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How to create a culture that supports innovation?

Dirk LoopCo-Founder & Director of CIPOC Ltd.

by

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KNOWLEDGE IN PRACTICEWe at CIPOC often work on projects on behalf of others, mainly larger companies.

Many times teams we have been delighted to work with suffered from strict corporate process frameworks. Of course, working as external project managers do not free us from these rule-sets but it is much easier to question or even to ignore certain parts of these. It is easy to get people to talk (about their private lives) and thus to build up trust, especially when you are new just temporarily deployed in a company. This way we typically identify innovation and improvement potential within a few days. Many consultancies use this knowledge to sell new projects. We, for our part, found that our clients are generally more pleased if permanent employees can be encouraged to take over the lead of their own ideas.

EXECUTIVE SUMMARY The mission of any executive or innovation manager should be the enhancement

of a culture of innovation. Innovation depends less on tools and processes but on people. Tools and processes have never been substitutes for visionary leadership.

Since the planning of innovation typically leaves lots of question marks, nobody involved should expect too much reliability. Instead, patience is what is required and the willingness to take risks and to except failure.

Although projects promoting the spirit of innovation often follow a top-down approach, every employee can improve his personal skills, pertaining to trust, teamwork and commitment, and therefore becomes a role model for others (bottom-up). Hybrid approaches have shown here to be most effective.

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How

ABOUT THE AUTHOR

DIRK LOOPHaving studied national economics, Dirk Loop is also educated in

banking, highly trained in effective leadership & communication

skills and a PMI-certified Project Manager. He offers fundamental

interdisciplinary knowledge, and more than ten years of relevant work

experience in various industries and professions - from corporate

controlling to public relations, from ip-management to software

development. Loop is a co-founder and director of CIPOC ltd (http://

www.cipoc.com), a consultant firm focused on innovation and quality

management for telecommunication, energy and banking.

It is unfortunately easy to ensure that innovation

never occurs in a company. Many companies show

“excellent” practise in this discipline:

1. Never listen to anyone. No matter if you are

dealing with an employee who comes up with

an idea or a customer complaining about a

service. The notion is taken that the employee

or the customer will be “wrong”, so it would be

a waste of time listening to them.

2. Be aware that everybody wants your job. So

do not trust anybody. Instead, keep everybody

around you inferior and voiceless.

3. Absolutely rely on processes and organisational

hierarchy. The design of both has probably been

very expensive, so they have to be the ultimate

solution.

4. Try to avoid a bird perspective. Always have

a detailed perspective on everything. Do not

burden yourself with independencies, other

business units or market demands. This will

only distract you from really important tasks.

5. Last but not least, change strategies and

processes, say once a month, or even better, at

random intervals. Ensure that nobody knows

about it. This might be the most important

“rule” of these, because this is how to ensure

that nobody can actually do anything.

Everybody sticking to these five simple rules will

probably never have to deal with any innovation at

all. If this is your intention, you do not need to go

any further and read on. You can stop right here.

99% OF ALL STATISTICS ARE WRONGMany companies and even a greater number of con-

sultancies use Benchmarking to measure innovation

processes, cultures or outcomes. Some of them also

use Benchmarking to set up improvement plans.

This, however, leads into a a dead end. It will never

lead to innovation.

Typical projects coming out of Benchmarking work

like this: You identify today’s industry leader, evalu-

ate what creates his leadership and set up a five-year

program to close your gap. Following this path, in

five years’ time you will be as good as the industry

Best practise killing the innovative spirit

How

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leader is today. However, you will still be five years

behind today’s industry leader as well as other com-

petitors. In addition, copying is the antipole of in-

novation and therefore a bad start to become more

innovative.

The following recommendations should neither be

understood as a blue print nor as a strict map to suc-

ceed in innovation. Nevertheless, their consideration

will certainly help to avoid threats and instead help

find opportunities to become more competitive.

