How to Create an Innovation Culture: A Comparison.

We at 1789 attend many events. And usually, one of our key messages (if not the key message) is: Innovate or die. If you fail to reinvent yourself, your product, or your service and stick to what’s working for you today, that may just be the end of you tomorrow. And let’s be honest, most people we talk to at these events already know deep inside, that this is true.

While attending these events I’m involved in very interesting conversations about innovation. People’s most frequently asked question is: How do you create an innovation culture? And, since you’re reading this post, I’m assuming you’re wondering the same. If you’re really pressed for time, you can skip to the end for three recommendations, but if you have five minutes, bear with me to know why I chose those three above all the possible answers.

What even is an innovation culture?

First, let me rephrase. What the people in those conversations (or you) are really asking is how do we make people come up with ideas, share them, develop them, refine them and put them to use to the company’s benefit?, right?

One answer that pops up is often is: You give the really good innovators, the geniuses, resources to do what they want. Think Steve Jobs (Apple), think Mario Mazzola, Prem Jain and Luca Caiefo (Cisco)! You just need to let them do their thing.

Well, sure. These guys paid their companies great service while the companies gave them all the freedom (and tons of money) to “do their thing”. However, it’s a quite risky strategy to bet all your innovation on a handful of Einsteins — What if they get a better offer? What if they leave? We need something that remains, even if individuals leave. That is culture. It’s what’s engrained in the firm’s DNA. Kotter describes culture as “the qualities of any specific human group that are passed from one generation to the next” (Kotter, Heskett. 1992. Corporate Culture and Performance; italics added).

The power of corporate culture

As culture is passed on, it becomes more than just an individual’s habits & vision. Nonetheless, it guides us with norms, values, and expected behaviors. Culture can influence employees enormously in their willingness to take actions, how capable they view themselves, and what they end up actually doing. Culture can influence behavior in ways you didn’t even think were possible. Let me give you an example:

Back in my sociology studies, I worked as a student assistant to a department examining corruption, especially bribery. We looked at a special case: Active corruption (e.g. giving bribes) without personal gain. In many cases, the corrupt individuals acted in favor of the company by bribing third parties, so their firms would get special contracts or licenses. The bribe givers themselves, however, did not receive any commission or public recognition (since, you know, it was illegal). But, and here’s the interesting part, they would do it anyway, and sometimes under great personal risk. I examined a case where employees bribed Chinese local officials in order to get operating licenses for those regions. The employees executing the bribes faced potential death penalty on bribery in China. They faced this risk individually, but got no reward whatsoever — and yet, they bribed officials in order to advance the firm.

Without any personal gain, the rational choice theory didn’t get us too far. Looking at the perpetrators’ private lives, none of this behavior made sense either: They are often morally sound, have families (who do not benefit from the bribe, I stress it again), and live as upright citizens. Consequently, neither rational thinking nor individual deviance could be used as an explanation for this active corruption without personal gain. So why did they do it then?

Markus Pohlmann, a sociology professor at the University of Heidelberg, coined this behavior organizational deviance. He and his colleagues argue that there are “unwritten rules” at play, that entrench the illegal behavior into the organizational cultures. So there we have it: corporate culture!

If (some) companies have a culture in which employees take on all that personal risk by breaking the law, in order to gain advantages for the company — if THAT is possible — why do firms struggle to create an innovative culture?

With no legal risk attached to innovation, shouldn’t it be the easier thing to engrain into the culture? (Unless, of course, we’re talking about inventing the gun powder or the like, but let’s not go there.)

Corporate culture: corruption vs. innovation — a comparison

The consequences of bribery are external, meaning they are outside of the firm and thus outside of the sphere relevant to “inside behavior”. We are all boundedly rational and cannot keep all information connected at once. Therefore, we often only concentrate on norms and traditions of the group we’re currently in. Think of how differently people can act in romantic relationships vs. around friends. They’re still the same person and none of it is fake — it’s just the norms which are different in either group. You only focus on the ones in your current environment. The perpetrators in the cases of organizational deviance often blended out the external consequences.

Now imagine someone in the same firm is trying to be innovative, maybe working on a new way to approach millennials in the sales process. More likely than not, they would be facing a lot of adversity! Here are some possible scenarios:

• The innovator approaches their boss, and the boss doesn’t like it: the project dies, the innovator is embarrassed.
• The innovator approaches their boss, and the boss likes it. However, the boss is facing some internal pressures, too. This innovation would cost money to develop and the risk of failure is high. In this case, the boss would face severe consequences and losses. Therefore, it’s likely he or she will put the project on hold, too.
• Maybe the boss imagines everything will go well. In that case, she cannot be sure, that she will get credit for advancing her protégée. Neither can the innovator be sure that she will get the credit she deserves. Makes her think. Maybe now’s not the right time.

