Nothing is more constant than change. Furthermore, the speed of change is accelerating. So for instance, the global knowledge is growing exponentially, disruptive megatrends (e.g. Internet Of Things, urbanization, demographic shifts) are shaping the innovation agendas and new approaches for capturing value by innovation (e.g. Business Model Innovation, Design Thinking) are becoming mainstream. Thus, new realities for innovation management are emerging and firms are forced to change their innovation management ever faster.
One might assume that under the constant pressure to change firms have achieved a great deal of excellence in running corporate change initiatives. However, quite the opposite is true. A large study from 2013 showed that only 1 in 2 major change programs succeed.
In this 2-part article series, innovation-3’s Frank Mattes shares his deep experience in designing and implementing innovation culture change initiatives. You will find ideas and inspiration about how your firm can increase the chances for success in changing innovation culture.
Innovation culture defined
We define innovation culture as the sum of self-sustaining patterns of behavior, thinking and deciding that determine how a firm sees and conducts innovation. While this way of defining innovation culture view might not satisfy every scientific requirement, it has a big advantage: It provides the practitioner with actionable levers for culture change.
Innovation culture is one of the five cornerstones on which innovation success builds. The other four are strategy, processes, organization/management/governance and networks/ecosystems. Actually, two thirds of executives regard culture to be more important than the firm’s strategy or its operating model, as a 2013 study by the Katzenbach Center has found. Ex-IBM CEO Lou Gerstner, who led one of the largest business transformations in history, even went further by saying that “culture is everything.”
Changing culture is not easy and one in two attempts will fail. This figure may come as a surprise given the fact that since the mid-2000s, organizational change management and transformation have become permanent topics on the management agenda.
Three inconvenient truths about innovation culture change
Change programs need to be built on solid and proven principles to increase the odds for success. Before we share the principles that we have found to be paramount, it is useful to look at three inconvenient truths that relate to the key elements of any culture change program: People (in particular: Top talent), culture and culture change.
People: The “New Deal” between the firm and top talents
Top talent these days has unprecedented choices. Search engines, employer reputation portals and career portals make every employer transparent. Leading firms have understood that this development requires a new view on the employer/employee relationship.
Some firms made test runs in which employees act as free agents. However they have discovered that this approach is neither efficient nor effective in winning top talent and get the most in transformational power from it. The leading firms with respect to talent management are currently following a different course: They establish a win/win entrepreneurial “alliance” between the firm and the top talents.
On the one side of the equation, executives want their top talent to help transforming the company for the future. On the other side, top talents want the company to help transform their careers and their personal development. This win/win scenario includes that top talent might leave the company – and that the firm should be prepared to provide challenges (e.g. innovation culture change initiatives) that stimulate top talent’s desire to grow, as well with respect to career as with respect to personal growth. If top talents are constantly provided with these kind of challenges, there is a good chance that it will remain within the firm.
So the new operating model for the employer/employee relationship builds on the paradigm of a win/win alliance between the firm and its top talents – Building up meaning and purpose for both sides.
Culture: There is no such thing as a homogeneous culture
Many innovation culture programs are doomed to fail right from the start since they assume that there is one homogenous culture and people are homogeneous regarding “drivers and barriers” to change. However, but assumptions are wrong.
If we take e.g. a high-level look at R&D (one important piece but certainly not all of innovation) we find that the “R”-culture is substantially different from the “D”-culture:
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- Research departments have a mid- to long-term outlook. People are driven by exploring the opportunities of technology. They live in a supportive culture in which expert status and peer appreciation are key. Top researchers are used to work in peer teams from the same area of expertise
- Development departments have a short- to mid-term outlook. People are used to work in multi-disciplinary product/technology teams, live in a deadline-driven achievement culture and tend to be career-driven.
