The leadership needs to understand the balancing act of management – the yin-yang of innovation culture is not an exception, but a rule.
Let me start this article with a few lines I wrote in the recent two articles titled ‘Innovation Strategy: Need of Alignment with Business Strategy’ (Vol 2, Issue 6, Falgun 2079) and ‘Being an Innovative Organization: Avoid These Mistakes’ (Vol 2, Issue 7, Chaitra 2079) in this magazine.
“Given the leadership understands the value of ‘being an entrepreneurial organization’ and keeps ‘innovation’ in its strategic priority, two major aspects need to be consolidated in an organizational system and culture before creating and running the innovation process engine within the organization. One, the organization needs to be transformed to be an innovative entity. It needs to go through a deeper level metamorphosis, or even serious genetic engineering of its seven Ss (Shared Values, Style, Strategy, Systems, Structure, Staff and Skills – Ref: McKinsey 7-S Model – Developed in the 1970s by Tom Peters and Robert Waterman, former consultants at McKinsey & Company).
The leadership should be willing to change the DNA of the organization and evolve to be a new nature of organization all together.
Unless leadership is willing to change its mindset, organizational culture and integrate ‘innovation’ within its value system, nothing effective will result.
They should change their mindset, culture and processes at the same time to fix the problem of falling into the ‘success trap’ and ‘path dependency’.”
The point I wanted to emphasize is – an organizational culture conducive to innovation is the sine qua non of ‘being an innovative organization’. While informally surveying my clients, corporate trainees, and students of MBA, I have not come across a single incidence where even one of the individuals ever said that they do not want to work in an organization where ‘innovation’ is part of the desired employee behavior and organizational culture. The reasons for their interest and factors playing a role in innovative cultures they cite are fun, freedom, flexibility, fellowship, and flatter organizations. While describing the basics of such innovative culture, I’ve found that most of them cite common factors like high risk-taking propensity manifested into tolerance to failure, encouragement for experimentation; collaborative work culture, an environment that encourages cross-pollination of ideas, flatter organization, etc. Easier said than done.
Imagine fun without result, freedom without responsibility, flexibility without discipline, fellowship without accountability and flatness of organization without leadership – it’ll be a total chaos. Innovative culture is hard to create and sustain within an organization. When it comes to execution, it can get puzzling and even paradoxical, even to the best of the corporate leaders. The major reason is innovative cultures are misunderstood. The tensions created by such puzzles and paradoxes need to be balanced and managed well; or else, all the efforts put on to create an innovative organization go to waste and sometimes, even be perilous.
There is no doubt that an innovative culture means a great tolerance for failure. Innovation cannot be achieved without wandering into unknown territories. Uncertainty, risk and failures are another side of the coin with the favorite side being innovation. Giant innovators like Apple, Google, Amazon and Facebook, all had their share of failures. However, they all have one thing in common along with tolerance towards failure – intolerance towards incompetence. They set extremely high standards of performance – performance par excellence. They recruit the best of the talents and their performance management system is highly rigorous. Anyone delivering below-standard performance is either replaced or relocated.
Many ‘wanna-be-innovative’ companies fall short in setting high standards for competence and performance. In many cases, their family-like ‘shy to fire’ value system comes in the way of trying to be innovative. Such organizations end up nurturing the ‘goodie-goodie’ culture but will never achieve the desired target of innovativeness. In fact, such organizations may even end up failing in the long run, not because of the lack of good culture, but the lack of aim, acumen and standards of performance. Subpar performance standards and tolerance towards failure can never be parts of the same innovation recipe.
Failures can teach us valuable lessons, but that requires solid discipline and high standards of competence and performance. Otherwise, failures can also be the result of a lack of competence and lax performance. It can be the result of badly done market research, flawed analyses, poor design, derailed customer centricity, etc. Only a company that is very confident of the competence of its human resources can afford the tolerance towards failure.
