Throughout Part II, you may have noticed that the advocated processes and approaches implied certain kinds of behaviors and attitudes by people in the organization. The best-designed innovation system will not perform very well if it is not supported by the right culture. In Part I of this book, I described the leader’s innovation strategy task. In Part II, I described the role of leaders as designers of an innovation system. In Part III, the next and final part of the book, I turn to the role of the leaders as creators of an innovation culture.
PART III
BUILDING THE CULTURE
Innovation is deeply a human activity, despite the fact that today it often uses lots of sophisticated equipment like computers and scientific instruments. Ultimately, people make all the critical decisions about innovation. They decide which problems are most interesting and potentially valuable to solve; they decide which technical options to explore and which solutions might be attractive; they decide which design features to include and which customers to target; they decide who works on the teams and which teams get the most resources. People make all the tough calls about which projects to kill and which ones to move forward.
Culture shapes the way people think and more importantly how people behave, and, thus, it profoundly shapes how innovation happens. You cannot really talk about building a capability for innovation without talking about organizational culture. In most large organizations, existing cultural norms have become deeply ingrained over a long history and are thus difficult to change. If you are a young, rapidly growing company, preserving your innovative culture is perhaps equally challenging. Regardless of company size or circumstances, the best strategy and the best system for innovation will amount to nothing if a company does not have the right culture for innovation. But what is the “right” culture for innovation? What does a culture for innovation look like? And is the same culture right for all organizations? (Short answer: no.) And what can leaders do to shape a culture conducive to innovation? These are the issues explored in Part III.
8
THE PARADOX OF INNOVATIVE CULTURES
Why It’s Not All Fun and Games
As he stepped into the bright California sunshine, Dennis surveyed the sprawling corporate campus in front of us. “When I started working here, we used to do good science in the hallways,” he lamented. “Now, things are much more formal. We have a lot more process and a lot more meetings.” Dennis had joined the now very successful biotechnology company about ten years prior when it was a start-up with a handful of scientists housed in one building. Along with the success propelled by the launch of two blockbuster drugs came growth, and with growth came change. Some of the changes were tangible—more people, bigger and better buildings, much larger parking lots (and much nicer cars occupying the spaces!). Other changes were more intangible. The place “felt” and worked differently. The spontaneous brainstorming in the hallways was replaced by more formal, structured modes of operation. There were more procedures to follow and more committees to approve decisions. People behaved differently. In short, the culture had changed.
Culture consists of the shared values and social behaviors of members of an organization. We can think of culture as akin to organizational “software.” It shapes how an organization’s formal systems—its “hardware”—function. As is true for computers, organizations require both hardware and software to operate. Culture is an extraordinarily powerful driver of organizational behavior and performance. It can either lubricate or block the intentions of formal systems and processes. Let’s say that the leaders of an organization take my advice and institute a set of processes for searching for ideas, synthesizing diverse ideas into coherent concepts, and selecting among potential projects. Whether these processes yield transformative innovations will depend heavily on the attitudes and expectations of the people involved in these processes. Are they willing to speak up? Are they willing to challenge each other’s ideas? Are they willing to take chances? If not, then the formal system simply will not matter. Culture can be thought of as a “shadow” organizational system. You cannot always see it, but you feel its effects all the time.
A common view among both academics and practitioners is that as organizations grow in size, their cultures change in ways that inevitably inhibit their capacity for transformative innovation. Like Dennis’s company, they become more formal, less spontaneous; people are afraid to take risks. Therefore, the argument goes, no matter what the large organization tries to do in terms of strategy and systems, its efforts to become a transformative innovator ultimately fail because it is stuck with a “big company culture.”
I agree that, as organizations grow, their cultures can change and sometimes need to change. Additionally, I have certainly seen my fair share of cases where those changes in culture have led to behaviors that are antithetical to innovation. Although innovative cultures are actually quite rare, I do not agree that changes antithetical to innovation are inevitable. Organizational cultures, like everything else about organizations, are human creations. As such, they can be shaped through the hand of management. Since nothing is inevitable about organizational culture, let’s explore how a large company can create one that is vibrant.
The Paradox of Innovative Cultures
What are the characteristics of an innovative culture? I have posed this question to dozens of management audiences over the past several years. These verbal on-the-fly “surveys” in no way constitute research, of course. They are just a way for me to gauge what audiences believe about innovative cultures. Quite comforting, though, is the fact that, in general, the responses correspond remarkably well to the academic research and case studies written on innovative cultures. Let me summarize the major themes I hear:
A Tolerance for Failure: Given that innovation involves exploration of uncertain and unknown terrain, it is not surprising that a tolerance for failure is believed to be an important characteristic of innovative cultures, and for good reason. No one will take risks in an environment where failure is punished and people fear the personal consequences of their own failures. Innovation, which is inherently risky, will be snuffed out.
