Is Your Innovation Strategy Aligned with Your Culture?

Step back for a moment and take an objective look at your company. Then answer these three questions:

1) Is it performing at a high level when it comes to creating innovative products or services for its customers?

2) Are customers not just satisfied but wowed by your company’s offerings?

3) 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. Most of you didn’t raise your hands. Don’t feel bad, as you’ll be reading some interesting survey results in a moment.

It’s human nature for those in senior leadership positions to espouse how innovative their organizations are. Indeed, it seems that almost every organization claims to be an employer of choice, especially being in the top 100 employers. The math is dubious on these claims.

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.

Before Booz & Company (its roots date back to 1914 when it was founded) was sold to PWC in 2014, it produced an excellent newsletter: Strategy+Business. One issue featured an insightful article on the link between corporate culture and innovation. The authors noted 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. As they put it:

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.

At the time, this global survey of companies was the seventh in a series of annual reports. Some of the results were startling. (The survey was conducted of1,000 public companies around the world that spent the most on R&D.) Only 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

The attitudes possessed by those leading companies was at times surprising. 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 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.”

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.

As a side-bar comment, long-time customer service guru Tom Peters has the view 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. Call this situation the Known-Unknowns, where customers understand that something is missing in their firm’s product or service offerings, but they’re 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.

Leadership is at the heart of creating a corporate culture that embraces customer focus and continuous innovation. 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