Definition

innovation culture

Contributor(s): Jill Dyché

Innovation culture is the work environment that leaders cultivate in order to nurture unorthodox thinking and its application. Workplaces that foster a culture of innovation generally subscribe to the belief that innovation is not the province of top leadership but can come from anyone in the organization. Innovation cultures are prized by organizations that compete in markets defined by rapid change; maintaining the status quo is insufficient to compete effectively, thus making an innovation culture essential for success.

Innovation cultures often measure employees based on metrics such as value creation (for customers as well as for shareholders) and competitive differentiation, instead of traditional metrics such as on-time delivery and revenue generation. Companies that foster innovative thinking also encourage discovery and find ways to reward time spent on the research required to generate new products and ideas. A much-cited example of this is Google's "20% time" policy, which allows employees to spend one-fifth of their work week on what they want to work on, with the expectation that this discretionary work will result in an "aha" moment.

Innovation culture in IT organizations

Three ways IT organizations can create an innovation culture is by embracing digital, establishing innovation labs and rewarding discovery.

Embrace digital

Innovation is par for the course with companies that aim to make the shift from traditional to digitalized business processes. Indeed, "going digital" is often the first step toward creating an innovation culture that permeates the workplace, rather than resides solely in IT or other pockets in the enterprise. Examples of digital projects include mobile payment and mobile product recommendations initiatives as well as any real-time network data provisioning. Each requires innovation. Until a few years ago, these projects were impractical and cost-prohibitive.

Establish an innovation lab

Creating an innovation lab serves many purposes, but one happy byproduct of such labs is a renewed collaboration between IT and the business, because business innovation is closely tied today to information technologies. A real-world example is the innovation lab at Toyota Financial Services. Vice President and CIO Ron Guerrier started an innovation lab in 2011 for businesspeople to come and kick the tires, so to speak, on new automotive technologies.

Enabling and rewarding experimentation

An innovation culture allows people to experiment. For instance, an IT organization crawling through historical data, with no specific questions in mind, might turn up findings that were totally unexpected based on correlations in the data. Nascent big data and improved higher-performance analytics engines are making data discovery -- exercises that were previously too time-consuming or cost-prohibitive for most companies -- newly practical.

Sustain innovation

Establishing a culture of innovation is one thing; sustaining that culture is another. One way IT organizations can sustain a creative, exploratory culture is by rewarding employees for this kind of work. Another way to maintain innovative thinking is by exploring different corporate culture models like holacracy.

Change the reward and measurement structure

There are traditional measurements that require a person is on time with projects, but those measurements hold less water in an innovation culture. Instead, organizations with innovation cultures are measuring success by asking what business value the person has delivered, how sustainable that value has been, what new ideas they've brought to the table and how many of them actually were executed.

Implement a holacracy

A holacracy is a governance structure that distributes power among self-organizing groups, rather than being vested in a typical hierarchical corporate culture model. One architect and early adopter of the holacracy structure is Zappos.com. As Zappos.com discovered, the transition from a hierarchical structure to a "bossless" workplace is often difficult. Forming a flat organization creates a whole new employee network of relationships across organizational silos and aims to make things happen more quickly and more dynamically than in traditional top-down structures.

Importance of innovation

Innovation cultures are difficult to establish and sustain but are considered by many management experts essential for creating competitive differentiation and competitive advantage in the marketplace. Another benefit of creating a culture of innovation is for the sake of staff retention.

When it comes to IT innovation, it is important that IT leaders understand that a culture of innovation is not just about the big idea or creating a think tank. Creating an innovation culture requires hard work, including establishing new measurements, inventing and accepting new job roles, knowing how to monetize innovation, and understanding what failure looks like.

Failure occurs when innovators don't ask enough questions, when concepts aren't workable, when plans are deemed too costly or when systems crash -- but that is not to say that failure is bad. According to Forbes contributor Edward D. Hess, professor of Business Administration and Batten Executive-in-Residence at the Darden Graduate School of Business, "Failure is a necessary part of the innovation process because from failure comes learning, iteration, adaptation, and the building of new conceptual and physical models through an iterative learning process. Almost all innovations are the result of prior learning from failures." Organizations fostering a culture of innovation must be prepared to fail in order to innovate.

This was last updated in July 2015

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