A Willingness to Experiment: As discussed in earlier chapters, experiments are vehicles for learning and, as such, are essential for innovation. Innovative organizations tend to experiment a lot. Conducting experiments requires more than a system and resources, though. Organizations that embrace experimentation are comfortable with uncertainty and ambiguity. They do not pretend to know all the answers up front or to be able to analyze their way to insight. They experiment to learn rather than to produce an immediately marketable product or service. They accept the fact that many experiments will generate unexpected or even undesirable information (bad news), but they do not view such occurrences as failures. Organizations with an experimental mind-set are always looking for ways to disprove their initial hypothesis so they can switch to more promising paths.
Psychological Safety: Psychological safety is an organizational climate in which individuals feel they can speak truthfully and openly about problems without fear of reprisals. Decades of research on this concept by my colleague Amy Edmondson indicates that psychologically safe environments not only help organizations avoid catastrophic errors, but they also support learning and innovation.1 For instance, when Edmondson, Richard Bohmer, and I conducted research on how cardiac surgical teams adopted a novel minimally invasive surgical technology, we found that the teams where nurses felt safe to speak up about problems during surgeries were faster at mastering the new technology.2 Psychological safety promotes innovation because it enables the kind of criticism that General Eisenhower asked for on the eve of Normandy. If people in an organization are afraid to brook criticism, openly challenge and debate the ideas of others, and raise counterperspectives, then potentially valuable information is lost in all three critical innovation processes—search, synthesis, and selection—that we discussed in Part II.
Collaboration: As discussed in Par
t II, well-functioning innovation systems need information, input, and significant integration of effort from a diverse array of contributors. The collaboration required for innovation is a behavior, not a process, and it cannot be dictated through processes or systems. People who work in a collaborative culture view seeking help from others as natural, regardless of whether providing such help is within their formal job descriptions. People work together not because they are ordered to do it or paid to do it, but because it is a shared norm of behavior. Collaborative cultures also require people to accommodate one another. This means, in practice, that I might have to do more work or change my design or modify my plan in order to make your job easier or your contribution stronger. In collaborative cultures, the focus is on getting the best overall result, rather than everyone optimizing their own contribution.
Flatness: An organizational chart gives you a pretty good idea of the structural flatness of a company, but little about its cultural flatness—how people behave and interact regardless of official position. In culturally flat organizations, people throughout the organization are given wide latitude to take actions, make decisions, and voice their opinions. Deference is granted to competence, not title. Channels of communication are fluid and direct (there are no “official channels”). Good ideas can come from anywhere and anyone regardless of position or function (recall Josh Boger’s quote in the previous chapter about wanting the person on the loading dock to be thinking about clinical trials).
It is easy to see why flatness facilitates innovation. Culturally flat organization can typically respond more quickly to rapidly changing information because decision making is decentralized and closer to the sources of relevant information. People in flat organizations have less need to “run things up the flagpole” or to check with their bosses (who, in turn, must check with their boss before approving “your” decision); they have greater freedom to experiment. Flat organizations tend to generate a richer diversity of ideas for innovation than hierarchical ones because they tap the knowledge, expertise, and perspectives of a broader community of contributors.
These cultural attributes complement and reinforce one another. A willingness to experiment requires a tolerance for failure. A tolerance for failure depends on psychological safety.3 Psychological safety helps support flatness. The benefits of flatness depend on how willing people are to collaborate. We can think of all these attributes together as forming a system of beliefs and behaviors that reinforce innovation. Focusing on just one is not enough. You have to buy the whole package.
A few years ago, I became puzzled by an observation I made consulting for a large health-care company. Like many other organizations, this company wanted to create a more innovative culture. Senior leaders had actually identified many of the attributes listed above as “targets” for the kind of culture they wanted to create. And yet, like leaders of many other organizations, they struggled to make progress to implement this “package” of cultural attributes. This struck me as odd. Hard-to-implement organizational changes are usually associated with practices that garner resistance because they impose some kind of pain. You do not have to be an organizational scholar to know that people resist changes they do not like or changes that impact them personally in negative ways. In these situations, organizational change is akin to taking bad-tasting medicine. Ultimately, it may be good for the organization, but it is tough to swallow.
The cultural attributes most people associate with innovation, though, do not seem so tough to swallow. What is so painful about tolerance for failure, freedom to experiment, willingness to speak up, openness to collaboration, and less hierarchy? All the attributes I described above struck me as not just good for the organization (because they promote innovation) but also as creating a rather pleasant work environment. I asked group after group at this company whether they would want to work for an organization that had such a culture, and virtually everyone said yes. Before reading further, ask yourself the same question: Would you want to work in such a culture?
