Building a Culture of Innovation
Innovation is the main business buzzword nowadays. The world is becoming more volatile and complex. Technology is developing exponentially, and hardware and software are converging. Real innovation is more than just acting in response to a change; it is the ability to initiate change in the business environment to which other companies will have to respond. Successful organizations shape markets and create new consumer behaviours, and this may require pivoting into areas and business models outside their core. SAP invests in innovation beyond merely providing software solutions, it focuses on developing best practices and breakthrough technologies with capability to shape IT trends. Airbus opened a Silicon Valley startup and hired a Google executive to run it. Goldman Sachs is rebranding itself as a technology company; it has built a 9000 people IT division (almost the same size as the total headcount of Facebook, and three times the size of Twitter). Google is diversifying impressively fast. In allocated 36% of its 2014 venture capital investments into life science and healthcare technology startups, bought Nest for its thermostat technology, and recently created Sidewalk Labs, a smart city startup.
Apple’s case shows that innovation equals revenue. After 12 years of poor performance, Steve Jobs rejoined the company, which at that time needed funds of around $150 million to remain in business. This was challenging for Jobs but he never gave up; he used tactical approaches to solve the company’s problems and the end result of this was excellent comeback. As much as he used various approaches to improve performance of the company, most of the success was due to innovation. Apple’s revenue increased from US$ 8.2 billion in 2004 to US$ 182.8 billion in 2014.
Online retailer Zappos is facing ever increasing competition and has come up with various strategies to ensure it survives, key among them is innovation. The company is now taking a rather unusual step that it believes will set an innovative trend; shedding hierarchy. The company is now implementing a management system known as Holacracy, that encourages teams of workers and self-lead workers. Zappos’s profitability has been increasing over the years; $50 million for 2013, $54.5 million for 2014, and is projected at $97 million for 2015.
Google realized that the IT world is expanding and becoming increasingly competitive each day, and that the only way to lead is introducing new customer friendly products which is only possible through innovation. Google’s stock price has reached at least 900 percent of the initial 2004 IPO price. Its first quarter revenue for 2015 was $17.2 billion, a 12 percent increase in revenues year over year. The company doubled its headcount in the past two years (at the end of Q1 2015, it had 55,419 employees). To ensure continuous innovation Google taps employees and lets ideas percolate up. By creating an arena that enables people to collaborate seamlessly to innovate, Google is benefiting greatly.
As we have seen, innovation has a large positive impact on a company’s profitability, it helps create new products and services that clearly distinguish a company from competitors, and satisfy the ever changing customer needs. The only way to do it is to build a culture that every employee knows that it is not only the top executives, managers, or R&D people that are responsible for promoting innovation. Following are some ways that successful companies build that kind of mentality:
Focus on the Right Things
Social responsibility is a must do for modern companies. Studies show that nowadays companies can succeed only if they focus their business on solving social problems. Corporations are expected to have large societal influence because their social capital is believed to be a powerful tool for transforming local communities, countries, regions and even global industries. An example is Exxon Mobil that in early 2015 announced its plans to exit from extraction and production of non-renewable resources. Pfizer’s modern social investments are aimed at building healthcare capacity and providing access to medicines for individuals that need them the most. Microsoft is also participating through programs like Tech for Good that provides grants for nonprofit organizations and software donations, and YouthSpark that is targeted at creating entrepreneurship, education, computer science and employment opportunities for 0.3 billion young people globally.
Google’s top secret for success lies in focusing on users. Google takes great care when designing its products to ensure their products ultimately serve users, rather than its own bottom line or internal goal. Its crowdsourcing projects enable the company to understand what the users want, thereby, give them the best experience. For example, after carrying out intense research into mobile market and studying consumer expectations, Google’s has recently decided to include fingerprint support, deeper app linking, and simplified application data permissions in the upcoming Android version.
Hiring the Right People
Research shows that diversity of opinion drives innovation, and successful companies make it a goal to have a workforce more diverse than their client base. They are constantly focused on improving quality and diversity of hires they complete. Google, the company said to be “a self-replicating talent machine”, only hires the right candidates, and not the best available for a certain position. Recruitment is a part of everyone’s job; the company says that although they get approximately two million new resumes annually, they prefer referrals from current employees, because historically this has proved highly successful.
Google focuses on hiring “T-shaped” individuals, i.e. employees who not only have a depth of expertise in their field, but also a breadth of interests and experiences outside of it. The company has a potent screening process, focused on finding individuals who are ready to deal with big challenges, embrace change, and are skillful in different aspects. Besides the role-related expertise, personality, leadership, and the general cognitive ability are carefully assessed. All the points, notes and suggestions of interviewers are combined together as a report and sent to your company’s global hiring committee.
The Zappos hiring process is one of the most unique in the world today. The company trains its employees, and when the training is over, it offers $4,000 in addition to training fees for any trainee that would like to quit. This is an attempt to ensure only serious employees work for the company.
Companies like Goldman Sachs, PepsiCo or SAP invest in diversity strategically. Goldman’s CEO, Lloyd Blankfein, says that diversity is at the very core of the company’s ability to serve their clients and maximize return. PepsiCo states that one percentage point of its 7.4% revenue growth (US$250) can be attributed to new products inspired by diversity efforts, and thus it requires 50% of hires to be women and minorities. Software giant SAP uses diversity to drive innovation and eventually meet customer needs.
