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Innovation is a much overused and misused term in business. Fundamentally, the end game of innovation is to provide new products, services, or business models to your customers that fulfil an articulated or unarticulated unmet need. And if you’re not innovating, you’re in trouble – now more than ever.
In this blog we’re going to explore what we mean by a culture of innovation, why it’s important, and how to create one. We’ll also look at why so many companies struggle with innovation, and therefore why we’re still talking about it so much. And finally, we’ll look at the impact of hybrid on innovation, and what it might look like in the future.
Often people believe innovation is solely about the end product or solution that customers use. But that is the outcome of innovation, not the input. Innovation can occur anywhere, and at multiple points, in the value chain. For example, to bring a new product to market, your organisation may have had to re-engineer or re-think a back-end process.
It’s also not just about external-facing work. For organisations to be truly innovative, they also need to be devising new ways to serve, support and engage their people, whether that’s new systems, organisational design, or ways of working.
So, to be innovative, you need a culture of innovation. This means focusing on people, whether outside or inside your organisation, as customers, and prioritising their needs. When you start to think of people as customers, you have more creative ideas about potential new offerings for them, you move faster to execute, and, most importantly, you get to market quicker than your competition.
Why do companies struggle with innovation? The Innovation Paradox [h3] Here’s the paradox: “While over 80 per cent of executives surveyed said that innovation was among their top three priorities, less than 10 per cent were satisfied with their organisations’ innovation performance.” McKinsey If your organisation is struggling with innovation, you’re not alone. But why is this?
Risk mastery is core to any business. All companies were originally borne out of a desire to take a risk. But the older an organisation gets, the more bureaucratic and slower they move. As a result, their original pioneering spirit fades, and they lose the innovation that got them where they are.
Many companies don’t appreciate the time, effort, and attention it takes to innovate. You have to be intentional about it. Organisations often know they should be innovating, or they say they do it. But
when you analyse how much time, for example, their people are given away from their day jobs to think about new ways of solving problems for customers, it’s very little – if any.
Anyone can set up an Innovation department, have an Innovation Day, or appoint a Head of Innovation. But for innovation to flourish, it needs to be spoken about regularly, incentivised, and role modelled. Innovation reflects an inclusive culture that values diverse perspectives, rewards risk taking, doesn’t punish mistakes, and promotes psychological safety. This way, people feel secure in sharing their views, will openly talk about what’s not working, and generate ideas to move forward. If you don’t have that cultural bedrock that promotes innovation, it won’t happen.
Creating a culture of innovation isn’t easy, but it is possible, no matter how big or old your company. As with all our work, changing culture is about behaviours, systems, and symbols. Key elements that need to be in place include:
When we work with organisations to promote greater levels of innovation, we always start by looking at how many resources are being put into it, as that is an indication of how seriously it is taken. For example, are you setting aside a budget for innovation and including it in your planning system?
Innovation needs to be encouraged by allowing your people time and space to dedicate to looking into the future and anticipating customer needs, as an intrinsic part of their job – not something they’re expected to do off the side of their desk when they get a minute (which they never will). Creating a discipline about innovation is essential for developing a culture where it thrives. One question that Google uses to review its employees is ‘How much time do you spend away from your day-to-day job thinking and working on new ideas for the organisation?’ If you had this question in your review process, how do you think your employees would rate you?
These don’t have to be financial, but they need to be compelling enough for people to bring their best thinking and ideas into work. For example, you could offer prizes or promotions for ideas that become products or services, and for failures, big and small, that taught you valuable lessons. The SpaceX launch is a powerful symbol of celebrating failure and appreciating it for what it is – a chance to move forward with greater chance of success next time.
Culture, as we always say, is set at the top because the most senior leaders cast the largest shadows. So, leaders need to behave in a way that fosters innovation. That means repeatedly:
If your people look up and see your leaders walking the talk, that will go a long way towards creating a culture of innovation.
The statistics don’t make for pretty reading. Whatever research you look at, there’s one clear message: Corporate life expectancy rates are shrinking – rapidly. In 1958, the average lifespan of the S&P 500 was 61 years. Currently, it is well under 20. And McKinsey predicts that by 2027, 75% of S&P companies will be extinct.
A big reason for this is organisations’ failure to innovate. Innovation is what keeps companies alive, and when they stop doing it, they die. Some slowly, some fast, but the result is the same. Companies that have a culture of innovation continuously come up with new products and solutions that keep them relevant and competitive.
For example, take the climate crisis and the commitment of many companies to reduce their emissions, and ultimately target net-zero. Organisations with a culture of innovation are not just making promises, they are investing heavily in new energies, technologies, and systems to redesign how they do business to be more environmentally responsible.
Regardless of your industry, size, or reputation, today’s world is too competitive, with disruptors constantly appearing. If you’re not innovating, one of your competitors is, or someone with their friend in a garage is; either way, they’re going to put you out of business. We call this a ‘Napster Moment’ – when someone who has no business being in your business comes along and puts you out of business.
There’s no doubt that hybrid has had an impact on innovation. In some cases, it’s made it harder to generate new ideas, especially within organisations who have traditionally relied on face-to-face collaboration and communication to innovate.
However, there are still plenty of ways to have a culture of innovation within a hybrid or remote-first environment. AI and Virtual Reality are going to increase in importance and impact, and facilitate greater levels of innovation among people who aren’t physically with each other. As these technologies become more realistic, intuitive, and effective, the need to be back in an office will subside.
The key for innovation is to get your people connecting and collaborating, no matter where they are. If you invest in new technologies, and take the time to train your people on them, you’ll get ideas coming thick and fast.
As we saw with business mortality rates, the pace of change is only going to get faster. But what’s also interesting is how quickly companies are buying others, or entering new categories.
CVS Health in the US is a good example. It went from being a pharmacy convenience store and branched out into insurance, and is now one of the largest healthcare giants in America, with clinics all over the country. Traditional healthcare companies didn’t see the move coming, and could only watch as CVS took a chunk of their market in healthcare financing, distribution, provision, and products.
As I wrote earlier, if you’re not expecting other companies to steal your market share, and you’re not innovating to stay ahead, then you’re soon going to be gone – or at best, your business will be reshaped (think how many industries have been redrawn, and companies killed, by the introduction of the iPhone).
Everything from calculators to cameras have been moved on by the relentless march of innovation. Creating a culture of innovation is the only way to insulate your company from competitor threats and grow your market share. While many companies claim to be innovative, in our experience, few are. So, the question is – is your organisational culture fuelling the innovation that is essential for your survival, or leaving you in terminal trouble?
Contact us to begin your culture transformation journey.
