The Six Pillars for Nurturing a Culture of Innovation

Authors: Mark Dahl-Jensen & Herman Kierulf, Innovation Roundtable®

There is no denying that creating and leading a culture of innovation is integral for large corporations to sustain their relevance. The topic has been one of the key pillars at our events for numerous years and will continue to play a major part – as one of the key themes at our upcoming Summit and the subject of interest at our workshop at Henkel in Düsseldorf in September.

At the Innovation Roundtable® Summit 2016, Mohanbir Sawhney, Professor at Kellogg School of Management, voiced that culture “Is the soil from which seeds grow.” Sawhney, who will be returning as a speaker for this year’s edition of the Summit, emphasized that fostering a culture of innovation requires a systematic approach focused on hard and soft dimensions.

Specifically, Sawhney pointed to six factors, all of which are essential and need to be in place within an organization to achieve desired innovation results: values, structure, process, incentives, tools, and folklore. The belief is that superior results emerge when companies fire on all cylinders in symphonic harmony. Within each component, leaders must put in efforts to create an environment where risk-taking is accepted. This is no easy task, and requires concrete actions, not just talk.

To build upon this framework and tease out nuances within each factor, the Innovation Roundtable® Research Team has delved into past presentations to uncover lessons learned in creating a culture of innovation.

Values

At the heart of culture lies values, embodying the core beliefs and attitudes of an organization. As they determine an organization’s priorities, values are necessary to get right to unlock the full potential of an innovative culture. During an Enel-hosted event earlier this year, Gregg Vanourek, Vice Director of the Entrepreneurship and Innovation Management Program at the KTH-Royal Institute of Technology, pointed out that values are core to what he refers to as an organization’s ‘triple north star’, along with purpose and vision. With an aligned north star, leaders have the fundamentals in place to ensure the culture is cultivated as intended.

Aligning an organization around a common set of values is crucial. According to Vanourek, values should resonate with an organization’s purpose — its long-term reason for being (why we are here). The vision statement, on the other hand, is what an organization aspires to achieve in the medium-term future (what success looks like). Regardless of what they are, the essential aspect, as highlighted by Sawhney, is for leaders to enact the values they set; alignment simply won’t occur if employees are not led by example.

Structure

While values can best be described as a soft factor, the organizational structure, the way in which activities are divided, organized, and coordinated, is more tangible. For innovation to flourish, the organizational structure should enable employees to tackle problems creatively. At a 2017 event hosted by Evonik, David Gram, former Senior Innovation Director at LEGO, spoke about how the company has adopted a similar portfolio management strategy to that of McKinsey’s three horizons of growth. Focus is simultaneously based on defending and extending the current core business, nurturing emerging businesses, and creating genuinely new businesses. LEGO’s Future Lab focuses on the latter, striving to do things in an unorthodox manner, introducing radical innovation without jeopardizing the core business.

Drawing on his experience from the Future Lab, Gram highlighted the importance of avoiding progress being stumped by bottlenecks that owe to a lack of expertise within teams. Cross-functionality ensures the holistic approach required for teams to run autonomously, comparable to a startup. Gram pointed out that to retain the nimbleness of a startup, it’s vital to not focus on having to do everything. Rather, focus should be placed on having a core understanding of the steps needed to enable success. Remaining expertise should then be borrowed, either internally or externally, to make it work.

To avoid such startup-like teams being dissociated from the core organization, Gram recommends that internal ventures and radical innovation units take a transparent approach to the way they work — to ensure that the parent company is continuously engaged. Ideas of radical nature must also tie into an organization’s values, as well as be congruent with its core capabilities. With the main purpose of autonomous teams being based on gaining an aptitude to disrupt oneself – as opposed to by competitors – this becomes a delicate balancing-act.

Process

A culture of innovation can materialize through advances in processes for discovery, experimentation, and managing the progress of innovation from front-end to commercialization. Sawhney quoted the following approaches as helpful in optimizing output: agility, design thinking, and the lean startup methodology. At an event hosted by Deutsche Telekom this year, Ingo Rauth, Professor at IE Business School, shared further views on how these approaches interlink. All three have similar traits in terms of being focused on the customer and continuously iterating on the business model, and the differences are subtle. Rauth argued that while design thinking helps an organization understand customer needs, the lean startup methodology helps guarantee feasibility and viability of projects. Meanwhile, agility ensures rapid development of solutions. Employing only one of these will leave potential untapped.

