Implementing Culture Change to Drive Innovation

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As discussed in a post last week, innovation is in part a cultural phenomenon – something that is in a lot of ways the antithesis of the culture that naturally appears in a successful firm over time. But its easy to change the culture to harness innovation, right?

You can’t be blamed for believing this, with the plethora of books and management consultants touting numerous ‘can’t fail’ ways to change the company culture from the CEO down as a way to boost innovation and create a renewed energy. Unfortunately, this is a lot easier said or written about than done. And what about those of us that work in a company that either thinks it is already innovative enough or has no interest in changing what works now for the larger corporation? How can an individual create real organizational change to increase and drive innovation without the power of the CEO to direct internal marketing campaigns and HR efforts?

As companies grow they require increased systems, processes, and hierarchy in order to manage the growth and control profitability. Eventually, this driving force becomes self-sustaining – with success comes bureaucracy (perhaps necessarily) and people that function well within a structured and organized environment. Eventually those innovative and driving employees that were the root of the success of the company either change to fit into the new dominant culture or are forced out. We justify this by saying that they aren’t a cultural fit anymore. At some point though in the progression of most firms it will become necessary to shift the culture to recapture that innovative spirit, at the very least within individual business units or groups that are looking for growth and new opportunities.

To understand how to impact the culture to improve innovation we must first understand two aspects of culture that can limit innovation:

Shared Beliefs: In most organizations, as a result of the filtering process that occurs during hiring and induction and that continues through teams shared experiences a strong set of shared beliefs will appear. These can be a strong tool to strengthen a corporation, leading to more delegation, decreased monitoring, higher satisfaction, higher motivation, faster coordination, and more communication, but importantly, also to less experimentation and less information collection.[1] Experimentation and information gathering are at the core of innovation, so while shared beliefs can be great for the corporation they can also severely limit innovation for a team.

Focus on Process Excellence and Cost Cutting: As stated above, a successful firm will have developed a strong bureaucracy by the time change for innovations sake is necessary. A focus on strong process excellence and cost cutting (along with out-sourcing and quality) are essential to deliver consistent returns to Wall Street. However, they are also an enemy of innovation as they look to eliminate complex projects that don’t fit the model and discourage high risk activities that require investments of time and money.

Knowing that these two things; Shared Beliefs and Focus on Process Excellence and Cost Cutting are major parts of the problem is only the start. How might the Osmotic Innovation change their team using this knowledge?

Disrupting Shared Beliefs: One cannot eliminate all sources of shared beliefs – so long as employees work together they will gradually build this characteristic. However, manager selection of employees plays a very strong role in sustaining shared beliefs. By selecting employees that are ‘culture fits’ or that think like the manager they sustain and strengthen this culture. Hiring people that are viewed as cultural risks while having the right skill set is one possible way to shift shared beliefs to encourage more experimentation and information gathering. Note that these should be people in important positions – having a few crazy technicians won’t disrupt the way that a group of managers or senior scientists think. It has been shown that culture and shared beliefs tend to flow from the important people within an organization so an even easier mechanism might be to put those who are willing to buck the status quo in your current organization into positions of responsibility and power or appoint them to take a lead on innovation initiatives.

Really Focus on Innovation: Because most employees see their compensation and reward systems being tied to the values of process excellence, cost cutting, and quality finding time or initiative to work on innovation or the willingness to support high programs is unlikely. Instead innovation needs to become part of everyone’s day-job, and should be tied to their annual performance / compensation reviews. This shows the commitment to innovation that can encourage creative employees to begin committing to new ideas and innovation. As was learned in the 1980’s at the joint Toyota-GM NUMMI venture, changing culture starts with changing what people do – the new way of thinking will come.[2] John Shook has described this in a model based on Edgar Schein’s original model of corporate culture; shown to the right. Apply this lesson by making employees responsible to deliver innovation as part of their job function. The new way of thinking (and culture) will follow. Merely advertising a new motto or idea to change peoples thinking isn’t enough to change values and attitudes and what people really do.

Short of wholesale changes driven by the CEO and Board, culture change to increase innovation can be managed and implemented within smaller parts of the organization by recognizing the key factors that drive and develop culture. Disrupting the entrenched belief systems to encourage experimentation and new knowledge gathering along with making innovation a measured part of a teams job function can be the levers used by the Osmotic Innovator to change a team or organizations culture from the ground up.

[1] Van den Steen, Eric. On the origin of shared beliefs (and corporate culture) RAND Journal of Economics. Vol 41, No.4, Winter 2010. 617-648.

[2] Shook, John. How to Change a Culture: Lessons from NUMMI. MIT Sloan Management Review. Winter 2010, Vol. 51, No. 2. 63 – 68.


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