Magazine Spring 2013 Research Feature

How Innovative Is Your Company’s Culture?

Many executives want their companies to be more innovative. A new assessment tool can help pinpoint your company’s innovation strengths and weaknesses.

Jay Rao and Joseph Weintraub Reading Time: 10 min 

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Image courtesy of Flickr user reway2007.

Today’s executives want their companies to be more innovative. They consume stacks of books and articles and attend conventions and courses on innovation, hoping to discover the elixir of success. They are impressed by the ability of comparatively young companies such as Google and Facebook to create and market breakthrough products and services. And they marvel at how some older companies — Apple, IBM, Procter & Gamble, 3M and General Electric, to name a few — reinvent themselves again and again. And they wonder, “How do these great companies do it?”

After studying innovation among 759 companies based in 17 major markets, researchers Gerard J. Tellis, Jaideep C. Prabhu and Rajesh K. Chandy found that corporate culture was a much more important driver of radical innovation than labor, capital, government or national culture.1 But for executives, that conclusion raises two more questions: First, what is an innovative corporate culture? And second, if you don’t have an innovative culture, is there any way you can build one? This article addresses both questions by offering a simple model of the key elements of an innovative culture, as well as a practical 360-degree assessment tool that managers can use to assess how conducive their organization’s culture is to innovation — and to see specific areas where their culture might be more encouraging to it.

Six Building Blocks of an Innovative Culture

An innovative culture rests on a foundation of six building blocks: resources, processes, values, behavior, climate and success. (See “The Six Building Blocks of an Innovative Culture.”) These building blocks are dynamically linked. For example, the values of the enterprise have an impact on people’s behaviors, on the climate of the workplace and on how success is defined and measured. Our culture of innovation model builds upon dozens of studies by numerous authors. (See “About the Research.”)

When it comes to fostering innovation, enterprises have generally given substantial attention to resources, processes and the measurement of success — the more easily measured, tools-oriented innovation building blocks. But companies have often given much less attention to the harder-to-measure, people-oriented determinants of innovative culture — values, behaviors and climate. Not surprisingly, most companies have also done a better job of managing resources, processes and measurement of innovation success than they have the more people-oriented innovation building blocks.

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About the Authors

Jay Rao is a professor of technology and innovation at Babson College in Babson Park, Massachusetts. Joseph Weintraub is a professor of management at Babson College.

References

1. G.J. Tellis, J.C. Prabhu and R.K. Chandy, “Radical Innovation Across Nations: The Preeminence of Corporate Culture,” Journal of Marketing 73, no. 1 (January 2009): 3-23.

2. D. Rock, “Managing With the Brain in Mind,” Strategy + Business no. 56 (autumn 2009).

3. S. Thomke and A. Nimgade, “IDEO Product Development,” Harvard Business School case 9-600-143 (Boston: Harvard Business School Publishing, 2007).

4. J. Rao, “W.L. Gore: Culture of Innovation,” Babson College case BAB698 (Babson Park, Massachusetts: Babson College, 2012).

5. Jim Lavoie, Rite-Solutions’ founder and CEO, was awarded the 2012 Harvard Business Review/McKinsey M-Prize for Management Innovation. For more information on the company, see H. Rao and D. Hoyt, “Rite-Solutions: Mavericks Unleashing the Quiet Genius of Employees,” Stanford Graduate School of Business case HR-27 (Stanford, California; Stanford Graduate School of Business, 2006).

6. J. Rao, “Speaking the Lingua Franca of Innovation,” IESE Insight no. 14 (third quarter 2012): 13-19.

7. Confirmatory factor analysis revealed that 16 out of the 18 factors were reliable at 0.7 or above; the other two were above 0.6. A complete item analysis showed that item discrimination was 0.3 and above.

8. J. Katzenbach and A. Harshak, “Stop Blaming Your Culture,” Strategy + Business no. 62 (spring 2011).

i. See C.M. Christensen, S.D. Anthony and E.A. Roth, “Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change” (Boston: Harvard Business School Press, 2004); E.H. Schein, “The Corporate Culture Survival Guide” (San Francisco: Jossey-Bass, 2009); G. Hofstede, “Culture and Organizations: Software of the Mind” (New York: McGraw-Hill, 1991); G. Hofstede, “Attitudes, Values and Organizational Culture: Disentangling the Concepts,” Organization Studies 19, no. 3 (May 1998): 477-493; C. O’Reilly, “Corporations, Culture, and Commitment: Motivation and Social Control in Organizations,” California Management Review 31, no. 4 (summer 1989): 9-25; D. Denison, “What Is the Difference Between Organizational Culture and Organizational Climate?,” Academy of Management Review 21, no. 3 (July 1996): 619-654; and Tellis, “Radical Innovation.”

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Comments (9)
Jay Rao
Hi Hasan, Thanks for your comment and question. The assessment is copyrighted. If you want to know further options, please check out www.innoquotient.com. Jay
Hasan Ali Polat
Great article, am I allowed to use the tool with my clients to assess their current state & define areas for change management work ?
ncrl
I am working in a government agency that helps enterprises improve their operations.   Will it be possible for us to use the diagnostic tool to determine the readiness of a potential organization to innovations?
John Aboud
"Nothing changes if it is not measured."  The article's greatest contribution and leap forward is the quantification, via the survey, of the elements of innovation and providing a pathway for enhancing innovation. It's not good enough to ask for innovation or even demand it.  Executives who truly desire innovation must get a handle on the elements of innovation as they currently exist, and assess strengths and weaknesses of the elements (building blocks) that lead to enhanced innovation.  Using this survey can provide the data needed to plan a course of measurable action that can lead to a better future.  A very practical hard-nosed approach.
Jay Rao
Hi Ludmilla, Thanks for your interest. You can email me at rao@babson.edu or my co-author weintraub@babson.edu.
LUDMILLA SALONDA
This is a very useful article for change managers who desire to affect effective change informed by a 360 view of the organization.  Where do I go to get permision to use the diagnostic tool to assess where my organization is really at ?
Kannan V
Very good article and brings out the need for various elements to be in place if you are a successful innovator.
However, challanges in innovation are different in a product organization and a services organization.  In a services organization often the mandate would be to innovate or carry out a continuous improvement program on your customers process set or ways of working.  
Sometimes they are contractual with or without gain sharing.  One of the additional key element that I see here is "Maturity in the customer relationship".  
Should additional building blocks be added for the services industry to be innovative ?
Very interesting article and need of the hour.
Jayakumar.K.M. Nair
During my corporate days, i was one of those who promulgated the truth that Soft one is the hardest one. Even now I strongly support the thought. 
Innovation essentially should come from within the organisation and the people who are actively lifting the company to higher platforms. Look around the global scene now. The world is growing really fast ( there is also another thought process parallel to it saying that the world is shrinking fast !) . That is the challenge to the CEO and his team. The sunshine is there, but then how to bring it inside. He need to see the genesis of the innovative spririt taking root in his organisation and how it adds value to the company, its product and the people involved.

Good article
J.K.M.Nair
max
Thanks for a valuable article, it reminds me of two points made in The Truth About Innovation (2008). First, innovation is a cultural thing with values, behaviours, climate interacting with slack resources to make new ideas useful (the definition of innovation). Second, that innovation can be measured and that some kind of balanced score card for innovation is a valuable part of the efforts to greater innovation success. One of my more recent books (Adaptability, 2012) argues that it is how innovation helps organisations to successfully adapt that matters most - and this would be a worthy addition to your cultural scale.