Albeit design thinking has become the de-facto standard for human-centered innovation, Rauth holds that agile and lean methodologies also have a key part to play and need to be integrated into organizational processes, and subsequently engrained in the innovation culture. Fully integrating such user-centric and iterative processes into the culture takes time and can prove a challenge. It can, however, prove core to unlocking a more innovative organization and achieving great results. To get started, Rauth advocates that leaders integrate the processes in increments, starting off with a small unit.

Incentives

Despite doing everything else right, an organization’s innovative output can still be hampered if its incentives stand in the way of employees moving in a desired direction. Often, they do, which has led to the demise of many great businesses. One example was pointed out to us by Mattias Schanze, Director of Siemens’ Next47 initiative, at the 2017 Summit. Enjoying a leading position in the telecommunications industry in the mid-90s, Siemens was approached by a startup that aspired to partner up with the company in the VOIP business (internet calling). Deciding to focus full-heartedly on its core telecoms business, Siemens declined the partnership. As history shows, the startup – Cisco, the worldwide leader in IT and networking – went on to be hugely successful. Siemens, on the other hand, no longer conducts business in the telecom industry. Taking such experience to heart, Siemens has learned how vital setting the right incentives can be, especially those of more exploratory nature. To avoid similar cases in the future, Siemens has made an asserted effort to put incentives in place that widen the scope of external input by actively collaborating with startups, of which Next47 is a core initiative.

During the same Summit, Bill Fischer, Professor at IMD, highlighted how leaders are responsible for ensuring that organizations avoid incentive traps. To succeed on the long-term, Fischer argued that organizations need leaders who are explorers to carry them into the future – leaders must address the unknown. Explorers should not go into the unknown alone. Rather, they must ensure that organizational incentives guide employees to become explorers themselves, and that novel insights are accepted and have a part to play within organizations.

Tools

To aid the innovative capacity of an organization and cement its innovation culture, tools can be employed to increase collaboration. At a Bosch-hosted event in 2017, Hao Dinh, Innovation Leader and Growth Hacker at GE Power, highlighted how FastWorks, a GE program informed by lean startup principles that combines a set of tool and practices, was introduced in 2014 and aimed to enable customer collaboration. Dinh asserted that real-time feedback from customers augments GE Power’s ability to be efficient in its innovation initiatives.

Additionally, Sawhney brought forth Boeing’s internal social networking tool, ‘inSite’, as an example for internal employee collaboration. By enabling knowledge to be captured and facilitating discussions of projects, inSite increases Boeing’s collaborative capacity. Other than the direct output provided, Sawhney pointed out that such tools also become a manifestation of the innovation culture.

Folklore

The stories an organization communicates about itself – its folklore – is a crucial aspect of any culture, and a culture of innovation is no exception. 3M has a long history of innovation and puts in a deliberate effort to share such stories. As pointed out at 3M’s 2017 event by 3M’s Technical Director of R&D, Wynne Lewis, its 15% allotted free-time scheme is a specific manifestation of its innovation focus. With its emphasis on employee freedom, and continuous dissemination hereof, numerous innovations have been created, including the well-known Post-it® Note.

As Sawhney pointed out, innovation stories need not only capture success stories – failures also bring with them necessary learnings. At an event at Enel this year, Enel’s Chief Innovability Officer, Ernesto Ciorra echoed this conviction, highlighting the need for blame-free and open internal communication. Enel created an internal app to facilitate this, providing employees with the means to share innovation stories and aid learning. To Ciorra, failure should not only be accepted, it should be embraced – failure is a prerequisite for innovation to flourish.

Gain Valuable Insights on the Latest Innovation Trends

From 6-8 November, we look forward to our annual flagship event, the Innovation Roundtable® Summit, where we will continue taking lessons on board about building a culture of innovation, in addition to a multitude of other innovation themes. In the name of failure, guests can also peruse epic failed products at the Museum of Failure Exhibition. If you work in a corporation, you can get up to a 30% discount off the ticket price until 12 October — so sign up today!

We launched our new Online Network last month for our members. There, you can access videos and summaries of presentations from our events, exclusive interviews, articles, as well as event reports. The network also allows you to connect and discuss with our extensive network of innovation practitioners in large firms. Should you like to be among the first ones to be invited to join in the next public release phase, please contact us here.

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