HOW TO CREATE A CULTURE THAT SUPPORTS INNOVATION?This in-depth article is divided into two parts: The

first part, Top-down steps, gives recommendations

to line managers. In this context a manager is defined

as someone who leads a team, has organizational au-

thority and has access to budget. The second part,

Bottom-up steps, focuses on the individual worker

or project member who has limited formal power,

but some opportunity to change the culture of an

enterprise from the inside.

TRUST YOUR PEOPLEInnovation requires freedom in many ways: The

freedom to think out of the box, to explore and ex-

periment, to venture – and most importantly to fail.

“If you give people freedom to innovate, (...) then

you must also give them the freedom to fail. Accord-

ing to Deepak Seethi of AT&T, the organization of

tomorrow will demand mistakes and failures. It is

only by trying lots of initiatives that we can improve

our chances that one of them will be a star.” (Sloane,

2006: 95)

Innovation is built on freedom – and freedom is built

on trust. Without trust an enterprise will never be

able to create an innovation culture (Please see fig-

ure 1: Charting a Top-Down approach to leverage

a culture of innovation). But trust, in this concept,

is a two-way street: Bottom-Up, employees need to

trust their management. They need to be sure, that

lateral thinking and opposition is not fundamentally

a bad thing that gets them a pink sheet. They need

to know that management is open-minded and fair.

On the other hand, management has actually to be

open-minded.

What makes things even more complicated is that

leaders witness their employees fail once, or more

than once, but still need to keep up trust and motiva-

tion. Leaders should consider the wise words of J.K.

Rowling, single mother and mega-bestselling author

of the Harry Potter series: “It is impossible to live

without failing at something, unless you live so cau-

tiously that you might as well not have lived at all.”

(Rowling, 2008)

Leaders should do anything to avoid distrust, fear

and pressure. Instead, executives should get to know

their employees better. Not in a classic fraud preven-

tion context (Previous employment, education, cer-

tificates claimed, references to pre-hire drug screen-

ing), but personally. They can do this for example by

walking randomly into their employee’s ofices and

engage in small talk or by spontaneously crashing

into project meetings. If they get to know the person

behind the position beter then building up mutual

trust will be much easier.

DO NOT TRUST YOUR PROCESSESTools & processes might be great, but they do not

guarantee innovation, and in some cases they might

Top-Down steps to leverage a culture of innovation

How

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even provide a false sense of security. They can help

but they are not sufficient. Innovation is fundamen-

tally influenced by people in need of not only being

managed but also to be led. Yet processes are no sub-

stitute for visionary leadership.

However, my experience is that especially larger com-

panies often rely on processes, because strict processes

deliver predictable results. They need predictable re-

sults for board meetings and shareholder announce-

ments. Unfortunately, this belief in organizational

structures promotes smaller improvements and incre-

mental innovations, avoids breakthrough innovation

and therefore becomes a risk sooner or later.

An example: Two managers apply for their portion

of the budget. Manager A says: “I’ve got a great idea.

We don’t know how much money we will have to

spend till we know that it really works and at this

point we do not have a marketing strategy, but we

think it might change our whole industry.” Silence.

Now it’s manager B’s turn: “We will take our existing

product x and bundle it with our successful product

y. We will use our existing advertising and distribu-

tion channels to sell it to our existing customers.

Look at the spread-sheet, this will be the end-year-

profit.” Whose budget will be approved first?

Best advice is to “learn the process, execute the pro-

cess, and then (to) lead within it” (Jacoby, 2011). If

this means that lines have to be crossed, so be it.

BE PATIENTMany project or portfolio management processes

follow strict rules. They start with workshops in

which stakeholders (typically Marketing units) ex-

press their ideas and requirements, ending up with

highly defined schedules and planning spread-sheets

of product lifecycles and revenue forecasts. Starting

an innovation project leaves a lot of question marks

Figure 1.

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How

6

because innovation – as opposed to improvement –

is unpredictable.

