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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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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.”