I have asked this question numerous times at organizations around the world, and I generally get an overwhelmingly positive response. This confirmed my sense that the cultural attributes I described above are not at all like bad-tasting medicine. In fact, the contrary appears to be true. These are practices almost everyone seems eager to embrace.
How could a set of organizational practices that everyone seems to love be so hard to implement? Imagine if the latest research showed that eating ice cream was good for your health. The more ice cream you ate, the longer and healthier you would live. If that were true, my assumption is that everywhere you looked, you would see people eating ice cream. After all, everyone likes ice cream (note—in my fantasy world here, there is no lactose intolerance either). Personally, I would eat more of it if it were not bad for my health. If it were actually good for me, I would probably have it for breakfast, lunch, and dinner (and dessert too!). It would be really puzzling in this scenario if you did not see people eating a lot ice cream. Hard to beat “good for you” and “good to eat”!
Tolerance of failure, willingness to experiment, psychological safety, collaboration, and flatness all seem like the ice cream of organizational practices. People seem to like them. And why not? They seem really pleasant. And hence the puzzle: Why don’t we see more organizations implementing these practices? How can a set of practices that seem so pleasant—so tasty—be so rare?
Perplexed, I dug a bit deeper at the health-care company and talked to a number of senior executives, asking them why they were struggling to implement this culture. As I listened, I started to hear some reticence. Sure, tolerating failure might stimulate more innovative behavior, but couldn’t that same mentality if carried too far lead to costly and risky consequences? And if failure is tolerated too much, couldn’t that lead to sloppy thinking? Experimentation sounds fine, but how do you get people focused on execution? Collaboration is wonderful, but some managers thought the organization was already being bogged down by excessive meetings and the need for alignment. Freedom to speak up could certainly help the organization challenge the status quo, but couldn’t it also lead to conflict? In principle, they liked the basic precepts of innovative culture but were not sure how they could be implemented “practically.”
At first glance, it is easy to dismiss these concerns as senior managers simply feeling threatened by changes that impinge on their power and control. But I did not see it this way. The more I thought about it, the more I realized their concerns were potentially valid. This raised a question in my mind. Perhaps tolerance for failure, willingness to experiment, psychological safety, collaboration, and flatness—while important features of innovative cultures—alone are not sufficient for creating an innovative culture.
What I learned in researching this question over the past few years is that these easy-to-swallow practices—tolerance for failure, willingness to experiment, psychological safety, collaboration, and flatness—are just one side of the innovation culture coin. Innovative cultures have a rougher side as well. These less palatable practices, though, are critical complements to the more pleasant ones. It is as if “ice cream” could be healthy only if you dipped it in cod liver oil. Innovative cultures consist of pairs of practices that appear to be in tension with each other. However, as explained below, this tension is exactly what is needed to get the delicate balance right. Innovative cultures are a paradox.
Tolerance for Failure but No Tolerance for Incompetence: Innovative organizations set exceptionally high performance standards for their people. They recruit the best people they can find and then hold them accountable for high levels of performance. People who do not meet expectations are either fired or moved into roles that better fit their skill sets. Steve Jobs was notorious for firing people at Apple he deemed not up to the task. At Amazon, employees are ranked on a forced curve, and the bottom part of the distribution is culled. Google is known to have a very “employee-friendly culture”—free food, gyms,
generous parental leave policies, and the like. It is routinely ranked among the “best places to work.” But Google is also one of the hardest places on earth to get a job (each year the company gets more than 2 million applications for about 5,000 positions).4 Google is not known to fire people, but it does have a rigorous performance management system that moves people into new roles if they are not a good fit for their existing ones. At Pixar, directors who cannot get movie projects on track after extensive feedback are replaced.5
How can strong performance standards coexist with a cultural tolerance for failure? Wouldn’t the fear of getting fired lead people to take fewer risks? Paradoxically, a tolerance for failure requires having strong individual performance standards. Say you have two employees on your team. One you deem a very high performer. She has demonstrated superb technical judgment and has a track record of delivering. The other team member has struggled. Her technical skills are not what you thought they were when you hired her. She has a mixed track record when it comes to executing projects. Think about how you might interpret a “failure” experienced by each of these employees on a future project. My guess is that if the strong performer fails, you are more likely to see it as the result of thoughtful risk taking than as a result of sloppiness. You are likely to be more tolerant. If the less competent employee fails, you are more likely to see the episode as simply confirming your initial suspicion about her capabilities. In most organizations, you would not even go this far. You probably would hesitate to even let the less competent employee take on a risky project.
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