Best example is the first tablet computer Newton,

from Apple, the first of its kind. Ten years ago, Ap-

ple stopped the Newton in 1998. Some say it was

a commercial flop because the tablet had been to

big for a pocket and the “90ies”-man, tend to buy

gadgets, was not willing to carry handbags. Others

believe that Apple stopped its development because

the product devoured a billion dollars (MacNeill,

1998). But the tablet returned, and on January

18, 2011 Apple announced it had sold 7.33 mil-

lion iPads during its fiscal 2011 first quarter ending

on December 25, 2010 (Apple, 2011). As men still

tend to buy more gadgets than women, it looks as

if men at least changed their minds on handbags

significantly.

No one becomes impatient when a scientist cannot

tell, within a few weeks spent experimenting, how

to build a simple, cheap and safe spaceship, say for

vacations on Mars. This would take at least anoth-

er ten years or so. But once an invention is made,

many stakeholders expect development and deliv-

ery to be less complex and revenues to be safe, or

at least predictable. In most larger innovation proj-

ects many events take a different course to what was

originally planned. In order to manage expectations

better, timelines and profits should not be promised

or assured. This only leads to disappointment and

impatience.

Perhaps the best advice is to be prepared that ex-

pectation will probably not be met. However, this

might not necessarily be a bad thing. Sometimes

outputs also overachieve the original scope planned.

Take Percy Spencer as an example. While he was

conducting a radar-related research project with a

new vacuum tube, he realized that the candy bar in

his pocket began to melt. He then put popcorn into

the machine, and when it started to pop, he knew he

had made a revolutionary invention on his hands:

the microwave oven. (MIT, 1996)

Another good advice is to consult rather than con-

trol. If every stakeholder knows that innovation is

unpredictable and that timelines are more likely

estimates based on a bulk of assumptions, nobody

will confound it with a strict rollout-plan, which

can actually be controlled by hard figures. Leading a

team with good advice and useful hints will increase

motivation, and the spirit of innovation, much more

than dead-lines and finger pointing.

There is a German proverb that says: “If a train runs

in the wrong direction, each station on its way will

be wrong.” In my opinion this is the best way to

check if an “innovation train” is still going towards

its goal: To look at the stations, not the train or the

tracks.

DO SOMETHINGEvery innovation project requires the willingness

to take charge and make it happen. Obvious? Not

at all! We live in a world of memos, emails, work-

shops, reviews, boards, meetings and discussions

about memos, emails, workshops, reviews, boards

and meetings. There is at least one complaint on ev-

ery idea and there is always a good reason to have

another discussion.

It has shown that the easiest way to stop excuses is

to start some kind of prototype, at least something

that gets people to think: “Well it’s not perfect, but

it’s a smart idea. This could be a success. I should get

involved.” This prototype, however, might not even

be close to a beta-version. Its only purpose is to stop

people complaining and get them involved.

How


IMPROVE EVERYTHING…Thomas Alva Edison is often quoted as saying: “I

readily absorb ideas from every source, frequently

starting where the last person left off.“ In my opin-

ion, this is a key element of innovation. Nothing, at

least no invention, is ever totally new. New knowl-

edge always emerges out of existing knowledge.

This is why people visit schools and universities,

and why nobody should stop listening and learning

even after years of work in the same office at the

same company.

Where do great ideas come from? In 2001 I co-

founded a company, that surveyed and evaluated

hundreds of patents a year. The focus was to show

the economic value of inventions in order to get

a basis for investments. What we have seen over

the years was that the story of the eremite inventor

who comes up with a billion-dollar idea is a myth.

Great discoveries typically emerge from a hive

mind (also see e.g. Kelly, 2010; Johnson, 2010).

And there has been a significant increase in patent

values when underlying inventions were close to

their market needs.