Hiring may be too lengthy and cumbersome, so acquiring a company with the right talent may be a more practical solution. Amazon, Google and Facebook are famous for their shopping sprees. Of late SAP has also made several acquisitions and partnered with other companies to help address the ever growing needs of their customers.
Empower Employees to be Corporate Entrepreneurs
Business complexity has made it important, but more difficult to encourage collaboration and initiative. The nature knowledge work has shifted from what existing data points to look for, and where to find them to how to identify novel and unprecedented insights from the exponentially increasing amount and complexity of information available at our fingerprints. As the world has evolved, white collar workers deal with increasingly adaptive challenges where existing expertise may no longer be an asset. These require attitudes of risk taking, resilience and agility, and corporate entrepreneurship, or “intrapreneurship” has become a buzzword.
Intrapreneurship could be defined as “emergent behavioural intentions and behaviours that are related to departures from the customary ways of doing business in existing organizations”. Developing innovation culture in an organization requires individual initiative. Creating conditions for employees to challenge the status quo is essential for success. These include psychological safety, encouraging risk taking, and tolerance to failure.
Google’s major success secret is building safety, transparency and empowering its employees. While this does not have to be revealing every single confidential detail, regular information sharing is a part of the company’s DNA. Google conducts a weekly TGIF (“Thanks Google it’s Friday”) meeting hosted by the company’s founders. Strategy, current R&D projects and HR initiatives are openly discussed. All employees are welcome to attend and ask questions about anything they think of (e.g. market trends, company’s future plans, employee compensation, management decisions). The Google founders role model the culture in their TGiF meetings; besides business, they share personal stories and aspirations, and even joke about their own failures and idiosyncrasies. To encourage participation and lighten the atmosphere, drinks and food are provided. The meetings are recorded for those unable to attend.
Tolerating sustainable levels of risk is vital for nurturing innovation. Innovative companies invest in structures for people to allow initiative and risk taking through decoupling leadership (attitude and skill) from management (authority level and administrative function, e.g planning, organizing, staffing, coordinating and controlling). AriBnB reduced its rules to bare minimum, a strong message for employees that the company trusts their judgement. Line and Zappos introduced flat structures without management roles. Google and 3M have 20% rules in place 20% project rule in place, which means that any employee who meets performance expectations can spend up to 20% of their time on voluntary projects in different teams or functions.
Collaborate Globally
In the modern world innovation is taking place at an exponential pace. This implies that to create new and meaningful knowledge, the company may need broader partnerships. Ford Motors promotes innovation through both internal and external collaboration. The company has invested heavily in R&D and series of new products. It has great internal capability for innovation, but to excel it partnered with various universities across the world as well as software and hardware providers such as Google and Microsoft. The high innovation capabilities have enabled it come up with various products: alternative propulsion systems including plug-in hybrids, biofuels, and electric vehicles, as well as more conventional engines and gasoline engines with tremendous fuel economy; and, driver connect technologies like MyFord Touch and Ford SYNC which improve driving experience and reduce distraction. Another great enabler for innovation within the company is globalisation of the Ford Product Development System, where it revamped the old system that allowed each of its production groups in Asia, North America, Europe, and South America to innovate independently. This was time consuming and way too expensive. Because of the ever advancing level of technology, globalisation and changing customer needs innovation is a must do thing for modern companies that want to excel in business. The company’s innovation communities in the US comprise of experts from various disciplines in North America including salespeople, engineers, and developers. The company stimulates innovation through various ways key among them being formation of strategic partnerships. It welcomes anyone with an innovative idea to share it out so that both teams can work to turn it into a reality.
Conclusion
Innovation equals profit. It can help tackle multiple issues, including overcoming stagnated growth, creation of new markets, or new consumer behaviours. Innovation rewards both consumers and organizations; consumers get products that can better satisfy their needs, and organizations reduce production costs and increase revenue. Innovating should be the obvious behaviour of everyone in the company, whether specified in their job description or not. As discussed above, highly successful organizations share the same simple trends: they hire talented and diverse employees, focus them on inspiring goals, empower them to take risks, and partner globally.
Contributed by:
Piotr Feliks Grzywacz | Piotr@PronoiaGroup.com | PronoiaGroup.com
In my most recent corporate jobs, I was a learning and organisation development executive at Google and Morgan Stanley. I have over 15 years of experience in coaching senior executives and facilitating strategic organisational development interventions. My experience includes business partnering and relationship management, talent management, leadership development, innovation, change management and technical and functional competency development). I drove large-scale learning strategy and change management projects.
I never stop to learn. My education includes two Master degrees and a unfinished PhD in linguistics, three postgraduate degrees in management consulting, marketing & business administration, and public relations. I am working on my Doctorate of Business Administration in Management Consulting at Henley Business School, UK. I have several counselling and coaching certifications. I love learning languages, social studies, psychology, neuroscience, philosophy and business. I interested in many things, my hobbies range from cooking to shark diving.
Originally from Poland, I have lived and worked in Germany, Belgium, Holland and Japan. For the past fifteen years I have worked in Asia and the rest of the globe.
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