Organizations can teach themselves to grow.
Nearly every organization has rightfully made innovation a priority, and management journals dedicate significant column inches to how to manage innovation. But Joaquín Alegre, associate professor of management at the University of Valencia, and Ricardo Chiva, associate professor of management at Jaume I University in Castellón, Spain, argue that before you can innovate effectively you have to prepare your organization to be open to innovation by creating a learning organization. In their 2007 working paper, “Gaining From Organizational Learning Capability,” the authors tested key organizational characteristics discussed in the secondary literature as potential drivers of learning and innovation. They identified the most important characteristics required to create a high performing and innovative organization. The authors collected survey data from June to September 2004 regarding the European Union’s ceramic tile sector. This sector was selected because of its multinational presence and its dependence on both process and product innovation. By selecting a single industry, the authors hoped to eliminate any bias from intersectional studies. Examination of the data revealed that organizations that were above the mean in innovation performance were also above the mean in several organizational learning skills identified in the secondary literature. Given the connection, it is possible for an organization to measure its organizational learning capability and determine its strengths and weaknesses. The authors identify five key characteristics of high OLC organizations: experimentation, risk taking, interaction with the external environment, dialogue and participative decision making. Experimentation is the degree to which new ideas and suggestions are dealt with sympathetically by the organization. It includes searching for innovative solutions to problems using distinct methods and procedures. Experimentation produces a flow of ideas and proposals that challenge the established order and is a manifestation of the creative environment. Organizations that are innovation-resistant tend to have rigid management structures that are not open to these types of challenges. The second characteristic of high OLC organizations is risk taking, which is essentially the tolerance for ambiguity, uncertainty and errors. The risk-taking organization understands the value of learning from both successes and failures. Risk-averse organizations tend to miss the opportunities that come from risk and fail to see that the nature of innovation requires some uncertainty. Even among organizations with high OLC, risk taking is the least exercised aspect of learning. When assessing their own skills, companies scored their risk taking the lowest among the five key characteristics.