How To Create a Culture of Innovation

July 6, 2009  

I define innovation as an “organization’s ability to adapt and evolve repeatedly and rapidly to stay one step ahead of the competition.” A culture of innovation, when done right, gives you a competitive edge because it makes you more nimble with an increased ability to sense and respond to change.

A culture of innovation has less to do specifically with new products, new processes, or new ideas. There are of course discrete innovations such as the iPhone or a battery that is powered by viruses (MIT has developed this). These are valuable and necessary in order to create a culture of innovation.

But a culture of innovation is more than new ideas. It needs to be repeatable, predictable, and sustainable.  This only happens when you treat innovation like you treat all other capabilities in your business.  This means having, amongst other things, a defined process.

An organization’s innovation process must achieve three things.  It must:

  • focus on the “right” challenges
  • find appropriate solutions to those challenges, and
  • implement the best solutions.

These translate into three “portfolios” an organization must create:

  • A portfolio of challenges
  • A portfolio of solutions
  • A portfolio of projects

Let’s take each one at a time.

A Portfolio of Challenges

All companies have challenges. They can be technical challenges on how to create a particular chemical compound. They can be marketing challenges on how to best describe your product to increase market share. They can be HR challenges around improving employee engagement.

An organization’s ability to change (i.e., innovate) hinges on its ability to identify and solve challenges. Challenges are sometimes referred to as problems, issues, or opportunities. But at the end of the day, they are all just various forms of challenges. I will use these terms interchangeably here.

Where do you find these challenges? You can find them anywhere – from customers, employees, shareholders, consultants, vendors, competitors, and the list goes on.

Let’s face it, companies have no shortage of challenges.

And guess what, some of the most important challenges to solve are hidden due to organizational blind spots and assumption-making.

The “meta-challenge” for all organizations is to find which challenges, if solved and implemented, will create the greatest value. Given that organizations have limited resources and money, prioritization is critical.

My favorite quote (used many times in this blog) comes from Albert Einstein – “If I had an hour to save the world, I would spend 59 minutes defining the problem and one minute finding solutions.” Most companies spend 60 minutes of their time finding solutions to problems that just don’t matter.

Therefore, the first step in creating a culture of innovation is to surface, identify, and codify challenges. And then you must become masterful at valuing, prioritizing, and framing these challenges.

Think of your innovation portfolio much like you would handle a financial investment portfolio.  You want some safe bets (incremental innovation) and some riskier investments (radical innovation).  You also want a variety of innovations ranging from technical challenges to marketing challenges, and service challanges to performance improvement challenges.

Once you have the right challenges to solve, the next step is to find solutions.

A Portfolio of Solutions

Every challenge has multiple potential solutions. And there are multiple ways in which to find these solutions.

Some challenges are solved in the moment by the person who thinks them up. Most challenges in fact are solved this way.  These challenges tend to be “unarticulated” in that they are not presented to the organization as a problem to solve.

Other challenges are more complex and require specialized expertise. You need to find the right person(s) with the right knowledge.

Others require less technical expertise and are solved through creative thinking.

For each challenge, you need to first determine which mechanism would best yield a viable solution. Approaches include, but are not limited to…

  • Internal Individual/Team: This is the most common way challenges are typically solved. This is when you use internal resources whose job is to solve these types of challenges. For example, this would be the development team members assigned to a particular product.  They are paid to solve their product development challenges.  Brainstorming is often the tool of choice.
  • Internal Crowdsourcing: Sometimes the best solutions are found by people who typically do not work on this problem. It might be a customer service representative finding a great new branding idea. Or maybe it is tapping into R&D people who are in different parts of the organization.  Sometimes this can be achieved through company-wide competitions.  Read my article on how reality TV show type competitions can be used to stimulate creativity.
  • Outsourced (External Single Source): Some challenges can be solved (and potentially implemented) by a third party who takes ownership for delivering the result. Typically, outsource partners are found through some type of RFP process. eLance.com is a well-known example of a platform that matches specific challenges with bidders who are able to solve specific types of problems.
  • External Crowdsourcing: Some challenges are best solved by a diverse group of external solvers who can independently work on a solution to your problem. In some circles, this is referred to as Open Innovation. InnoCentive and 99Designs.com are two good examples of this. A challenge is posted and solutions are provided by a wide variety of solvers.

These are only a few of the many approaches. If one technique (e.g., internal team) does not yield a workable solution), try a different approach (e.g., external crowdsourcing).

Regardless of which technique(s) you use, the result will be a portfolio of solutions for the given challenge.  Depending on the technique you use, you may end up with a low signal to noise ratio.  This is the ratio of a signal (what you want – that is, good ideas) to the noise (what you don’t want – the duds).  Your success is often based on your ability to separate the wheat from the chaff.

The next step is to strengthen and select the best ideas, combining them into a comprehensive solution. If you find a solution that works, the next step is to implement.

