"Organizational culture" is something plenty of people are puzzling over today, and with good reason. More and more leaders are realizing that the culture permeating and guiding their organizations will determine whether they succeed or fail.
The term “organizational culture” refers to an alignment between two forces inside an organization: values and behaviors. Aligning those forces productively is one of the most difficult and important tasks facing leaders today.
Customers and partners routinely tell me they want to create a "culture of innovation" in their organizations. By this, they usually mean that they want to create contexts where certain actions—those that generate new and unforeseen sources of value capable of fueling growth—are not only expected but also commonplace.
I certainly understand why. Today, a culture of innovation is a strong indicator of an organization's ability to weather the kinds of constant disruption nearly every industry seems to be experiencing. But creating one is easier said than done.
Here's how I'd recommend an organization approach that challenge.
A new method
One method for creating a culture of innovation involves focusing on how your organization treats both feedback and failure.
In innovative organizations, feedback is continual and frank—in other words, it’s open. Dialogue about ideas associates raise must be ongoing, constructive, and, above all, honest.
To foster innovative environments, leaders must model the kinds of feedback behaviors they want to see in their teammates and associates. They need to be open to even the most difficult conversations.
Innovation is one product of creativity. Despite the way we tend to think about it on most days, creativity is very difficult; it’s the product of intense collaboration and sharing. Actually, Ed Catmull and Amy Wallace discuss creativity this way in their book Creativity, Inc. Innovative teams and organizations, they say, must have some way to simply separate the wheat from the chaff—to simply call a bad idea a bad idea—and move forward. Creating a culture of respectful, frank disagreement is key to this. The opposite of this kind of culture is one where feedback is a rarity—or, worse, where it's only positive (as I wrote in The Open Organization, it's possible for organizations to be “terminally nice”).
One of the things people receive feedback about is their failures. But cultures of innovation take a specific approach to failure: They celebrate it.
Without question, being innovative involves taking calculated risks. People in innovative organizations must feel like they can try something novel and unexpected without fear of intense, negative blowback—otherwise, they'll never attempt anything new.
Traditionally, we've treated failure as a sign of personal failing: Someone faced with a tough choice didn't make the "right" decisions, so we need to punish the behavior that led to a certain outcome.
But in cultures of innovation, where everyone is expected to experiment, how can anyone possibly know what the "right" and "wrong" decisions will be if the problem is so new that few people have any concrete experience with it?
Instead, I like to think about failure the way Jeff Bezos once described it in a letter to Amazon shareholders. He said:
Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there . . . Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you're still going to be wrong nine times out of ten. We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs.
The trick to making this approach to failure an organization’s default approach is changing the way we think about evaluation.
Traditional management is management by objective. It examines outcomes to see if they've aligned with expectations someone set out before undertaking a task. If these don't align, then someone, somewhere, has failed—and that's a bad thing.
In innovative cultures, however, we need to balance that approach with one that actually rewards failure. Leaders must be able to encourage certain motivations, which are a key source of innovation. They're not as overt or quantifiable as outcomes, however, which is why traditional management theory struggles to account for them.
How can leaders assess people who might have failed, but who've demonstrated exciting new ideas and approaches along the way? And how can they encourage others to actually emulate those people?
If you can get there, you'll know you have a culture that rewards risk-taking.
A focus on structure
This approach to creating a culture of innovation isn't a foolproof and complete plan for changing the way your organization functions today. I don't think such a comprehensive plan actually exists (if it does, please let me know!).
But I do believe that focusing on the organizational structures that govern approaches to feedback and failure is a promising way to begin—much better, anyway, than simply telling people to "be more innovative."
This article is part of The Open Organization Guide to IT culture change.
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