MT5003 Creativity and Innovation

Building
An Innovative
Organizational
Culture

LIM CHING WU LESLIE

g0603039@nus.edu.sg
HT0063039Y
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Introduction
Organizational Culture is the attitudes, experiences, beliefs and values of an organization [1].

It has been defined as "the specific collection of values and norms that are shared by people

and groups in an organization and that control the way they interact with each other and with

stakeholders outside the organization. Organizational values are beliefs and ideas about what

kinds of goals members of an organization should pursue and ideas about the appropriate

kinds or standards of behavior organizational members should use to achieve these goals.

Organizational values develop organizational norms, guidelines or expectations that prescribe

appropriate kinds of behavior by employees in particular situations and control the behavior

of organizational members towards one another. In the changing paradigm of the new

economy, organizational culture that supports and encourages creativity and innovation is

critical for success.

Success is linked to constant innovation. In the new paradigm, most linear processes are

easily automated or outsourced [2]. Companies can achieve the real competitive advantage

through their ability to master nonlinear skills such as the unique design of goods and

services, as well as the creative blending of linear processes.

Recently, Business Week and Boston Consulting conducted a study of The World’s Top 50

Most Innovative Companies [3]. Some of the most successful firms in the world, such as

Apple, Google, Toyota Motor, General Electric, top the list. 3M, the leading representation of

innovative companies for its invention of the Post-it Note by Art Fry, also came in seventh in

the list. Besides technology firms, leading firms in other industry such as Procter & Gamble

(household products), Walt Disney Co. (media), Starbucks (restaurants), and Wal-Mart (food

2
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

and staples retailing), also achieved top ranks in the list. Exhibit 1 in Appendix A shows the

complete chart of the Top 50 Companies.

There is a strong correlation of innovation in the organizational culture and success in these

firms. This paper investigates on two cases of organizational culture of innovation, Google

and 3M, to understand how innovation and creativity are used as a strategic tool to achieve

success. While the emphasis is on building a creative organizational culture, this paper also

briefly discusses on the issues to be aware of when pursuing innovation in the company, such

common mistakes in innovation and Amara’s Law.

Google Inc.
From a small internet search startup by two Stanford University graduate students (Sergey

Brin and Larry Page) to a company of 4,200 with revenue hitting almost $3.7 billion,

Google’s rocket to success has been built on its ability to harness wild ideas for business

innovations. Marissa Mayer’s, the Vice President of Search Product and User Experience,

role in bridging the PhDs and the MBAs of Google, helped the firm to remain competitive

against competitors in the search domain, such as Microsoft, Yahoo and Technocrati.

Hatching New Ideas

Marissa Mayer described the five ways in which Google generates new ideas [4]:

1. Free Thinking Time – Google gives all engineers one day a week to develop

their pet projects. Such free days can be accumulated if work gets in the way.

Pet projects do not have to be aligned with Google’s central mission. Google

News was produced in this process.

3
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

2. The Idea as List – An idea list is available company-wide for the inputting

and vetting of thoughts on technology and business ideas.

3. Open Office Hours – Managers open their office for discussions with staffs

two to three times a week. The Google personalized homepage was produced

in this process.

4. Big Brain Storms – Brainstorming sessions consisting of about 100 engineers

are conducted eight times yearly. In these sessions, six concepts are pitched

and discussed for ten minutes each. The goal is to build an initial idea with at

least one complimentary idea per minute.

5. Idea Acquisition – Companies with interesting initiatives are acquired by

Google. The company Keyhole that it bought in 2004 allowed Google to offer

maps with satellite imagery in Google Earth.

Innovation Drivers
From these five ways to generate new ideas, Innoblog (public blog of Innosight, Clayton

Christiansen’s consulting firm) summarized them into three main innovation drivers [5]:

1. Rigor and Discipline – Besides creativity, the key to the success of Google is

in the rigor and discipline of their approach. This can be seen from the

brainstorming sessions conducted each year and the results expected from the

process.

2. Lead from Top – Supporting processes are instituted by the top management

to encourage the generation and experimentation of new ideas. The open

office hours by managers and one day per week for pet projects are example of

this driver.

4
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

3. Act like a Venture Capitalist – Google looks at great ideas outside the

company. This resulted in key acquisitions that allowed them to roll out

successful products such as Google Earth.

This paper proposes that there are at least two other key innovation drivers. The first is

Google’s ability to provide the environment for innovation to mature before they take flight.

Generating many ideas from many brilliant minds in the company does not necessary

translate to successful innovations at the marketplace. In Stevens and Burley pointed out that

on the average of only one idea is successfully commercialized from 3,000 raw ideas [6].