A Portfolio of Projects

The final attribute of a culture of innovation is the ability to take all of the selected solutions and turn them into programs/projects so that they can be converted from ideas into reality.

Elsewhere on this blog, I discuss many different ways of making this happen. Some of them include “Build It, Try It, Fix It” – an iterative development process where you learn by doing rather than analyzing. Other more “waterfall” type development approaches are more linear and rely heavily on analysis and testing (analyze, design, build, test, deploy).

Regardless of how you implement, without this step, you end up with lots of ideas on the cutting room floor, none of which create value.

During implementation, it is critical that you keep track of the value proposition for each project, having the courage to change direction, or, in some cases, killing ideas altogether.

Bottom Line

A culture based on surfacing, solving, and implementing valuable challenges can make innovation repeatable and predictable.  This requires more than just a process, it requires an entire innovation capability [read my perspectives on the innovation capability].

My mantra is, ” When the pace of change outside your organization is faster than the pace within, you will be out of business.” And as we all know, today’s pace of change is crazier than ever.  A culture of innovation, when done right, can give you a leg up in a highly evolving marketplace.

P.S. There are many different “techniques” that can be used at each stage of the process.  Communities, social networks, customer-feedback systems, etc.  These will be addressed more fully in future articles.

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18 Responses to “How To Create a Culture of Innovation”

  1. Jim MacLennan on July 6th, 2009 1:02 pm

    A related story from last year (http://bit.ly/1DhK6I).

    I like how you’ve identified the three portfolios; IT groups should be able to identify portfolios of Projects and Solutions, but it takes some insight to effectively help the business see the Challenges.

  2. Twitted by ldguymn on July 6th, 2009 2:36 pm

    [...] This post was Twitted by ldguymn [...]

  3. Stephen Shapiro on July 6th, 2009 3:53 pm

    Jim, thanks for the comment. As you point out, I think the challenges part is the biggest challenge. Becoming masterful at this is one of the keys to success.

    I look forward to taking a look at your article.

  4. Creating Innovation on July 8th, 2009 8:27 am

    A very indepth article on Innovation.

  5. Twitted by vickysita on July 9th, 2009 3:31 am

    [...] This post was Twitted by vickysita [...]

  6. Surf’s Up: Top Creativity Links for July 11, 2009 « Creative Liberty on July 11th, 2009 1:29 pm

    [...] How To Create a Culture of Innovation [...]

  7. Paul White on July 15th, 2009 7:58 am

    You are so right in placing the initial emphasis on innovation on the culture of an organization. Culture – or climate – comes first. Without a culture which supports innovativeness, it is unlikely that any attempt at idea creation or idea management will be successful or as successful as it should be. Just look at the culture for innovation at 3M, P&G, for example. You find that culture is multi-dimensional and not based on one significant corporate practice.

  8. It’s Official! | Business Innovation Speaker and Consultant Stephen Shapiro on July 15th, 2009 12:16 pm

    [...] I am assembling a team of innovation experts who want to change the world using a challenge-based approach.  If you are interested, please send an email to me at steve (at) 24-7innovation (dot) com. Please [...]

  9. Business Genome on July 20th, 2009 12:17 pm

    Thanks for this post Steve. I think that you’re really onto something with your idea that “when the pace of change outside your organization is faster than the pace within, you will be out of business.” I think one of the reasons that companies are getting outpaced is because there is a ton of information out there to help companies innovate themselves, but there’s no easy way to access and utilize that information. We’re in the process of developing a tool that would help organize some of that “information to innovate,” which we hope will help companies better understand their next step.

  10. Leadership Link Round-Up: July 20-24 | Samuel Bacharach Blog on July 25th, 2009 9:15 am

    [...] Creating a culture of innovation is essential. Here’s a great way to start. [...]

  11. Toby Elwin on August 20th, 2009 11:55 am

    I appreciate the portfolio view of options and the connection that talent culture and motivation drive financial results.

    I have practiced and advocated many of what you lay out; I am an advocate. I continually challenge myself to link talent and innovation to financial drivers and business results. Because if I do not link these to business results I am only a theorist, not a business partner.

    Thanks for the post, an introduction to you, and the really fascinating work at InnoCentive.com.

    I welcome continued conversation on my business blog: http://blog.amajorc.com

  12. Chris Sparshott on October 13th, 2009 11:19 pm

    I am wondering which tools innovation consultants and the like use to drive innovation and culture change in the (i) enterprise (ii) small businesses.

    All your thought are appreciated,

  13. uberVU - social comments on March 11th, 2010 1:54 am

    Social comments and analytics for this post…

    This post was mentioned on Twitter by chuckfrey: What’s needed to create a culture of innovation? Among other things, a sustainable, repeatable process: http://tr.im/r6Co

  14. Measures: Will You Get What You Want? | Business Innovation Speaker and Consultant Stephen Shapiro on May 10th, 2010 10:19 am

    [...] general, there are three types of measures associated with “challenge-based” innovation (be sure to read this article if you are unfamiliar with the concept of [...]

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