Heterogeneity is even increasing if one goes from the functional to the departmental to the individual level – and any successful change initiative that produces sustainable change ultimately needs to zero in on the individuals. As an example, in innovation culture change programs aiming at more openness, more collaboration and more information sharing we often find the following four typical barriers to change – with an individual mix that is often across the map:
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- “External engagement is second best” (Root causes: Demanding nature of work with external partners; External knowledge is not compatible with internal categories and language; Reward systems geared towards closed innovation)
- “I can’t overcome the paradox of non-disclosure” (Monolithic, unsophisticated IP; No clear guidance on what can actually be told at what stage of the partnering process)
- “The safety of working with established partners is preferable” (Dating is a difficult process; Complexity to set up new and binding arrangements; Prohibitive duration for setting up new and binding arrangements)
- “Digesting external knowledge is hard” (Low importance placed on assimilation of external knowledge (Absorptive capacity); Low translation skills)
Change: People are fatigued of change programs
As stated above, only one in two major change initiatives succeeds. The costs of failure are high – not only financially but in confusion, lost opportunity, wasted resources, and diminished morale. One observes frequently that employees turn to sarcasm and cynicism when they went the extra mile for an initiative that was announced with great fanfare but simply fizzles out.
Two of three managers see “change fatigue” (i.e. exhaustion coming from making too many transitions at once) as a problem for new change initiatives. Many managers and frontline people feel overwhelmed by a constant stream of change programs addressing technology, partnering, culture, technology, management approaches etc. – in particular when the change programs are poorly thought through, rolled out too fast, or put in place without sufficient preparation.
7 principles that address key problems in innovation culture change
Roughly four out of ten managers and executives agree on each of the following statements:
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- Firms lack the skills to build sustainable change
- Change programs are designed in the C-suite neglecting valuable information from frontline people
- People do not understand the changes they are expected to make
- People do not agree with the changes
These numbers make it clear that change in general and innovation culture change specifically is hard. But it is not impossible.
In our consulting practice, working with 250,000-people MNCs as well as with highly agile 1,000-people “hidden champions”, we have found that successful innovation culture change programs have a DNA consisting of seven elements (explained below). Think of them as being the foundations for designing and managing a successful innovation culture change program.
Understand your starting point well
As stated above, innovation culture is not homogeneous. It is also not isolated from the other four cornerstones of innovation management. Actually, innovation culture is shaped by (and conversely is shaping) the other four cornerstones. So how can a senior manager embarking on an innovation culture initiative get a rapid and solid understanding of where exactly the decisive levers for change are?
We have heard this question many times from our clients. Over the years, we have developed a tool – we call it the “Health Check” – that answers this question concisely. The results from this tool allow for a pinpointed design of the innovation culture change program, differentiated by function, by hierarchy level and by region.
According to our working definition of innovation culture (see above), the Health Check firstly looks patterns of behavior, of thinking and deciding. But since culture is inter-connected with strategy, organization, processes and networks, the Health Check looks into these dimensions as well. And finally, the Health Check looks for barriers at the individual level. In other words, the Health Check addresses six dimensions:
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- Culture (patterns of behavior, thinking and deciding)
- Clarity and “actionability” of the innovation strategy
- Alignment of management levels on the innovation strategy
- Governance mechanisms
- Processes and toolbox
- Barriers at the individual / personal level
The Health Check is conducted in some singular in-depth interviews and in a large-scale survey. The results are sliced and diced by function, hierarchy level and region. Results are visualized in rich graphics, e.g. in the form of heat maps or radar diagrams. Evaluating these visualizations (and the data behind) one can clearly identify the decisive levers for change – by function, by hierarchy level and by region.
Of course, these kind of analyses might be complemented by additional considerations, e.g. by stakeholder mapping. But in our view it is more important to get the ball rolling after the results of the Health Check are in than risking “analysis paralysis”.
(Note: The “7 principles” visual and the “Health Check” are protected Intellectual Property. If you are interested in using thesel please get in touch with the author to discuss options).