Sunday, September 7, 2014

Why too many Companies Create a Culture that Prevents Innovation?

Whether an organization is more or less innovative depends on the clarity and precision with which its purpose is developed, understood and disseminated.

Either you are a bellwether industry leader or a startup company, innovation is the light every organization is pursuing nowadays, however, the majority of organizations cannot ‘walk the talk’ and manage their innovation effort more effectively. Further, why too many companies create a culture that prevents innovation?

Purpose clarity: Whether an organization is more or less innovative depends on the clarity and precision with which its purpose is developed, understood and disseminated; and the extent to which people can buy into a realizable vision which contains the imperative to innovate. Often this real and concrete purpose is exchanged merely with the performance of quarterly financial reports, the short term takes over. Everything focuses on important and meaningful paper and numbers. Nothing else matters. Short term begins to dominate the company and this is the end of the long-term approach that makes innovations as an integrated component of the strategy. Well established companies sometimes forget the higher purpose they have had when they were created: probably creating a better future for the people and make a better world.

Everything begins with leadership. Leaders will model and establish a framework and environment for developing a culture of innovation. Then it comes to the connection with business objectives, skills, and knowledge. Success today depends on innovation and not only on what corporations produce and sell but in how they operate. Smart firms make sure they understand the need for reinvention and renewal. It’s a balancing act of long-term strategic goals and short-term operational needs. The company has difficulty in innovation invariably have not had executives support or guidance, communication across the company has been weak, and there are little empowerment and limited delegation. The trick is to release the potential of the organization by addressing these things. The boards need to recognize that they are looking for shareholder value and that means building value through a long-term strategy, requiring new innovative products that have unique selling points within growth markets.

Long-term focus: This short-term reward model is fundamentally flawed if applied in businesses where the lifecycle of a contract or product makes it essential for C-Level executives to accept a need to invest in long-term projects. Of course, no change will guarantee to get better C-Level executive’s support, but it will, at least, start to change their investment time-horizons - which should improve the outlook for employees, customers, suppliers, and society more generally. Too often executives are going up the tree by taking short-term decisions that make them look good, but they have not bothered to define a strategy towards sustainable long-term growth, and the business starts to deteriorate in terms of market share, with negative growth and deteriorating profitability.

Risk tolerance culture: Certainly innovation that brings out new killer products or spots a niche should be rewarded. Failure should not be an offense and actually, if there are not a few failures, then you are not trying hard enough. The job of management is to help when a failure happens to turn it around as a team. However, in many organizations, Creativity, Curiosity, Trust and Strong relationship with consumers, that should be leading any company's decision, come to the bottom of priorities ladder.

The suggestions to build the culture of innovation:
(      1)   Put the Purpose, People and Consumers' Experience at the center of everything you do. Communicate and Share the higher purpose. People must believe in Company' purpose.
    (2)   Re-Create the start-up stage (at least in some departments), Innovation and ideas-generation need to be seen as not simply the preserve of the few (in R&D or marketing). 
   (3)   Better communication and framework provided by the senior executive team; a focus on what clients wanted and what the marketplace was moving towards...
 (4)   Create a strong culture with strong values (transparency, long-term relationships). Put the right people in the right seat for the right purpose/goal. Create the right environment where SHARING is a must.
      (5)   Employees need to be given 'permission' to be innovative. Failure should be regarded as a learning experience rather than an offense. Build a culture of continuous learning and encourage break-through thinking.
    (6)   Shareholders and C-suite executives need to agree that the next round of financial statements is not the sole, drop-dead short-term purpose.
    (7)   Performance management and remuneration policy and process need to reflect the desire for the organization to be innovative. 

 Innovation is for sure not rocket science, Governance, leadership, and management should be credible, to embody culture, values, and purpose, to encourage ‘think differently’ and reward innovative effort and practices.


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