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Successful Innovation in Business – A Cultural Change?

October 14, 2011 15inno No Comments

This is a guest post/article by Dr. Joachim von Heimburg, General Manager, Innovation & Corporate Program at Saudi Basic Industries Corporation (SABIC).

Learn from a corporate innovator with lots of experience and great insights!

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What is innovation? Everybody seems to know – if you google innovation you get 230 million hits. So everybody knows what innovation is but everybody seems to mean something slightly different when talking about innovation.

There is a lot written and talked about vectors of and tools for innovation – knowledge, partnership, venturing, crowd sourcing – in short the bones and muscles to make innovation work. However, there is another,  “softer” aspect of innovation, the climate, the expectations, the emotions, net the cultural context in which innovation will flourish – or not.

What is innovation in business? Lots of people think about invention and innovation as being two sides of the same coin. But nothing could be further from the truth.

Invention is the domain of R&D – the product of R&D activities. At the start of the year, every R&D manager guarantees management one thing – that he’ll spend the R&D budget. By the end of the year he will have patent applications, specifications, problem solutions, new processes and products to show for it. Net, invention turns money into knowledge.

So what’s innovation? Innovation in business is about producing value for the business by changing the way value is created. New processes and products, patents and specifications are needed to achieve this. Net, innovation turns knowledge into money.

These definitions have a couple of important consequences.

  • Not every invention is an innovation. These are those patents sitting on the shelf and collecting dust – inventions which did not produce any innovation.
  • Not every innovation requires an invention. It just requires a novel way to use existing knowledge to create value for a business, be it by adapting, adjusting or altering. A good example is the first IPod – an innovation in the music market. But Apple did not invent anything significantly new to make it work.
  • In order to create value for the business, several functions and groups have to collaborate. So, innovation cannot be the job of one single department. R&D is not the sole owner of innovation. It’s everybody’s job!

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Innovation is a process. A company does not have to wait for a young Edison or a clone of Steve Jobs to sign up to become more innovative. As any process the innovation process can be planned, managed and improved. The normal vectors of process management have to be taken into account like strategy, organization, capability, and processes and tools.

Then this should be straight forward.  This should be like the Total Quality process – reloaded. An innovation consultant just needs to train the organization to become more innovative. So here a quote from a website of an innovation consultant on how it should work:

Engaging people in innovation is hard work; however our clients have realized that following a simple process reduces the difficulty. If you want your employees to engage in innovation activities and help them understand WHAT YOU MEAN by Innovation, and WHY it is important, then show them that everyone is innovative, just with different approaches.”

Quote from the website of Desai Group.

May be it is not so easy. However, the consultant makes a very important statement:  people are innovative already today! They do not have to be taught to become more innovative.

So tell the people what you mean by innovation, why it is important and encourage them to get started. Does this approach work? Obviously not, so why does this not work? What are we missing?

Let me share some insights: In one of the companies I worked for I did a survey amongst employees on innovation – what is innovation, how to do it, etc. Two answers struck me:

  • Question: Is innovation important for your company? 2/3 of the respondents said “yes”.
  • Question: Who is responsible for innovation? 2/3 of the respondents said “not me” (you could feel the “Good that somebody else is on the hook here” in the verbatim).

What are we missing? If everybody can be innovative: What makes the difference whether you are innovative or not? It’s the smell of the place – the culture of the place.

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So we need talk about company culture. What’s the culture of your company? Does it drive innovation or does it get in the way of innovation?

Let’s start with a definition of culture:   “The sum total of values, norms, assumptions, beliefs and ways of living built up by a group of people and transmitted from one generation to another.”  (From the website of Ideachampions)

What does company culture do in business? Here my definition: It defines what counts and how things are really done in that company. Net: It drives decisions when the boss is not around.

What happens when the boss is around and takes decision? He drives culture! Top Management shapes the culture of the company by the examples they set and the decisions they take. Not by what is written on a website or in a mission statement. But it is hard work and takes long – it takes years. Another important insight: You cannot delegate changing culture. If you do, your people will conclude that you are not serious and will not follow your direction.

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Imagine you are the CEO and you are committed to change the culture of your company to become more innovative. Who or what is going to be your biggest barrier? Probably you yourself. Your people will watch you like a hawk to check whether you stay true to your commitment to innovation. You’ll shape the culture even if you do not plan to do it.

Here a couple of typical CEO statements:

  • The earlier this pays out, the better!
  • Don’t take any unnecessary risks!
  • Keep me posted!
  • This is an R&D (Manufacturing, Marketing…..) idea.
  • Don’t bother me with details!

