We are witnessing an acceleration of innovation across the world, driven by an urgent need to adapt to the current environment. Dominated by innovations in pharmaceutical and healthcare, other innovations in logistics, retail and hospitality, and financial services are gaining ground. New business models, product platforms and new ways of engaging customers are key areas in which companies are innovating these days.
The need to create an innovative culture in organizations has never been more pressing than today, as the culture of an organization can make or break digital transformation efforts. Managing Directors (CEOs) have recognized the need to transform corporate cultures into cultures driven by innovation.
Even before the pandemic, forward-looking business leaders already recognized the need to transform the cultures of their organizations with the advent of the Fourth Industrial Revolution and rapidly changing consumer preferences. This is why in our consulting work, we support companies in their digital and cultural transformation strategies.
One diagnostic tool we use is the Six Building Blocks of Innovation. This framework, proposed by Jay Rao and Joseph Weintraub almost ten years ago, postulates that innovative culture rests on a foundation of six building blocks: resources, process, values, behavior, climate and success.
These building blocks are dynamically linked. “For example, company values have an impact on people’s behaviors, on the workplace climate and on how success is defined and measured,” said Rao and Weintraub.
Values. Values determine priorities and decisions, which are reflected in how a business spends its time and money. Truly innovative companies spend generously to be entrepreneurial, promote creativity and encourage lifelong learning. A company’s values are less what executives say or write in annual reports than what they do and invest. Values are manifested in the way people behave and spend, more than in the way they speak.
Behaviours. Behaviors describe how people act in favor of innovation. For leaders, these acts include a desire to remove existing products with new and better ones to energize employees with a vivid description of the future and to reduce bureaucracy. For employees, actions to promote innovation include relentlessly overcoming technical hurdles, “grabbing” resources when budgets are tight, and listening to customers.
Weather. The climate is at the heart of working life. An innovative climate cultivates commitment and enthusiasm, inspires people to take risks in a safe environment, fosters learning and encourages independent thinking.
Resources. Resources are made up of three main factors: people, systems and projects. Of these, people – especially “innovation champions” – are the most critical because they have a powerful impact on the values and climate of the organization.
Process. Processes are the path that innovations follow as they develop. These can include the familiar “innovation funnel” used to capture and sift ideas or stage gate systems to review and prioritize projects and prototyping.
Success. The success of an innovation can be measured at three levels: external, corporate and personal. In particular, external recognition shows how innovative a company is viewed by its customers and competitors, and whether an innovation has paid off. More generally, success reinforces the values, behaviors and processes of the company, which in turn guide many subsequent actions and decisions: who will be rewarded, which people will be hired and which projects will get the green light.
When we diagnose how innovative an organization’s culture is, we conduct a 54-question organization-wide survey that rates employee perceptions on a scale of 1 to 5 in these six building blocks of innovation. The resulting average score is what we call the organization’s innovation quotient, with 5 being the highest.
So far, we have assessed the culture of several companies in the manufacturing, energy, technology and financial services industries in the Philippines. Highly innovative companies scored higher than 4 – advanced in their transformation – while those in the early and middle stages hover between 3 and 3.9.
What’s interesting is that in all of the organizations we assessed, the tangible, tool-focused building blocks – resources, process, and success – scored lower than the people-focused determinants of the innovative culture. – values, behavior and climate. The latter generally obtain higher scores in companies in the Western world. Does this mean that employees of Philippine companies have the right mindset and behaviors towards innovation, but CEOs and boards underinvest in tools, technologies and methods? Most likely.
That is why, in our consultancy work, we help organizations transform their building blocks from resource-process-success through planning, process audits and innovation programs. Most importantly, we align them with transforming employee mindsets, behaviors and skills – the soft side of innovation – to ensure sustainable and institutionalized culture change.
The author is the founder and CEO of Hungry Workhorse Consulting, a digital and cultural transformation consulting firm. He is Chairman of the Information and Communications Technology Committee of the Financial Executives Institute of the Philippines (Finex). He is a fellow of the US-based Institute for Digital Transformation and teaches strategic management in the MBA program at De La Salle University. The author can be emailed to [email protected]
The views, information or opinions expressed by the author do not necessarily reflect or represent those of Finex and its board of directors.