Will 2016 be the year your organization embraces corporate innovation? If so it needs an 'Innovation Culture' according to Steve Blank in an article on the UC Berkeley Hass Business Schools’ Berkeley Blog. Here is an abridged version:
One of the interesting innovation challenges I’ve encountered centers on a company’s culture. While start-ups have the luxury of building values and culture from scratch, existing companies that want to (re)start corporate innovation must reboot an existing – and at times deeply rooted – corporate culture. It’s not an easy task, but failing to change the culture will doom any innovation efforts the company attempts.
All too often a corporate innovation initiative starts and ends with a board meeting mandate to the CEO followed by a series of memos to the staff, with lots of posters, and one-day workshops. This typically creates ‘innovation theatre’ but very little innovation.
In their book Corporate Cultures: The Rites and Rituals of Corporate Life, Terry Deal and Arthur Kennedy pointed out that every company has a culture – and it has four essential ingredients:
Values/beliefs – set the philosophy for everything a company does, essentially what it stands for
Stories/myths – stories are about how founders/employees get over obstacles, win new orders…
Heroes – what gets rewarded and celebrated, how do you become a hero in the organization
Rituals – what and how does a company celebrate?
It was in my third start-up that I started to understand the power of a corporate culture.
You can get a good handle on a company’s culture before you even get inside the building. For example, when companies say, “We value our employees” but have reserved parking spots, a private cafeteria and over-the-top offices for the executives that tells you more than any PR spin. Or if a CEO proudly boast about their corporate incubator, but the incubator’s parking lot is empty at 5:15 pm.
I’ve learned more about a company’s corporate beliefs, heroes and rituals by sitting in on a few casual coffee breaks and lunches than reading all of its corporate mission statements or inspirational posters in the cafeteria. In Horizon 1 and 2 companies (those that execute or extend current business models), stories revolve around heroes and rebels who manage to get something new done in spite of the existing processes. Rituals in these companies are about the reorganizations, promotions, titles, raises, etc.
These core values and beliefs and the attendant stories, heroes and rituals, also define who’s important in the organization and who the company wants to attract. For example, if a company values financial performance above all, its stories, myths and rituals might include how a hero saved the company 5% from a supplier. Or if a company is focused on delivering breakthrough products, then the heroes, stories and rituals will be about product innovation (e.g. the Apple legends of the Mac, iPod and iPhone development).
Hacking a Corporate Culture
For innovation to happen by design not by exception, companies need to ‘hack’ their corporate culture. This is akin to waging psychological warfare on your own company. It needs to be a careful, calculated process coordinated with HR and Finance.
Assess your company’s current values and beliefs as understood by the employees.
Communicate the need for new values and moving employees to a new way of thinking, is hard. It starts with thinking through the new values and beliefs the company wants to live by.
Plan a concerted effort to create a new set of stories, heroes and rituals around those values.
Simultaneously with the creation of new culture, align the company’s incentive programs (compensation plans, bonuses, promotions, etc.) to the new values. Failure to realign incentives doom any new culture change.
To create an innovation culture a company needs heroes and stories about employees who created new business models, new products and new customers. Stories about new product lines created out of a crazy idea. Or heroes like an old-guard manager who kept sending the best teams to the corporate incubator; or division general managers who adapted and adopted an acquired product and built it into a successful product line, or engineering teams who got out of the building, saw a customer need and built a product to serve it – and ended up with a new division. And the rituals and rewards need to support this type of innovation.
Culture change almost always runs into problems – resistance to change (we’ve always done in this way), obsolescence (the world changed but not our values), and inconsistency (we give lip service to our values, but don’t really implement them). But the combination of hacking the culture and reinforcing it by changing the incentives can make it happen.
The result of an innovation culture is a large company with a unified purpose that can move with speed, agility and passion.
UC Berkeley program: The Innovative Organization