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One of the most important variables in the success of a business over time is the extent to which
the organization develops innovative business strategies and has an agile culture that supports
such innovation. This article describes ways of accomplishing both requirements.
COMPANIES ARE INCREASINGLY FINDING them- client saying, “We have lots of great ideas; our problem is
selves facing a volatile and often harsh environment. implementing even one of them.”
Many have felt the impact of difficult economic trends. So innovation requires two critical elements: an agile
Others in highly competitive businesses need to respond and innovative culture and an innovative strategy. In our
rapidly to technological change as well as changes in cus- consulting work, we find we usually must deal with both.
tomer buying habits and perceived needs. The first reac- Since it is less familiar to managers, I will primarily focus
tion to crises is usually a hunkering down, in which on the cultural issues in this article but will also summa-
people or product lines are eliminated. But in the long rize tools for strategic issues.
run, most organizations find that they must become more
innovative if they are to survive the turbulence in their
business environments. CREATING AN INNOVATIVE CULTURE
Innovation may be defined as “doing things in a new or The first conclusion is probably one that most people can
different way to create new sources of value.” New ideas, accept: The capacity to adapt to rapidly changing busi-
products, services, or processes all may have potential, ness conditions lies primarily in an organization’s peo-
but if they fail to create value, they are not considered ple, not in its resources, products, or even technology.
innovative. The second conclusion is less widely held: While
The most important variable in the success of a busi- processes, skills, and competencies are important to fos-
ness over time may be found not on the balance sheet but tering successful change, the practices and behaviors that
be derived from the way people in the organization con- make up the organization’s culture are of even greater
ceive of their business. Specifically, it is the extent to importance.
which the organization has an innovative business strat- Coming up with new ideas is not enough. The old
egy and a supportive and innovative culture. Among the adage, “Invention is one part inspiration and nine parts
few safe predictions is that there will be change and that perspiration,” emphasizes the point that creativity is only
organizations with rigid, bureaucratic cultures will find it a small part of the inventive effort. The same is true of
difficult, even impossible, to be successful over time. One innovation. The term perspiration, however, is slightly
has only to look at the number of major corporations misleading. In the innovative company, it is not a matter
cited as “ideal” or “excellent” by writers only a few years of working harder; it is a matter of working smarter.
ago that are now struggling because they lack a culture
and strategy that would have allowed them to innova-
tive and adapt to today’s market conditions. MEASURING INNOVATIVE POTENTIAL
The natural tendency seems to be to concentrate exclu- Our experiences with organizations that have been suc-
sively on strategy. There are several new approaches to cessful in volatile environments led us to begin devel-
this issue, such as Kim and Mauborgne’s (2004) “blue oping an instrument that would measure corporate
ocean” approach, but we have found that focusing first on innovation potential in a way that would provide action-
the culture is generally a better way to go. I recall one able feedback.
Performance Improvement, vol. 49, no. 1, January 2010
©2010 International Society for Performance Improvement
Published online in Wiley InterScience (www.interscience.wiley.com) • DOI: 10.1002/pfi.20120 39
In designing our research, we did our best to avoid 6. Meeting the needs of the business and customer is
imposing a single bias by using a wide variety of sources to seen as far more important than conforming to
supplement our own experience. We deliberately avoided bureaucratic and administrative requirements.
trying to assess any single position, such as determining 7. We see ourselves as able to influence events, not as
what constitutes a “learning company,” as described by victims of circumstances.
Senge (2006). We went through various sources as well as
8. People feel encouraged to make on-the-spot deci-
our own work to identify performance practices that
sions when necessary, without waiting for full
appear to characterize adaptive companies and found that
approval from higher management.
eight principles accounted for most of the items:
9. At the conclusion of a project, we regularly look for
• Commitment lessons learned.
• Creating value 10. Once we have made a commitment to change, we
• Initiative have a sense of urgency and a high level of resolve to
• Support for change follow through.
• Leadership The fact that successful adaptation depends on several
• Learning factors may also help to explain why single-focus
• Openness approaches do not seem to work in the long run.