These all are run-of-the-mill management statements – I have heard them umpteen times. Of course you want more innovation, but what’s wrong with

  • Get your money back fast.
  • Better safe than sorry.
  • I like to know what these young guys are doing. They do not have a lot of experience and I may have to intervene.
  • This project is easy. Let’s have the marketing specialist own it and be done with it.
  • I need to keep the whole picture in mind. I cannot afford to be bogged down in the nitty-gritty.

Sounds like good, solid no-nonsense management, right?

But what are the culture messages you are sending to the organization by following those principles? This is what your organization hear you say

  • The earlier this pays out, the better
    • Implement fast. Make only incremental moves.
    • Don’t take any unnecessary risks!
      • Avoid risk – do not fail.
      • Keep me posted!
        • Boss wants control. Don’t venture too far.
      • This is an R&D (Manufacturing, Marketing…..) idea
        • This is not my project.
      • Don’t bother me with details!
        •  Unconventional (complex) projects do not fly.

With these statements you are framing the innovation culture of your company. You limit it to short term, low risk, and incremental moves. You are perfecting the steam engine in the face of the petrol car or the fax machine at the dawn of the Internet. Yes, building a steam engine consuming 10% less coal is innovative but is this the type of innovation you want and need?

This actually may work for a successful company for some time. But it will not ensure that you can sustainably create value in a changing business environment. Think of the steam engine, Polaroid, the fax machine. They all became obsolete by a change in business environment they could not react to by incremental moves.

Now you probably think “This is not fair. I’m not behaving in this way all of the time. First I need to achieve my annual goals, so a healthy level of short term, low risk, and incremental moves is in order. And I want more innovation too!”

A truly innovative culture needs to be open to both types of changes – small and big ones. And people are biased. When they have the choice they go for the small change, in particular if they see themselves encouraged by the boss. Remember Mark Twain who said: ” I love progress, but I hate change!”

So the CEO needs to drive bigger changes more strongly than business as usual in order to get more innovation.

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What should top management do to foster an innovation culture? What does promote an innovation culture in a company? Let’s look at the culture of a typical manufacturing company. For such a company success is producing a lot of products with high quality at the lowest possible cost. This means you want

  • Reliable and robust manufacturing processes. Predict & Repeat!
  • As little distractions as possible: keep the wheels turning and don’t take risks. They may result in downtime and quality issues. So minimize risks!
  • Never have to stop production because of a mistake. Very visible and very painful. Never fail!
  • Inventions but without distracting production. Let’s make sure that things are really ready before we deal with them for good. Delegate inventions to R&D and keep them in the labs till they are really, really ready. This produced a lot of great inventions. But it creates the silo culture – the “this not my job” attitude. But innovation is everybody’s job.
  • Activity. No action no product. So activity becomes a value. Busy people are good people. But are they productive and create value?

Is this a company culture in which innovation flourishes? To an extent. But we are talking here about what culture will promote more innovation. This culture encourages the status quo and creates barriers to change. So it will not drive more innovation than it already produces.

How do you change this culture to drive more innovation? How do you live a culture of innovation? Here a couple of thoughts:

  • Become open to change. Create a learning culture which encourages challenging the status quo. Then drive implementation.
  • Any change carries risk. Accept it and reward managing risk – not avoiding risk.
  • Accept failure as part of learning. In fact you only learn when the results of an action are not what you have predicted. Some people call this failure – I call it unexpected outcome. Thomas Edison was once asked what he had achieved during the last week. His answer: I found 2000 ways how not to build a light bulb. This is not failure – this is learning how to build a light bulb. But fail early and cheaply – not in a full scale plant. A sign that you are succeeding in improving the innovation culture: People share their failures – because they are insights.
  • Keep R&D focused on creating knowledge and inventions but make innovation everybody’s job.
  • Do not worry about activities – only results count. Do not worry how you solved a problem; make sure you solve the problems relevant to your customers and your company.

But always remember: Your people, in particular your operational managers watch you like a hawk. They check all the time whether you stay true to your long term commitment to innovation. The last thing operational managers like to do is to risk the delivery of committed short term operational goals for the sake of more innovation – remember their bonus is at stake!

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To conclude let me summarize my key points:

  • Your people are creative and many are ready to innovate.
  • Your organization may limit their potential to innovate.
  • Company culture is an important factor in this.
  • Top Management and only Top Management sets the culture, often without being aware of it. They can change culture in a way that it fosters innovation.
  • Top Management needs to motivate operational managers to integrate innovation into their daily operations.
  • All this requires personal, long term commitment. It asks for leading by example, creating a learning culture, accepting failures as part of learning, involving everybody in the innovation process and rewarding results, not just activities.
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