Creating a culture of innovation

The key to successful innovation isn’t all about money or having bright ideas, it’s about developing a culture to turn those ideas into reality.

The classic model of disruptive innovation was developed by an academic called Clayton M Christensen. In 1995 he co-wrote an article , which has had a huge influence on innovative firms ever since. It was followed a year later by the book that became the dotcom generation’s bible, The Innovator’s Dilemma.

Christensen turned conventional wisdom on its head when he argued that mature companies do not fail because they do things badly. Their culture, he explained, made them vulnerable because they “succumb to one of the most popular, and valuable, management dogmas. They stay close to their customers”. They then fail to spot radical innovations, which their customers don’t want at first because they don’t immediately see why the new thing might be useful (imagine, for example, the first time you heard a transistor radio). The lesson: “Smart companies fail because they do everything right.”

If this seems a depressing conclusion, Christensen also suggested that the culture in established firms can be good for business – but too stable to make changing easy. It has resources and established processes dedicated to business as usual, it has stable values (for example, expectations of profitability) and team skills that value what it does today more than what it could potentially do tomorrow.

This model breaks potential innovation into four parts. For incremental innovations, these processes and values, managed well, are appropriate. But when it comes to innovation that doesn’t fit your existing processes, Christensen recommends a dedicated cross-functional team inside the organisation.

Changing values

For innovation that changes the values of the parent company, early innovation may lead to a separate spin-off or internal organisation. This is because it may cannibalise existing businesses, or reduce profit margins, and so will meet resistance even from the previous generation of innovators. For example, Apple stole Sony’s market for mobile music, even though Sony had thousands of patents, because it was using those patents chiefly to defend its Walkman and music and film businesses. If the innovation challenges both processes and values, the innovation happens best with a dedicated team.

These teams do not have to be made up of existing staff alone. Many innovations require technical or other skills that are new to the culture. Partnership, either with other members of the supply chain (for example, a retailer), or with technology or design experts, is normal, especially when the innovation team is based outside the company structure.

On the other hand, recruiting innovators means you can grow your own innovation culture. “Hire, develop and nurture a diverse group of people. Innovation comes from different ideas hitting up against each other. Research has shown that companies that are great at innovation are actively creating and nurturing not only cultural, racial and gender diversity, but also cognitive diversity,” says Rose Cartolari, a business strategist who helps teams innovate. “Organisations often forget to be explicit and intentional in their HR policies.”

Disruptive thinking

An example is Aviva. Jan Gooding, Aviva’s global inclusion director, sees her job not just as encouraging diversity but as encouraging innovation, too. “We want to disrupt ourselves,” she says, “so we had to ask ourselves, ‘How diverse are we in our thinking?’”

Aviva has made a special effort to either recruit or consult people who don’t think like an insurance company. One of the outcomes has been a push to redesign how customers have applied for insurance. Instead of asking them to fill in long forms about the exact specification of locks, Aviva is attempting to use the data it already holds, or can access, to find out what it needs to know about the applicant. It discovered the potential for this innovation by effectively starting with a clean sheet of paper and asking what was wrong with the process they all took for granted. “There can be a real social detriment here, in that customers aren’t buying the insurance they need,” explains Orlando Machado, Aviva’s chief data scientist. “I think the industry has ended up in this slightly overcomplicated place one step at a time.”

Research has shown that companies that are great at innovation are actively creating and nurturing not only cultural, racial and gender diversity, but also cognitive diversity

Rose Cartolari
Business strategist

Agile methods or design thinking?

But, even with the best initial insights, how will your innovation teams work to bring them to market? Recently, the buzzword has been “agility”. Agile methods were pioneered in software development, in which innovation is the day-to-day goal of the team. But its principles can be applied in many different ways.

Agile development is based around “scrums”, which are cross-functional, self-managed teams. They innovate in “sprints”, which are short, intense periods of innovative work. At the end of each period, they use feedback to evaluate the work so far, and plan the next sprint. A “scrum master” makes sure that the project isn’t losing momentum.

Joeri Van den Bergh, co-founder and partner at InSites Consulting, uses agile techniques to help his clients, which include Unilever, Danone and Vodafone, to innovate. He explains that to do this you need to find what he calls “T-shaped” staff, who have deep knowledge in one skill but broad abilities and adaptability, because the project is constantly iterating. “Our people are able to switch between types of tasks required at different moments in the process,” he says. The small innovation teams have a daily meeting to update each other on progress – but to keep it short and to the point, no one sits down.

The teams work with their external managers (the client) using a weekly meeting, which may also lead to speedy research to check the direction and success of the project. Van den Bergh rejects what he calls “the classic briefing-planning-commissioning way of working”, because this tends to be too slow, and doesn’t adapt to what the innovation team discovers along the way. “I believe every project can benefit from a higher level of adaptiveness and faster learning,” he adds.

Design thinking is a related method, which focuses on creating ideas by testing and trying as many (and creative) solutions as possible. It starts with an idea-creating stage, followed by rapid prototyping, with each stage tested on a sample of its target market. The idea is that the target market is involved with design choices at every stage.

Testing, testing

Whichever method you use to generate ideas, the creative step is only one element of the process, says Natalie Turner, the author of Yes, You Can Innovate. Discover your innovation strengths and develop your creative potential. Her method, which she uses as a consultant with companies that want to innovate better, stresses “Six ‘I’s” .

Companies think a lot about igniting, she says, but less about investigating, which is when the team brings critical thinking to the process. An investigation done well means that an organisation can be truly agile, discarding bad ideas quickly and giving time and resource to find a better one. “It requires a different mindset,” she warns, “It’s good to have enthusiasm, but if your igniters have a loud voice, it’s also really important to have people around them to test the ideas. Igniters are often not so good at investigating.”

Her next step, investment, is also a cultural challenge. Investment is a test of the courage of the organisation to innovate, because when resources are constrained, any resource put behind innovation could have also be spent on maintaining business as usual. Turner, from experience, recommends committing separate funding to innovation, which might also include developing partnerships in the supply chain. “Without separate funding, new ideas get stifled,” she says.

Whether you recruit or partner, use agile, design thinking or a process of your own, then develop in a garage, a lab or at your desk, there’s one element of innovation that is always true: the people who make it work do not focus on today. As Christensen wrote, established businesses fail at innovation “not because they make the wrong decisions, but because they make the right decisions for circumstances that are about to become history”.

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