Google is able to provide such environments to let these innovations slowly take shape. One

example is the Google Labs where it showcases some prototypes which are not ready for the

market yet. This platform allows users to directly comment and influence on the development

of the innovations.

The second key innovation driver which this paper proposes is Google’s recruitment culture.

Google is able to bring in creative people to form its innovative organizational culture.

Stringent recruitment processes, coupled with some of the best benefits, attract talented and

innovative individuals to work in all functions of the organization.

3M Co.
By nurturing the talents of its employees, and fostering a climate of innovation, 3M is

possibly one of the most innovative firms of the present time. It is famous for household

brands such as Post-it Note, Scotchgard, Scotch tape, etc. In the company’s over 100 years

history, it has created over 55,000 products and served 30-plus core technologies and

leadership in major markets worldwide.

5
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Creating Innovative Organizational Culture

The 3M Story highlighted some of the features in its organizational culture which foster

innovation [7]:

1. Recruiting and Retaining Talent – 3M recruits people who are creative and

have broad range of interests. It is thought that people with broad range of

interests are willing to learn and explore new ideas. 3M codified six traits of

innovative people in its recruitment brochure: Creativity, Broad interests, Self

motivated, Resourceful, Hard working, Problem solvers.

2. Creating a Challenging Environment – New business units were spun off.

These newly established divisions had to develop new products and find new

markets independently. This “Renewal” process increased the diversification

of 3M.

3. Knowledge Sharing – 3M encourages staffs to network, interact and share

their knowledge and problem.

4. Rewarding Innovation – 3M rewards its staff for being innovative. The dual

career ladder paths allow technical staffs to be promoted to the role of vice-

president level without taking administrative or managerial responsibilities.

5. Mentors, Sponsors and Champions – 3M has a mentor, sponsor and

champion program. Champions have strong credibility and are persuasive

“lobbyists” for new ideas and products. They are willing to take risks and

those successfully mentored often later successfully mentor others.

6
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Innovation Drivers
Collins and Porras summarized five innovative drivers from the 3M findings [8]:

1. “Give it a try, and quick!” – 3M has a process to try out many things and

keeping what really works. The key is to do something and keep on trying

something new.

2. “Accept that mistakes will be made” – 3M learns and move on from

mistakes. It treats failures as part of the innovative process and does not repeat

the same mistakes again.

3. “Take small steps.” – Conduct experiments in small scale and develop in full

scale when it seems promising. 3M conducts many inexpensive experiments to

create funnel for would-be innovations.

4. “Give people room they need.” – Staffs are given time, incentives, job

security and room to experiment. This is illustrated in the “15 Percent Rule”

where technical staffs spend up to 15% of their time on projects of their own

choosing or initiatives.

5. “Mechanism – build that ticking clock!” – Practices and tangible

mechanisms for experiment for staffs to try new ideas and innovate.

After examining the approaches of nurturing a innovative organizational culture in Google

and 3M, the next two sections discuss the issues to be aware of when pursuing innovation.

7
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Common Mistakes in Innovation

Dev Patnaik pointed out five mistakes which companies make when trying to spark
innovation but less willing to make the change in organizational culture to get the results [9]:

1. Over-reliance on Pilot Initiatives – Some companies initiate projects that

focus on single product idea or promising near-term opportunity. The scale
and impact expected is too big to depend on single approach such as
brainstorming. Successful companies such as Procter & Gamble take the
portfolio approach to innovation. The process of innovation is a series of
multiple experiments using different methods and consultants.
2. Unhealthy fascination with Unique Charismatic Examples – Charismatic
business leaders from successful firms do not always serve as good role model
for other companies.
3. Misapplication of other Companies’ Approaches – It is enlightening to
learn from successful companies’ approaches but dangerous to blindly emulate.
Mechanical application of inappropriate methods may lead to failure of the
innovation program.
4. Descent into a Cycle of Self-recrimination – Innovation planning teams may
feel that their problems are insurmountable after benchmarking against other
companies. Companies can look into their past success factors to capitalize on
their organizations’ strengths and capabilities. This creates sustainable growth
appropriate to their inherent cultures.
5. Resignation to Superficial Changes – Some companies choose cosmetic
changes over structural improvement. Such initiatives insufficient to change
the organizational culture.

Companies should be wary of such pitfalls when trying quick methods to transform their
organizational culture.

8
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Amara’s Law
Roy Amara, former president of the Institute for the Future states that [10] “We tend to

overestimate the effect of technology in the short run and underestimate the effect in long

run.”