Even though none of the consequences aren’t nearly as bad as potential death penalty, all repercussions are within the system. Strange enough that someone would be punished for doing something beneficial for the company (there goes the innovation!).

Innovation is “pissing off most people” (Tom Goodwin), because many don’t understand, don’t care or don’t dare. And with hierarchy being a strong career sorting mechanism, egos are likely to be hurt along the way. This makes people cautious and defensive — overall creating an atmosphere in which psychological safety is not connected to novelty. Values inherent to the system clash at this point and the stronger ones (profit, sustaining and strengthening one’s position within the firm) prevail.

This brings us to a second point: The bribery case is a continuation of the status quo. The act of bribing is not really seen as a cost, but as an investment in the firm’s strategic goals and therefore viewed as stabilizing. With the top strategic goal usually being profit, bribing officials will be reflected in the measurements and performance evaluation (because the outcome affects the numbers).

But, didn’t you say that in organizational deviance, there were no personal gains attached to the act? That’s correct! In the cases examined by Pohlmann and colleagues, personal gain was negligible. So, we know from science that the evaluation part is not even needed to get you to do it. We can imagine having it will only enforce the behavior.

Innovation on the other hand always means change. And changing a running system — any running system — requires courage, but to be courageous, one needs to feel safe enough to try. Innovation may or may not be a strategic goal, but the measurement is likely still linked to only the end result: profit. In this case, all initiatives that go beyond immediate profit will be viewed as costs. And therefore, the running system will always be preferred, because, as our friends Amos Tversky and Daniel Kahneman explain, losses feel much worse than unrealized gains. Especially, when we cannot yet understand the magnitude of the potential gain. If innovation is seen as a cost factor instead of an investment, failure is too much of a risk to take.

By the way: many companies are window dressing as they feel the need to imitate successful innovators with great innovation labs etc. — not because it will make them more innovative, but because they hope for a larger share of the pie. They show the outside world new and flashy things, while sticking to the status quo internally. Great PR does not mean you’ve achieved an innovation culture (see also: Innovation Theatre).

We can observe one third thing: In parenting, there’s a saying “Children don’t listen to what you say. They imitate what you do.” I am not at all implying employees are babies, but what I do think is that the quote is valid for adults, too: To fit in, we imitate others. Just think when you go to another region and within a day you’ve adopted the local dialect. In the bribery cases, we often found that the behavior was shown by peers and superiors. Consequently, a sense of belonging emerged when employees imitated their boss and colleagues. Innovators, on the other hand, often need to fight alone, likely feeling like the odd one out.

How to escape the innovation quagmire

It may seem like I’m putting feelings above everything else, although you were reading this article to find out how to change behavior. But: experience and the resulting emotions within a system shape our behavior. And therefore they ultimately determine what is passed on to the next generations.

My friend Boris Bezirtzis shared some valuable knowledge the other day: “You cannot design experience, that’s what’s happening within the people. You can only design a context”.

So, finally, here’s my recommendation: Create a context, in which innovation can thrive.

1. Evaluate the reasons why you’re aiming for innovation and then make it your strategic priority. Regard innovation as an investment in your strategy rather than as a cost which runs against your profit. Make it an internal priority with positive internal consequences. Walk the talk!
2. Build a structure to support it: I strongly dislike the term “failure culture”. Nobody intends to fail — but it is essential that failing is not frowned upon. The courage to try must be rewarded and the failure needs to be viewed as an opportunity to learn. This can be achieved by removing hierarchy where it is unnecessary, enabling people to access information easier and to understand what happens with ideas once they are heard. It also means that those supporting and fostering innovation need to be rewarded besides the innovators themselves.
3. And last, but not least: Every single individual contributes to the organization. Your actions matter. Lead by example and don’t just talk about it: Make innovation a normal thing, not something so big and aspirational that no one will ever dare to try anything new. Be positive about it, support others, so others can follow your example. The way people react to and live innovation is what influences others most, and it’s also the easiest thing you can do as an individual.

This, surely, is not a bullet-proof recipe and let me tell you: as obvious as it sounds, it’s a pain to implement. Cultural change is not something that comes over night and not something that’s easy to depict. But I believe it’s our best shot at creating a culture that (drum rolls please:) cultivates innovation.

Want to discuss more?

My name is Mary-Jane and I’m a partner at 1789 Innovations, a Frankfurt-based strategy consultancy. We believe that having a true impact in times of uncertainty happens through people. Our goal is to empower each other to become creators of change to go beyond the revolution — together. If you want to talk more about innovation and strategy for innovation, I’m curious about your thoughts, opinions, or questions. Leave a comment or contact me directly via LinkedIn. :)

For more information about 1789 visit our webiste 1789Innovations.com. See you there!