Building and Sustaining A Culture of Innovation

Success Requires Innovation

Success in business requires finding ways to do something new, better, faster or more efficiently than others. Success requires innovation. But it’s a catch-22: as success drives growth, the startup culture that provides such fertile ground for new ideas begins to adopt the rigid structures and processes that help larger organizations manage complexity at scale – making it difficult to innovate successfully.

Look at Ford and AT&T, for example. Both are two of the oldest companies in America and were, at one point, two of the most innovative organizations in the world, reshaping how people live and work. Today, they are both fighting for relevance, struggling to rekindle the innovative spirit that once drove them.

Many companies have turned to buying startups and more nimble companies as a solution. Unfortunately, the result is very often the destruction of the culture they sought to acquire. Take the example of Amazon and Whole Foods. While the acquisition seemed to capitalize on several natural synergies, the two companies had very different cultures, which dampened the possibility of a smooth integration. Today there are regularly stories of Whole Foods employees crying on the job, workers being fired for not complying with Amazon’s inventory system, and some workers taking steps to unionize. Company culture is a key determinant of merger success but is often overlooked. Acquisition as a strategy to create an innovative culture is always a gamble.

It all serves to highlight one of the greatest challenges businesses face: in an ever-changing, world with ever-accelerating business cycles how does a company go about creating a sustainable culture of innovation?

The answer is to cultivate an environment that actively engages current employees, entices new talent and enables perpetual innovation. This must be done from the ground up. As former CEO of Wells Fargo John Stumpf once said, “It’s about the culture. I could leave our strategy on an airplane seat and have a competitor read it and it would not make any difference.”

A Framework for Cultivating Culture

At BrandCulture, we developed a framework to help our clients do just that: develop a culture that nurtures and promotes innovation. Our framework lays out six distinct areas organizations can work on to shape and sustain the right culture: Leadership, Communications, Symbolism, Rewards & Recognition, Environment and Structure.

Leadership

A commitment to innovation must begin at the top and flow throughout an organization’s leadership. As former CEO of Lockheed Martin and Under Secretary of the Army, Norm Augustine describes, without strong leadership commitment to innovation, a robust innovation culture is unlikely to thrive, “You can say over and over that innovation is important and that it requires taking risks, and you can even write it in books, but that doesn’t have much meaning. People watch how you act, what you do when someone takes a reasonable risk and fails, despite the fact that they did their very best. You have to be understanding of that. Other people watch and see how the management team reacts.”

Within an innovation culture, this means leaders must allow employees the freedom to explore new ideas. Unfortunately, research shows this goes against many managers natural tendency to respond defensively to novel suggestions or risk a failure that might make them look bad. Employees pick up on this and quickly begin to withhold new ideas in order to avoid potential conflict.

Instead, leaders need to model openness to new ideas that they want to foster in others. At the software company Index Group, CEO Tom Gerrity once gathered all of his staff in order to watch a consultant give him critical feedback. After employees saw how open their CEO was to critical feedback, they became more open to speaking up and managers became more open to feedback themselves.

Leaders also set the tone for ambition. Corning’s CEO, Wendell Weeks challenges the company’s engineers to think bigger. When an engineer proposed a way to increase efficiency by 25 percent, Weeks countered by asking “Why not 50 percent?” At the time, 50 percent was out of the question, but it prompted the engineer to aim higher and consider all options.

Communications

Innovation takes coordination and understanding among teams and employees, to share ideas and use resources efficiently. This requires a culture that fosters clear and open communication. Many modern corporations create “innovation labs.” While there is nothing inherently wrong with an innovation lab, there must be clear communication between the lab and the mother ship.

Moreover, new ideas can come from anywhere in the organization if open communication is encouraged. An example of such an innovation is the Sony PlayStation, which originated as an idea from a junior level employee named Ken Kutaragi, who was encouraged to share his idea with executives.

Trust is a key factor in innovation. The Finnish mobile gaming company, Supercell, makes employee engagement a priority. The game developers work in “cells” where even new employees are given autonomy and encouraged to give feedback. Supercell has achieved a revenue of over 2 billion, even with about 300 employees.

Leaders can even look outside the company for innovation help. P&G launched the program Connect + Develop which allows outside developers to suggest concepts for P&G. One of its top-selling skincare products, Olay Regenerist Eye Derma-Pods was developed by Catalent. Over 40 percent of P&G products have a component that was externally sourced. While P&G values employee engagement and communication, it doesn’t limit itself and welcomes communication with outside innovators.

By utilizing a simple and compelling communications structure, employees are able to own tasks more easily, take initiative, work through co-dependencies, know what to do when the unexpected occurs, and link their tasks to a shared vision. All of these things are critical components of a culture of innovation.