For example, in the case of iPod, its effect on the production of music has not been fully

understood. There are huge longer-term implications. Similarly, RFID is more than about

tags. There are huge implications for how businesses operate and how society accepts the

potential of being tracked. The dot-com bubble burst in 2000 was another example of the

result of Amara’s Law. It was then predicted that Internet-based business model was the next

big thing. However, $5 trillion in market value was wiped out [11]. Seven years later, the

potential of Internet-based business model has been realized. Internet start-ups like

Amazon.com, Google, Alibaba.com have successfully acquired real business with many

customers.

The significance of Amara’s Law to organizational culture is that innovators in firms must

understand that innovations, which are not mature for the marketplace at the moment, may

have great impact next time and should not be put down quickly. On the other hand,

innovations that succeed today, may present other opportunities next time. Innovations such

as mobile phones have greater impact on people than predicted. It is better to exploit an

innovation incrementally so as to cope with the uncertainty of the market.

9
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Conclusion
Creativity and innovation are absolutely critical in today’s economy for firms to stay

competitive. This paper discussed the ways in which successful firms build innovation as part

of their organizational culture. Some of the similar key drivers for innovation in Google and

3M include: recruiting the innovative people, giving staffs room and space to innovate (1-

day-per-week-rule in Google and 15 Percent Rule in 3M), creating incentives for innovation,

and progressing in small and patient steps. Firms can learn from the approaches in the cases

of Google and 3M to build in their own DNA for Innovation. However, the ways to innovate

and generate ideas are constantly changing. The best approaches for these firms may not be

the best for other firms. It is necessary to recognize the importance of innovation in the

organizational culture, and adapt the success formulas from innovative companies to suit

individual firms.

This paper also briefly highlighted some of the pitfalls which firm should be aware of when

they embark in pursuing the innovative organizational culture. Firm must be willing to make

necessary changes to successfully transform to an innovative culture. Finally, the Amara’s

Law underlines the importance of assessing the long term impact of innovations. It is

necessary to exploit innovations incrementally to counter market uncertainty.

10
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

References

[1] Organizational Culture, Wikipedia, 2007.

http://en.wikipedia.org/wiki/Organizational_culture
Retrieved on 1 Nov 2007.

[2] O. Parr-Rud, Business Intelligence Success Factors, Business Intelligence Network,

2007.
http://www.b-eye-network.com/view/4127
Retrieved on 1 Nov 2007.

[3] The World’s 50 Most Innovative Companies, Business Week Magazine, 2007.
http://bwnt.businessweek.com/interactive_reports/most_innovative/index.asp?chan=innovatio
n_special+report+--+2007+most+innovative+companies_2007+most+innovative+companies
Retrieved on 6 Nov 2007.

[4] How Google Innovates, Business Week Magazine, 2005.

http://www.businessweek.com/magazine/content/05_40/b3953095.htm
Retrieved on 6 Nov 2007.

[5] N. Painchaud, Google’s Culture of Innovation, Innoblog, 2005.

http://www.innosight.com/blog/index.php?/archives/36-Googles-Culture-of-Innovation.html
Retrieved on 6 Nov 2007.

[6] G. Stevens, J. Burley, 3000 Raw Ideas = 1 Commercial Success, Industrial Research
Institute, 1997.

[7] A Century of Innovation – The 3M Story, 3M Company, 2002.

[8] J. Collins, J. Porras, Built to Last, Random House Business Books, 7 Sep 2000.

R-1
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

[9] D. Patnaik, Five Common Mistakes in Innovation, Business Week, 19 Oct 2007.

http://www.businessweek.com/print/innovate/content/oct2007/id20071019_786269.htm

Retrieved on 6 Nov 2007.

[10] T. Espiner, Accenture’s King of Blue-Sky Thinking, CNet News.com, 30 Oct 2007.

http://www.news.com/Accentures-king-of-blue-sky-thinking/2100-1011_3-6216087.html

Retrieved on 6 Nov 2007.

[11] Dot-Com Bubble, Wikipedia, 2007.

http://en.wikipedia.org/wiki/Dot-com_bubble

Retrieved on 6 Nov 2007.

Cover Picture taken from Business Week.

http://images.businessweek.com/ss/07/05/0503_innovative_co/index_01.htm?chan=innovatio
n_special+report+--
+2007+most+innovative+companies_2007+most+innovative+companies

R-2
Centre of Management of Science & Technology
MT5003 Creativity and Innovation

Appendix A: Tables and Charts

Exhibit 1: Top 50 World’s Most Innovative Companies Chart.

A-1