among their top three business initiatives, but only half of those companies are investing in this aspiration. That means the other 50 percent are unlikely to meet their goals in this area because an innovative, effective workforce doesn’t happen by chance.
If this is a priority for a business leader, they must intentionally shape their company culture to foster innovation while preserving the work ethic that keeps things running smoothly.
Since an organization’s culture is a composite of the behaviors regularly exhibited by its staff, leadership should identify the types of conduct and attitudes that promote creative thinking in concert with responsibility. Then they should launch a culture initiative in which these behaviors are continuously reinforced and practiced throughout the company.
How CultureWise Can Help
The CultureWise system was designed to build, improve, and support high-performing cultures in small to medium-sized businesses. If leaders want to increase innovation in tandem with efficiency or strengthen any other operational area, CultureWise can help them gain a competitive advantage via their culture.
The program offers a unique suite of tools and resources that engage employees in multiple ways. CultureWise clients receive expert guidance and advice, a step-by-step process to roll out the initiative, and access to a vast library of teaching content delivered through a powerful mobile app.
CultureWise founder and CEO David Friedman based this revolutionary system on his eight-step framework to revitalize company culture that he introduced in Culture by Design. The second edition of the book includes tactics to strengthen culture in the new remote work environment. A free, two-chapter download is currently available.
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