Six Essentials to Cultivating an Innovation Culture

A decade ago, I was invited to coach a group of Nokia’s fast-rising superstars. Thirty-five “high potential” managers flew in to Palo Alto, assessment-3California to network, sample local wines, and focus on innovation. At the time, Nokia seemed unstoppable. Growth was in the double digits. “The company sells five phones every second,” gushed Fast Company in a profile. “Their global market share, 38 percent, is greater than that of their nearest three rivals combined, and boasts a 50 percent share in Western Europe.” What could possibly go wrong? Cultivating an innovation culture is essential to success.

You can imagine my surprise when I surveyed the group beforehand, and discovered a much different culture than the one portrayed by the press. Risk-adverse, top down, capable only of incremental innovation, were frequent comments. “Large corporation syndrome” has set in, one manager reported. Failure is punished here, claimed another.

The biggest surprise came when I asked the class a question. If someone on your team has an idea, what do you want them to do with it? One participant couldn’t hold back. “I’d just tell them to forget about it,” he blurted out with evident frustration. “You’re only going to beat your head against the wall.”

At the time, I brushed off these comments as overly critical. Like everybody else, I assumed Nokia would continue to dominate the mobile market. But two years later, Apple released the iPhone. And Nokia began its spectacular crash. These days, I often use my list of Nokia Innovation Barriers (see below) as a cautionary tale. The company’s growth and strong brand had covered many sins, but did not protect it in the end. Nokia’s engineer-dominant, left-brain, execution-driven culture was no match for a right brain, esthetic and emotion-based attack from a new market entrant (Apple).


A decade ago, cultivating a culture of innovation was a “nice to do” activity. Today it is becoming a “must do” discipline for organizations that want to be around tomorrow. Here are six essential steps to cultivating an innovation culture:

1. Understand what an innovation culture is, and why it’s essential to work on improving it. Culture refers to the values, unspoken rules and subtle cues that guide people’s behavior and suggests how they should act within your environment to be effective. Culture is heavily influenced by an organization’s leadership. If risk-adverse, just-make-your-numbers behavior is rewarded by leadership, this message cascades to the far reaches of the company. But when a disruption starts to occur, the culture will ignore it or deny its existence until it becomes a full-blown crisis. By then it may be too late. Unless you’re working constantly to improve your culture, it will inevitably veer toward the kinds of behavior that Nokia’s high potentials revealed.

Before you start trying to improve your culture, you must first figure out what behaviors your organization genuinely rewards and sanctions. Then ask: is this the type of behavior that will help us meet the goals we’ve set and the market challenges we face? My strong suggestion is that leadership must spell out the behaviors you want more of, and catch people exhibiting them, and reward them in every way. Reward the mid-manager who emails the chief a disturbing story from the front lines where your product was no longer competitive. Compliment the millennial generation employee who speaks up in the meeting and asks an assumption-assaulting question. Laud the salesperson that rents the truck and drives through the night to personally deliver the customer’s order after a snafu. Reward the receptionist who contributes the most ideas to your Innovation Portal. Share stories that illustrate the desired behaviors, and make these people heroes. Behavior that gets rewarded gets repeated.

2. Put somebody in charge of cultivating the culture. Studies by Booz & Company show that companies with “highly aligned innovation strategies and highly aligned cultures generate 30 percent higher enterprise value growth and 17 percent profit growth.” All well and good, but in most companies, nobody is in charge of creating and maintaining an innovation culture, much less in aligning it with an the organization’s strategy. It is a colossal mistake to assume that the human resources department, just because it is in charge of people, should perform this role. My experience is that they are ill-suited for this role. Instead, I have long advocated a systematic approach to innovation whereby innovation strategy and culture alignment become the responsibility of the firm’s chief innovation officer.

3. Periodically assess the climate for innovation. There are a lot of things a company can do for itself, but understanding your culture’s strengths and weaknesses is not one of them. “There’s a rumor around here that we punished someone for failure,” said the division chief of a major chipmaker. “But we don’t have a clue what they’re talking about.” Surveying employee engagement has become commonplace in recent years, but a workforce can be engaged and still be anti-innovation and risk-adverse. Climate surveys enable you to objectively assess such cultural essentials as: the level of trust people feel towards each other and towards management; amount of collaboration across functions and silos; receptivity to new ideas; availability of resources among other attributes. Pay attention to gaps that exist between where people rate your company on an attribute, and how important they judge that trait to be. And make sure to contrast your company’s results with how a sample of other innovation Best Practice companies perform on these attributes before you seriously start thinking of launching a company-wide innovation initiative. The value of periodic assessment is that it gives you an objective pulse of how your people are feeling about the climate for innovation today, and enables you to gauge progress in your journey to cultivate a more open climate.

4. Make innovation a part of everybody’s job. Until recently, innovation was considered the responsibility of the R&D department, new product development, or the marketing team. Few companies included mention of creative initiative when assessing individual performance. Today more and more firms expect employees to operate from the principle that innovation is not what you do after you get your work done, it’s how you approach your work day-to-day. There’s growing recognition that a firm’s next breakthrough might arise from the supply chain arena, from a new manufacturing method, from entering a new market or championing a new business model. Progressive companies are training their high potential contributors not only to meet their numbers and be operationally excellent, but in the mindset, skillset and toolset of innovation. Some are even creating early warning systems to apprise them of asymmetrical threats such as Nokia faced. In our two day master classes for standout managers, topics include: How to spot opportunities in changing customer requirements; disrupt or be disrupted; how to lead change initiatives: how to sell new ideas up, down and sideways; and how to set expectations in the case of high-risk ventures or business models. Experience in this realm is becoming the biggest resume-builder, rather than avoiding high profile but “risky” projects.

5. Incentivize and reward broad-based innovative thinking. Why would anybody in their right mind volunteer to work extra hard to bring an idea to life if the result might be getting fired if things don’t work out as planned? The risks must always be born by the organization, and not the individuals involved. My experience is that in the vast majority of organizations there are abundant disincentives, but few incentives strong enough to encourage people to take risks. Recognition via salary increases and promotions are not usually enough to change behavior day to day. To change behavior, change the rewards, dinner for two to a nice restaurant, a bit of time off after completion of a major task, a handwritten note from the chief.

6. Improve the work environment. Innovate solutions to things in the office that waste people’s time. Eliminate policies and procedures that annoy people. Pay attention to enhancing the physical environment. Install white boards in all conference rooms. Hold meetings to exchange information, and brainstorming sessions to surface new possibilities. Set the example. Seek constructive feedback on your performance from the people who report to you. Ask continuously: how can I improve? Do you feel I am listening to you? Focus on improving communication skills. Change meetings by encouraging people to ask different questions. Invite people to think big. Say something like, “Guys, I think we’re getting in the weeds here. Reframe the question. During one brainstorming session with a client, the question “how can we increase productivity” got few responses. But when the question was changed to: “how can we make your job easier” ideas poured forth. If one of your top barriers is “lack of time to think” plan a “No Meetings Friday” and invite people to use the day to think up new ideas. Give out an award for the best ideas received.