The logic consequence is that the success rate of

innovations will rise when the right people are in-

volved, and listened to. In most cases this will be

customers or co-workers. The ideas of salesmen and

call-centre agents have been especially proven to be

valuable as they get the unfiltered feedback of the

customer experience.

… BUT NOT AT ONCEFrom the invention of fire, to steam engines, to nu-

clear energy, people have tried to make their lives

safer, easier or at least more convenient. But it took

one step at a time to get there.

In a big corporate environment changes are often lim-

ited by complexity. Business units for example find

themselves involved in drafting different, sometimes

even opposite requirements, but want, to reach the

same goal. Software application developers are chal-

lenged with bulks of internal and external interfaces

and interdependencies, not to mention running con-

tracts with customers, unions or outsourcing compa-

nies, and statutory regularities and obligations.

Small businesses, especially start-ups, usually do

not have to face such a level of complexity and are

therefore much more flexible. This allows them to

try things more easily, experiment and change entire

business models within a short period, if required.

Assuming that big corporations have major prob-

lems with extensive change, anyone who is willing

to change anything is well advised to concentrate his

other efforts on feasible project sizes within existing

processes. Successful innovators are not high-risk

takers. They choose what they perceive to be moder-

atly difficult challenges. (also see Pellman; 1999: 81)

This is also because ideas projecting too far into the

future are sometimes less valuable. Not only, com-

panies but also people in general, are able absorb

only one small step at a time. For example, Gregor

Mendel formulated his ideas about genetics in 1865.

But it took another 40 years until three later scien-

tists were able to understand his work and to this

day, not all that Mendel had had in mind has been

incorporated. (also see Kelly, 2010)

TRUST YOURSELFAs discussed above, trust is a key element of the cul-

ture of innovation. And this does not exclude the

individual. The best salesmen are those who actu-

Bottom-Up steps to leverage a culture of innovation


How

8

ally use their products in good faith. Nobody trusts

a bold hairdresser who sells hair-restorers. So the

best question any executive could ask his or her em-

ployee, coming up with a new idea, is: “Would you

invest your own money in it?” And the best answer

an employee could give is an honest “Yes”.

It is actually crucial that the person who sells an idea

is committed to it. It often takes months to get a slot

in a board meeting to present a project. And it may

even take a longer time to obtain a decision.

But anyone who chooses this path should be aware

of its strengths and weaknesses. A good social net-

work and personal (not necessarily organizational)

authority within a company will help make things

easier. And what also helps is being a specialist in a

certain discipline, one’s expertise being underlined

by publication or external speaking engagements.

Another good advice is not to disregard daily busi-

ness especially it has no direct link to innovation

projects. Being smart at everyday’s work helps not

to provide targets to enviers and to raise self-confi-

dence. However, it should be considered that there

is just a fine line between self-confidence and hubris.

THINK OF THE WHOLE PICTUREAlthough an idea may be great and market opportuni-

ties look right, following these might not be the top pri-

ority of an enterprise at that specific point in time. Oth-

er topics or projects may be more important or have a

better alignment to the company’s overall strategy. For

example, if a company’s current cash flow depends on

just one customer, it may be a good idea to attract new

prospects in order to reduce this dependency. But it will

almost certainly be a bad idea to put the current in-

come at risk before identifying a reliable new source. In

the end, these decisions have to be trade-offs between

safeguarding the present and the future.

Bottom-up innovators often forget to consider inter-

dependencies and complexity. Companies in grow-

ing markets particularly force such challenges be-

cause organizational structures often follow current

demands more so than planned strategies. So, even

very small changes within their organization cause

the companies unforeseeable impacts.

A closer look at today’s software development proj-

ects illustrates the above: In software development

projects, timelines and amount of new functional-

ities to be deployed often are ambitious. As a result,

source code of new software is often littered with

hot-fixes and workarounds. The end customer will

probably not notice, since everything seems to work

without a problem. But programmers working on

upgrades or additional features have to consider ev-

ery line of code and its impact on the others.

