#3 Profit and the Innovation Culture
In the last article (“#2 What is the cause”) we where I tried to boil down the objective(-s) of the company and it’s stakeholders — in the hunt of how to best manage the pitfalls of playing the Infinite game (“#1 The infinite game”) whilst having these finite objectives with mismatching importance.
Let us now link back to this and adress the problematic issue with the profit objective and corporate ideas of building and maintaining an innovation culture.
First let us define what an Innovation Culture means.
A corporate culture consists of “the values, beliefs and behaviors practiced in an organization” — and the innovation culture hence is the work environment/corporate culture that leaders cultivate in order to nurture unorthodox thinking and its application
So why do we feel there is a necessity to strive for this culture?
In the 1926 Ernest Hemingway novel “The Sun Also Rises” there is a dialogue between two of the characters that goes like this
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
Up until today’s date these premises stays the same — where many companies are finding themselves on a slowly-burning platform which suddenly ignites into a relentless, devastating furnace. The flames emanate from many sources: if it’s not a technological disruption, then it’s a sluggish global economy or an ever changing consumer base that comes with a complex and challenging omni-channel engagement, which the digital era demands.
Looking at future strategies might seem to be a luxury, but it’s the only way to avoid being on a burning platform: hence the ubiquitous search for innovation and the innovation culture.
So given all of these challenges it of course makes a lot of sense to chase down the path of “building an innovation culture” within the company. That must be the way of not being a victim of the disruptive flames of furnace…. or?
This assumption is often very futile given the corporate objectives already discussed where for instance profit is unmistakenly “numero uno”. But it is actually wrong in many other ways as well.
Let us try to untangle the “build the innovation culture idea” here for a second,
- Is it wrong to try to build an innovation culture which can help us find ways to become a disruptive company or at least be competitive in the future market? If so — why is it wrong, and what is the way to move forward?
The keys to achieving effective corporate innovation by means of a clear innovation culture can be many and some really are intangible, but a couple stand out as more important and are very clear:
- Leadership; due to the fact that
- Within most organizations the culture is determined and defined by their leaders
- Digital and Innovation objectives / efforts are defined by the Leaders
- Leaders are prone — by the fundamental objective (profit) and the frames of the finite game (short term budgets, BU operational models etc) — to be controlled by the adaptor paradigm, meaning “doing things better” instead of “doing things differently” — which would be the innovators paradigm. This leads to digital transformational efforts or possibly something we can call “incremental innovation” but not necessarily the disruptive innovation models that we strive for.
2. Operating Model; due to the fact that
- Most companies traditional operating models does not work well when it comes to supporting an innovation culture.
- The KPI:s and the reward system are built for the short game and the profit objective — as mentioned before — which does not support an “innovation framework”
- So — to create sustainable, profitable growth we need something like an “innovation operating model,” one that, in order to be robust, “ought to reflect the why, how, and what of the entity” that creates it and uses it. It is often much better to think about innovation as a system with its own operating model.
So to be able to get the innovation culture idea to work we need leadership buy-in and an “innovation leader”. We can here compare an innovation leader to a film director.
The film director is setting the stage and enables talented actors to perform at their best, jointly shaping a movie.
In the same manner - the innovation leader has a clear purpose which he/she delivers in a focused and strategic manner, not knowing what the result will look like and — in comparison — if the movie will be a success or a failure - by enabling the talented co-workers to jointly adress the future.
Different approaches have then often been set in place to establish and align the “innovation operating model” with the company’s current operating model and by this building the innovation culture within the company.
This approach could work in an environment where we are focusing on operational improvement and efficiency — reduce errors, costs, and delays but without fundamentally changing how that work gets accomplished — and the “innovation operating model” part is carving this out. Then the change and the innovation component is quite uncontroversial.
This however is NOT what we would call operational innovation (or — in my eyes — innovation at all) — which is the invention and deployment of new ways of doing work.
There the strong executive leadership comes into play as it entails a departure from familiar norms and requires major changes in how departments conduct their work and relate to one another. It is truly a deep change, affecting the very essence of a company.
This means that if the “innovation operating model” being run in the innovation system has had success and is showing that we need to drive the change of the company and the domain it is operating in — the wiring of the current business model needs to be redrawn.
So — what does it all boil down to?
Well, innovation culture cannot be built and thought of as a sole entity.
Thinking about innovation only as a project, special initiative or even as a cultural goal is a flawed approach. The idea would instead be of thinking of innovation as a system (a discipline that can be taught and managed) with it’s own operating model. This approach can drive the growth (and in extension — profit) that companies need and this is also the path to an innovative culture, which is something definitely worth pursuing, just not something that can be bought
The key to be able to run successful innovation is a conscious leadership decision to create and invest in an own operating model — the “Innovation Operating Model” — and to fully establish what would this look like.
Stay tuned to more on this topic in my next article “#4 — The Innovation Operating Model”
