Step back for a moment and take an objective look at your company. Then answer these three questions:
- Is it performing at a high level when it comes to creating innovative products or services for its customers?
- Are customers not just satisfied but wowed by your company’s offerings?
- Is your company’s approach to innovation embedded in its corporate culture?
Raise your hand if you answered yes to all three questions. Be honest now.
Hmmm. Just what I thought–most of you didn’t raise your hands. Don’t feel bad, as I’ll be sharing some interesting results with you in a moment.
It’s human nature for those in senior leadership positions to espouse how innovative their organizations are. As I’ve talked about in other posts it seems that every organization is an employer of choice, especially being in the top 100 employers. I’ve yet to figure out the math on that claim.
When it comes to innovation and corporate culture, what CEO doesn’t want to lay claim to being among the best? Unfortunately, there’s reality and there’s fantasy. The latter seems to be winning with most companies.
Fortunately, there’s recent research that examines the link between innovation and culture.
My favorite e-newsletter, from Booz & Company’s Strategy+Business, featured an excellent article The 2011 Global Innovation 1000: Why Culture is Key. The authors note at the outset that there are many parts to what makes up an innovative company: strong customer orientation, talented employees, focused innovation strategy, solid business strategy and execution capabilities.
The larger lesson for companies that struggle to convert their R&D expenditures into successful products, solid financial returns, and unassailable market positions is that it may not just be traditional factors like the innovation pipeline that need rethinking. Instead, companies should follow the lead of the most successful innovators in ensuring that the company’s culture not only supports innovation, but actually accelerates its execution.
– Booz and Company, Why Culture is Key
The 2011 Global Innovation 1000 survey (7th edition) produced some startling results. (The survey was conducted of 1,000 public companies around the world that spent the most on R&D.) Only about half (47%) of the respondents stated that their companies “robustly supports” their innovation strategy. And 36% admitted that their innovation strategy was not adequately aligned with their firm’s business strategy.
Of interest is that the executives who responded to the survey tended to acknowledge that a corporate culture that does not support innovation produces poor performance relative to competitors. And of special note is that respondents identified two particular cultural characteristics:
a) strong identification with customer experience
b) pride in product
I confess that despite my experience in researching issues on organizational culture and leadership that I’m still blown away by the attitudes possessed by those leading companies. The literature is long and littered with countless examples of CEOs who carpet bombed their firms through inept leadership. Fortunately, there are the success stories that inspire hope for the future.
The Booz & Company survey found that companies that had both highly aligned innovation strategies and highly aligned cultures had 30% greater enterprise value and 17% higher profit growth, in comparison to firms with weak alignment. 3M is one company that’s cited as one with tightly correlated strategic goals and corporate culture. Its innovation strategy is about “customer-inspired innovation.”
I get it when it comes to listening to your customers and building a strong trusting relationship. I learned this lesson 35 years ago while working in consumer lending, and later on while managing a service branch. However, I’ve never forgotten words of wisdom from management consultant guru Tom Peters. Many years ago I watched Peters in action on a video where he talked about customer service and the importance of ignoring your customers. Read this post I wrote last year where I reference Peters. Are You Practicing Leadership’s Five Is?
The Strategy+Business article refers to 3M’s chief technology officer who talks about the need to connect with the customer to learn their “articulated and unarticulated needs.” Once this is established, the next step is to create the capacity across 3M to solve the customer’s problem.
Peters’ view is that customers often do not know they even have a need. That’s why experimentation and creativity are such important activities for companies to engage in in a competitive marketplace. I’d call this situation the Known-Unknowns, where customers understand that something is missing in their firm’s product or service offerings, but they are unable to define or articulate it.
However, at a deeper level there’s what’s called Unknown-Unknowns. Think back to the early internet days. Contrast that scene to today, some two decades later, with the massive recent growth of social media and the role it’s playing in democratizing countries traditionally ruled by dictators. Look at how work has been rapidly virtualized around the world and the distribution of wealth to emerging economies.
And how about the ubiquitous 3M Sticky Note, and its clones, created by a 3M employee who was trying to create something that was kind of sticky but overly so. There was no market for it at the time.
Leadership is at the heart of creating a corporate culture that embraces customer focus and continuous innovation. If you haven’t already, take a moment to read the two posts included above. The journey is tough and never-ending, but it’s one that fosters energy and excitement. The primary role of those in formal leadership positions is to create the conditions for innovation and to focus employees’ collective energy towards a shared vision.
It’s a journey well worth taking.
We found that the most exciting environments, that treated people very well, are also tough as nails. There is no bureaucratic mumbo-jumbo… excellent companies provide two things simultaneously: tough environments and very supportive environments.
– Tom Peters
Photos by J. Taggart (“The Bean,” Millennium Park, Chicago)