Not only does complexity increase efforts, it also

increases costs. This should become evident when

business cases are made. If it does not, then wrong

expectations are raised that will most likely lead to

disappointment. Infamous examples can be found –

unfortunately to no surprise – in today’s software in-

dustry. But just because complexity is “complex”, it

should never be an excuse not to start. Start at a lower

level, e.g., with a pilot and take one step at a time.

BUILD A TEAM The myth of the lonely genius who creates a fortune

out of inventions he has made in his basement still has

a strong lobby. In reality, teams are generally more ef-

fective – not only in generating ideas but also in bring-

ing them to life. An idea from one person often lead to

several more ideas from others. One’s complaint may

be another one’s solution. A task that is too big for a

single person might be a small thing for a team.

It is no secret that the effectiveness of a team emerg-

es with its commitment to a certain goal, sharing the

same vision. And it is generally helpful to involve

people who are enthusiastic and excited about an

idea, because they are more likely willing to spend

additional effort, often extending into their own

spare time. (also see Pellman, 1999: 82)

To create not only an innovation but also a culture of

innovation it is necessary to give credit to the achiev-

How


ers wherever possible. “In his book, The Journey is

the Reward (1988), Steve Jobs tells how it was the

team that created the Apple Macintosh. He recog-

nized their efforts and contributions by casting their

signatures on the inside of the casing.” (Sloane, 2006:

100) Generally I think crediting should start much

earlier. In my opinion it is a question of manners.

Who should be part of a team? Valuable team mem-

bers should bring along with them the skills required

for certain projects as well as their enthusiasm. In

some cases the question of required skills is not that

simple. Especially at the start of an unpredictable

project, requirements and hence the scope, activities

and skills needed might be unclear.

Another experience we have had over the years

is that teams are often more effective when they

“fight”, fighting in a contextual sense, of course, is a

good thing. It shows that people are committed, and

whith this commitment come extraordinary results.

The worst for an innovation team is to remain silent.

This normally shows a sign of a lack of interest.

When a team has been created that is enthusiastic

and ready to make things happen, someone should

be in charge to keep the team together. An easy way

is to hold periodic meetings. Another is to divide and

address responsibilities and tasks, and track and re-

port them as often as possible.

STICK TO THE PROCESSESAs elaborated above, it is often a good idea for in-

novation projects to depart from the usual paths

and processes. But this is not a free ticket. A famous

quote by Edison that should be mentioned in every

article on innovation is that “Genius is 1% inspira-

tion and 99% perspiration.” In order to use these

99% of perspiration wisely, it should be considered

to follow specific rule-sets and processes.

Figure 2.


How

10

Most companies employ a top-down strategy to en-

hance a spirit of innovation. They dedicate some bud-

get to “innovation”, call on someone to be in charge

and acquire some expensive software tool intended to

help them manage innovation projects and ideas. Web-

portals designed, fancy cards and posters printed to in-

cite employees and customers to take part in “idea con-

tests” that are often more lotteries than real contests.

Out of question, there have been efforts like this

shown to be surprisingly helpful. But in most cases,

the results are unused “ghost” intranet websites, dis-

appointed employees and de-motivated people who

are told to be innovation managers but never have

had any organizational authority to actually change

anything. In other words, many companies still see

innovation more or less like a hobby or freestyle ex-

ercise, as something to do for fun, and if the daily

business allows it.

I think that this attitude is a mistake. As Peter

Drucker, the evangelist of Marketing, puts it: “Ev-

ery organization – not just business – needs one core

competence: Innovation.” (Drucker, 1999: 119) This

is why I advocate a different strategic approach to

innovation and a generally different self-image of

innovation managers. The core mission of any in-

novation manager should be the enhancement of a

culture of innovation. Innovation depends on people

and their personal skills, trust, teamwork and com-

mitment. Anybody improving these skills directly

and indirectly helps enhance a culture of innovation.

