Why employee-driven innovation is good for employees and employers
Innovation is consistently one of the top priorities of executives, but most executives are dissatisfied with their organisations’ innovation performance. A poll by McKinsey in 2016 found that a staggering 94% of executives were dissatisfied. Employee-driven innovation (EDI) is a powerful and simple strategy every organisation can adopt. It means including all employees in continually improving the organisation. I’ve seen employee-driven innovation produce amazing results, and there’s extensive evidence that EDI is just as rewarding for employees as it is for employers.
Despite the known benefits of EDI, innovation activities traditionally exclude most employees. The traditional innovation model is “top-down” or “centralised”: senior managers set priorities and delegate projects to selected people. This model has some serious drawbacks:
- Employees only get involved in innovation if it’s in their job description. A colleague pointed out to me that it’s demoralising when your suggestions are ignored.
- The traditional model relies on busy senior managers being in touch with what customers are saying and how the business is running. But managers can’t be everywhere and are the first to admit that they rely on employees to escalate issues.
- Innovation is restricted to silos which reduce cross-functional collaboration and social diversity. It’s well-established that social diversity enhances creativity and innovation: “The fact is that if you want to build teams or organizations capable of innovating, you need diversity. Diversity enhances creativity.” (Scientific American 2014).
EDI complements top-down innovation
Employee-driven innovation complements top-down innovation by allowing insights and ideas to emerge from all employees across an organisation.
PwC reported that around two-thirds of innovative companies say, “bringing in employees with fresh thinking and establishing innovative behaviours and cultures are the most critical success factors for innovation, well above other criteria, such as increasing the innovation budget or establishing a clear business model for innovation.” (PwC 2017)
Employees see problems firsthand
EDI acknowledges that good ideas can come from anyone — from frontline workers to managers and customers themselves.
PwC found that “frontline employees can often see problems and solutions more clearly than their cost-conscious managers.” (PwC 2017) By tapping into the collective intelligence of their workforce, businesses can generate a larger pool of ideas and solutions.
Not a new concept
The concept of employee-driven innovation is not new. It’s one of the core principles of the Lean philosophy developed by Toyota in the years after World War II. The principle is known by the Japanese word Kaizen. Kaizen humanises the workplace by empowering individual members to identify areas for improvement and suggest practical solutions. I love that!
Why EDI is a win for employers
When employees can contribute their own ideas and energy at work, companies benefit in both the near- and long-term (HBR 2019).
Improves profitability: Companies that engage their frontline workers have two times the shareholder return (McKinsey 2022). A nationwide Danish study found that 59 per cent of companies with an employee-driven approach to innovation said their innovation process had produced an improvement in the bottom line. By contrast, only 41 per cent of companies with a top-down approach to innovation assessed their outcome positively.
Attracts top talent: Top talent wants to work for innovative companies. Candidates are so strongly drawn to innovation that 69 per cent of American workers would leave their current role for a position at a company considered an innovation leader.
Creates a symbiotic relationship: By engaging employees in innovation, the employer-employee relationship becomes more of a partnership with a joint goal of serving customers. There’s a lot of evidence to show that employee-driven innovation helps to create a positive and symbiotic relationship that’s mutually beneficial for employers and employees.
Improves customer experience: Customers are willing to pay more for a good experience, and one in three consumers say they will walk away from a brand they love after one bad experience (PwC 2018). To improve customer experience, it’s valuable to have input from frontline workers about what they’re seeing and hearing while working with customers. That’s part of the employee-driven innovation process.
Why EDI is a win for employees too
Enhances professional development: EDI challenges employees to think beyond their normal role, gain a broader business perspective, and develop problem-solving skills that can be quoted on their resume. This constant stimulation leads to personal and professional growth, making employees more versatile and skilled in their roles. It can particularly motivate those who aspire to leadership roles or seek more meaningful work.
Improves job satisfaction: Employee-driven innovation makes employees feel valued and heard, boosting their morale and commitment to the organisation. The same Danish study found that employee-driven innovation improves job satisfaction and reduces absence due to sickness. A large study of Australian public service employees found that employee-driven innovation increases job satisfaction — while top-down innovation negatively impacts job satisfaction!
Gives a sense of ownership and accomplishment: When employees have a say in the direction of their projects, they tend to develop a stronger sense of ownership and commitment. And when employees see their ideas come to fruition, it fosters a sense of accomplishment and pride in their work. This positive reinforcement makes the workplace more fulfilling and enjoyable.
Brings employees closer together: Employee-driven innovation encourages collaboration. When team members work together on creative tasks, it brings them closer together socially. Not only does it reduce the amount of rudeness among team members, but it also reduces the perception of rudeness from others (HBR 2023).
Making it happen
Many employees are reluctant to embrace innovation because of worries about failure, criticism, and career impact (McKinsey 2022). In fact, 85 per cent of executives surveyed by McKinsey said fear holds back innovation efforts often or always in their organisations. The starting point is for employees to feel psychologically safe to ask questions, experiment, and give feedback. Like a seedling sprouting in a garden, employee-driven innovation doesn’t survive in an unfavourable environment. A supportive culture of innovation is absolutely necessary.