Top-10 lists are always popular and provide a good
• Respect and challenge place to start, but a more comprehensive approach is nec-
To construct an initial instrument, we chose six prac- essary to provide a base for making solid recommenda-
tices for each of the principles. The items were reviewed tions or taking action. As a first approximation, however,
by people in 15 companies with substantial experience one might ask, “Would people respond positively to these
of innovation; practices were rated as to the degree of 10 items in my company?” If the answer is no, perhaps an
importance for their innovation efforts. investment in creating a more innovative organization is
The results were a bit surprising at first, but on reflec- appropriate.
tion they make sense. For example, the single most
important practice was related to understanding how DATA REVIEW
one’s job contributes to the organization’s success.
Review of the data gathered in our research showed that
Neither we nor any of the gurus we consulted gave this
four of the innovation support categories accounted for
kind of item top billing, but all made some reference to it.
most of the variance in the ratings. We have tentatively
It’s something that everyone agrees is important but that
labeled these the core four: commitment, creating value,
is seldom dealt with well.
leadership, and initiative. The other remaining four areas,
while still rated as important, are not seen as having the
THE INNOVATION SCORECARD same level of impact on the organization as the first four:
Here are the top 10 cultural practices, in order of their 1. Commitment: A key element in commitment is under-
perceived importance to implementing innovation: standing how your efforts can contribute to the success
1. People see their job more in terms of the value they of the organization. Surprisingly, relatively few people
create than the task they perform. really understand what drives the businesses they work
in. And all too often, senior management attitudes
2. Our people show a sense of personal urgency and seem to say, “Why do they need to know that?”
energy about achieving results.
2. Creating value: People in innovative organizations tend
3. We are willing to make significant change in the way to look at their jobs in terms of the value they create
we do things now to better provide value to the cus- rather than just the tasks they perform. This view of the
tomer and the company. work helps build motivation to improve, work with
4. We are more concerned with doing what’s right for others, and find new and better ways of working.
the customer and organization than we are doing Creating value means getting people to think about
only what the boss wants. what is right for the business and operate from business
5. People in the organization have a clear understanding priorities rather than personal or political pressures.
of how their efforts affect the satisfaction and reten- 3. Initiative: The practices relevant to innovation are not
tion of customers. just empowerment warmed over. Initiative comes from
No one has figured out how to predict change in the mar- Kotter, J.P., & Heskett, J.L. (2006). Corporate culture and
ketplace very well. What we can predict, however, is that performance. New York: The Free Press.
the pace of change will continue, even under good eco-
nomic conditions. Organizations that are likely to do well McKinsey Global Institute. (2007, October 20). Financial
over the long term will be the innovative organizations globalization’s new power source. The Wall Street Journal,
that create and deliver a winning strategy. The economic p. A2.
meteor has struck, and most organizations are probably
dinosaurs. Pascale, R. (2000). Surfing the edge of chaos: The laws of nature
So how do organizations avoid this fate? Size is no and the new laws of business. New York: Three Rivers Press.
guarantee. We have already seen many brontosaurus-
sized companies go extinct. But using an approach simi- Peters, T.J., & Waterman, R.H. (2004). In search of excellence:
lar to the one described here provides some hope: Lessons from America’s best-run companies. New York:
HarperCollins.
1. Examine your strategy using the six tools presented.
2. Modify it as needed. Rummler, G.A. (2007). Serious peformance consulting according
to Rummler. San Francisco: Pfeiffer.
3. With the new strategy in mind. conduct an audit of the
innovative practices of your organization’s culture. Senge, P.M. (2006). The fifth discipline: The art and practice
4. Focus on those that are not sufficiently demonstrated, of the learning organization. New York: DoubleDay
and give people feedback on their and their team’s Publishing.
performance.
Tosti, D., & Jackson, S. (1994, April). Organizational align-
And have lots of luck. ment: How it works and why it matters. Training, pp. 58–64.
DONALD TOSTI, CPT, PhD, is the founding partner of Vanguard Consulting. He has an extensive
and varied background in management and for three decades has been a recognized expert in
performance-based approaches to organizational effectiveness. He has received ISPI’s top two hon-
ors: Member for Life and the Thomas F. Gilbert Distinguished Professional Achievement Award. He
served as ISPI president in 2004–2005. He has been involved in a wide range of organizational
alignment and change programs for companies in the United States, the Middle East, and Europe.
His consulting activities include work in leadership, management, culture change, strategic alliance,
training, and internal marketing. He has also written numerous book chapters and articles on
human performance technology and its application in today’s business world. He may be reached at
Change111@aol.com.