We at CIPOC do not only work on client projects but

also on projects on our own behalf. We set out without

any processes and simply focused on the execution of

ideas. This was a bad idea still a lot to be desired. So

we took our knowledge and project management skills

and set up sophisticated processes. The result, however,

was to produce a large overhead that actually stopped

the executing efforts. So we choose to balance process-

es on the one hand and execution on the other, instead.

This has proven to be a much better approach.

On a larger scale we have found similar challenges

in many of our customers’ corporate environments:

Good ideas and projects blocked due to organiza-

tional and procedural overhead. Valuable time to

market lost in board meetings and their preparation.

Where this is the case, and where we were able to es-

tablish larger pools of projects that could be bundled

into programs, we succeeded in expanding and re-

defining processes within the program management

offices, e.g. easily re-allocate budgets or human re-

sources between projects. These agile entities with-

in companyies’ strict frameworks have been much

more successful and delivered many more project

rollouts in time, quality and budget.

Concluding remarks

Mistakes we learnt from

Many tasks within an innovation project are not so

innovative, but still have to be done. These especial-

ly, should be managed properly. Classic project man-

agement methods like PMI or SCRUM have shown

to be extremely helpful for managing sub-projects of

innovation topics.

If you are not sure whether you have got what it

takes to transform a company bottom-up, shed a

light on it by using figure 2: Ask a flow-chart.

How


MANAGERIAL IMPLICATIONS WHEN YOU WORK TOP-DOWN:1. Trust your people

• Know your people

• Reward opposition

2. Do not trust your processes

• Lead, don’t just manage

3. Be patient

• Expect failure as an outcome

• Consult rather than control

4. Do something

• Stop talking – start building

MANAGERIAL IMPLICATIONS WHEN YOU WORK BOTTOM-UP:1. Improve everything – but not at once

• Listen to every complaint and every suggestion

• Always think of the customer experience –

especially if the customer is a co-worker

• Concentrate on feasible project sizes

• Improve yourself

2. Trust yourself

• Know your strengths

• Trust your strengths

• Fight for your idea

3. Think of the whole picture / Be an entrepreneur

• Know that although your idea might be great,

other things will be more important

• If innovation is not your job, make sure your

daily business runs perfectly

• Make sure your numbers include independencies

• Start small – but start

4. Built a team

• Know your weaknesses

• Find a team to compensate your weaknesses

• Never trust a team that never fights

• Do everything to keep the team together

5. Stick to the processes

• Follow the rules. Not everything about them is

wrong

• Try not to lose interest in your topic

Managerial implications


How

12

Welcome to the forumThe InnovationManagementForum.com provides a platform and channel of

communication exclusively dedicated to innovation management. You are invited

to discuss questions that you might have about how to implement the knowledge

presented in this article in your organization. This is a valuable opportunity to

exchange experiences with the like-minded and with colleagues from around the

world. The author of this article will also take part in these discussions.

www.innovationmanagementforum.com

• AppleInc(2011)AppleReportsFirstQuarterResults

• Drucker,P.F.(1999)Management Challenges for the 21st Century

• Jacoby,R.(2011)Leading Innovation: Process Is No Substitute

• Johnson,S.(2010)Where Good Ideas Come From: The Natural History of Innovation

• Kelly,K.(2010)What Technology Wants

• MacNeill,D.(1998)Why did Apple kill the Newton?

• MIT-MassachusettsInstituteofTechnology(1996)The inventor of the week: Percy L. Spencer, The Microwave Oven

• Pellman,R.(1999)Intrapreneuring in Action: A Handbook for Business Innovation

• Rowling,J.K.(2008)The Fringe Benefits of Failure, and the Importance of Imagination

• Sloane,P.(2006)The Leader’s Guide to Lateral Thinking Skills: Powerful Problem-Solving Techniques to Ignite Your Team’s Potential(2ndEdition)

References and recommended reading

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