It needs a high level of competence and obsession towards high-performance standards in order to be able to learn through failures. Productive failures need to be defined and differentiated from unproductive ones by the leadership. Productive failures yield benefits in terms of business intelligence, while unproductive ones create information and performance liabilities. A culture that celebrates learning needs to be established and nurtured, not the ones that celebrate failures. Imagine a new product design fails and the organization learns about the never ever known technical glitch in the product architecture – that is what we can call a productive failure. That is what needs to be celebrated. A launch of a badly designed product without much to learn or yielding to the repetitive reflective mistake is an expensive proposition for an organization – that is what we can call an unproductive failure.
Leadership should clearly articulate the standards of performance and better such standards be high, if the organization wishes to establish a culture with the right alignment and understanding of ‘tolerance towards failure’. Difficult human resource decisions can sound arbitrary or even be misunderstood as a penalty for failure, in the absence of integration of culture manifested with a clear understanding of the high standards of performance. Leadership should clearly communicate and explain the expectations of performance and competence regularly. The natural deduction of it is that the hiring standards should be raised. Sometimes, that may cost the speed of growth of the company in short term.
Organizations while shifting their business model or products/ services to the level of radical, architectural, or disruptive innovation, may find certain competencies in some human resources irrelevant to the new context. In such cases, the ‘incompetence’ is just due to a change in the context and new business proposition. Leadership finds it quite uncomfortable to fire or relocate people for such reasons. However, the organization, in such cases can either find a new role fitting the existing competence or invest in developing the relevant competence in the human resource. The second option is quite difficult though. The balancing act between ‘wanting to be innovative’ and ‘wanting to be humane’ can sometimes take a toll on the leadership. However, even in such cases, the high standards of competence and performance integrated into the culture can make people fast learners and make them ready for the new and changed context of the innovative business model or product/ service.
Yet, there can be situations where both options (finding a new role and developing relevant competence) would not work for certain human resources. Retaining such obsolete competence would earn the organization the title of ‘humane’, but it will have to ultimately pay the price for the same. The astute balance between firing incompetence and tolerating productive failures is difficult to strike. One of the reasons is that the causes of failure are not always clear. Was it a product engineer or a brand manager? Was it a brand manager or a salesperson? Was it a salesperson or promotional content? Was it promotional content or a decision of product line addition? What if the product engineering was perfect, but the product should never have even been introduced in the market as it did not cater to the proper need of the consumers? Penalizing product engineers in the name of a lack of high standards of competence would be a lethal decision. Leadership needs to clarify how we define the levels of ‘appropriate consequences’ of failures.
What is the fine line that differentiates between forgiveness and permissiveness? And what is that fine line that does not get devolved while setting high-performance standards into failure to treat employees fairly – regardless of their performance? There are no easy answers. Yet, the solutions are quality leadership and a clear innovation strategy.
Changing the culture is equivalent to breaking the social contract. That definitely leads to resistance within the organization. Innovative cultures require a combination of seemingly contradictory behaviors, they risk creating confusion. While certain behaviors required for innovative cultures are relatively easy to embrace, others will be less palatable for some in the organization. However, the piecemeal fashion of implementation of only one dimension of the culture does not work – innovative cultures are systems of interdependent and contradictory behaviors. Hence, the leadership needs to understand the balancing act of management – the yin-yang of innovation culture is not an exception, but a rule.
In order to bring about cultural changes aiming towards innovativeness within the organization requires some solid actions. First, leaders must explain the harder realities of innovative cultures, especially, the paradoxical aspects of it. Second, they must recognize that it takes a village and a century (not literally though) to create an innovative culture.
Restructuring, re-engineering, spin-offing various independent units, etc. kind of actions rarely works. Such actions may be interim requirements, but not sufficient conditions for making an organization innovative. They may create confusion between scaling up and cultural changes. Without shaping values, norms and behaviors, such actions cannot magically do wonders, making organizations innovative and entrepreneurial within months. Finally, leaders need to learn the act of counterbalancing the contradictory requirements of innovative culture within the organization – balancing the tensions and counter tensions between the necessities of having fun and delivering results, devouring freedom and willfully bearing responsibilities, enjoying the flexibility and inculcating self-discipline, fruiting fellowship and taking accountability seriously and flattening of organization and having towering leadership.
Khatri is a Management Consultant and Educator.