Symbolism

One of the best and most efficient ways to reinforce culture is through the use of symbolism. Symbolism distills company values and communication into simple, powerful images, elements or behaviors. These symbols become shorthand for the company’s values and culture. Skillful use of symbolism is an excellent way to promote and reinforce a culture of innovation.

Intuit Labs still keeps the kitchen table where co-founder Scott Cook came up with the original idea for the company. Nike houses its Sports Research Lab in a Winnebago – the vehicle founder Phil Knight’s traveled in – to remind people of the trips he took to meet with athletes and discuss their needs at competitions. And the CEO of a major hospital physically removed the doors of his office in order to reinforce the idea of openness.

The firm Anomaly teamed up with Virgin America to create a symbolic branding medium. With the help of Burton (the snowboard company), Anomaly crafted a black suitcase with skateboard wheels. This luggage would be given to the crew and also available for purchase. The luggage became a branding mechanism, a way to connect the crew, and a way to connect customers to the company.

As a company scales, it naturally becomes more difficult to maintain a culture of innovation. Symbols, due to their simplicity, can be an extremely effective means to represent and instill a company’s commitment to innovation among employees.

Rewards & Recognition

For employees to continually innovate they need the right incentives. When it comes to innovation, this means rewarding people for contributing to new ideas. It also means accepting a certain amount of failure – because volume is what leads to innovation, not simply coming up with the single best idea. Edison invented the lightbulb, but he also had thousands of terrible ideas. As Stanford professor Robert Sutton notes in his book Weird Ideas that Work, the Pixar movie Cars was chosen from around 500 pitches from employees.

Similarly, Target holds a Big Idea contest every quarter. Winning employees get a cash prize, and they get to see their idea come to life. This encourages employees to always be considering new products while feeling “seen” by the company.

IBM consistently racks up more patents than any other company. Like Target, the company holds company-wide brainstorms. In 2007, CEO Sam Palmisano pledged $100 million for the best ideas. He funded 10 out of the 37,000 submitted.

Within a culture of innovation, employees must be praised for speaking up and sharing “crazy” ideas. If “bad” ideas aren’t tolerated, a culture of conformity will quickly emerge and original ideas will begin to dry up. For many companies, this means adjusting their incentive and annual review processes.

Environment

How, where and when employees interact with one another is another critical component to a culture of innovation. Small tweaks in the environment can make big changes in employee interactions, the conception of new ideas, and collaboration across teams.

Joshua Handy, the Vice President of Industrial Design at Method Products, a home cleaning company competing against giants like P&G, attributes much of his company’s success to the physical space they work in. The design team is located in the middle of the brand, operations, product development and sales departments. The design team’s work is on open display and peer teams can provide real-time input, which allows for rapid iteration and faster decision making.

Other examples of environments that help create culture include Living Social bringing elements of the outdoors inside, such as a bike rack, to reinforce their goals of an active lifestyle. Google is well known for the unique environmental elements in many of its offices, such as a slide in one of the lobbies. And many of AirBnB’s meeting rooms are designed around some of the company’s most lavish and unique listings.

Structure

While innovation can seem unstructured by its very nature, there are processes that can and should be established to foster innovation. If employees do not know or understand the processes for exchanging ideas, moving a concept forward or getting approval to pursue an idea, innovation will come to a grinding halt.

Samsung, for example, has very well-established innovation processes and structures that are clear but allow for exploration. Every business unit in Samsung is charged with developing new concepts, but they are able to freely draw on the expertise of independent product innovation teams. Samsung’s Product Innovation Team (PIT) uses four stages as a structure to its process:

• Understand: research trends in the world and understand the user’s perspective
• Ideate: brainstorm ideas using data that may provide solutions to the problem at hand
• Concept Development: refine the wealth of knowledge into a concept
• Finalize: finalize the concept taking into consideration market requirements

The key to a structure that promotes innovation is to lay out clear and simple guardrails that employees can use to guide their innovation activities. The process should be loose enough to allow for exploration and failure, but tight enough to make sure no one is ever unsure about next steps.

Making Innovation Stick

Innovation is not just a strategy. For an organization to truly embrace and benefit from a constant flow of new ideas, it must create a culture of innovation. Innovation requires a commitment from employees to devote their energy and ideas to generating new opportunities. It requires a commitment from leadership to support exploration and tolerate failure. Culture is the key to developing this commitment. By focusing on leadership, communications, symbolism, rewards & recognition, environment and structure, businesses can unleash the power of innovation, embed it in their culture and transform their organization into a powerhouse of sustainable innovation.