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Creating a Culture of Innovation

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Thanks to a competitive global environment, innovation has become a centerpiece of corporate strategy. A commonly regarded prerequisite for successful innovation is an organizational culture that encourages creativity and risk-taking.

Culture is defined by the values, norms and assumptions of organizational members. To what extent is innovation valued over alternate approaches to organizational growth (for example, marketing existing products and services to international markets)? Are experimentation and exploration acceptable behaviors? What assumptions can employees make regarding tolerance of failure? The answers to these questions provide a useful starting point for determining the extent to which an organization’s culture facilitates innovation.

Since senior leadership is ultimately responsible for creating organizational cultures that are conducive to innovation, it is helpful to identify cultural components that are particularly relevant in the context of successful innovation. Stories, routines and rituals, organizational structure and control systems are commonly recognized as being important starting points for creating innovative cultures.

Storytelling by the top-level executives is very important for communicating the organization’s core beliefs. In particular, stories that reflect tolerance for innovation failure and a preference for “asking for forgiveness rather than permission” have a powerful impact. They signal that the organization has realistic expectations with respect to innovation, i.e., that not all innovations will be successful; furthermore, the organization looks favorably on taking chances.

The routines and rituals of an organization are another important component of organizational culture. Organization-wide events like movie nights and collective employee volunteering opportunities can communicate a sense that the organization has a larger purpose. In addition, they build goodwill, which facilitates the transfer of tacit knowledge to explicit knowledge and stimulates innovation.

IDEO, one of the world’s most influential firms with respect to innovation, notes that hierarchy is the enemy of innovation. Thus, the extent to which an organization’s structure is “flat” provides a good indicator of its climate for innovation. Perhaps the best example of such an organizational structure is provided by W.L. Gore, the Delaware-based firm that is well known for its Gore-Tex fabric. At Gore, employees are known as “associates;” rather than “bosses,” associates work for “leaders,” i.e., supervisors who entice and direct associates to work on projects that are worthy of an associate’s time. This approach fuels passion and commitment and offers a sharp contrast to the disillusionment that characterizes innovators whose progress gets bogged down in bureaucracy.

Finally, control systems refer to what is most closely watched and/or controlled. In addition, it refers to what is rewarded and/or punished. For example, companies like SAS do not monitor employees’ absences due to health; further, the company has a health care clinic on-campus that offers free checkups, vaccinations, etc. The underlying philosophy here is that employees are motivated to give back to an organization that takes care of them.

Collectively, the appropriate management of stories, routines and rituals, organizational structure and control systems has the potential to fully unleash an organization’s creative potential. This creativity can then be channeled via innovation processes and strategies that enhance the odds of innovation success. But absent a culture that generates a continuous flow of innovative ideas, process and strategy will be less effective.

As a case in point, innovation strategies aim to identify appropriate innovation opportunities to pursue given the organization’s growth objectives. However, a dearth of innovation ideas implies that there will be no opportunity to implement the strategy. In contrast, an organizational culture that motivates innovation leads to a plethora of innovative ideas and presents decision-makers with an enviable problem: selecting innovations that promise to provide the greatest source of long-term competitive advantage.

Gerard Athaide is a professor of marketing for Loyola University Maryland’s Sellinger School of Business and Management, which has a campus in Columbia. He can be reached at 410-617-2858 or gathaide@loyola.edu.