The innovation equation includes culture and a system

Real change doesn't come solely from overhauling a company's culture. A company must also ensure it has the right system in place.

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In a world where you either innovate or go out of business, advice on how to create a culture of innovation within your company is everywhere.

That’s unsurprising, given that more and more companies feel like they’re falling behind. In the last two years of PwC’s Digital IQ survey of more than 2,200 executives, at least 66% rated their company's’ Digital IQ – or how well an organization can unlock value from technology – as strong. This year, it fell to 52%. (Disclosure: I am a principal at PwC.) And to further this point, PwC’s recently released Innovation Benchmark study of more than 1,200 companies found that 72% of the executives surveyed say they're not out-innovating their competitors, and half (54%) of them struggle to align innovation strategy with business strategy

The trap many executives fall into is reading this advice about a “culture of innovation,” and trying to mandate a top-down overhaul of the company’s social fabric. That’s a system made up of many parts, and it misses how innovation really happens.

You want a culture that allows for free thinking and experimentation, but you won’t be successful if you don’t have the internal system to harness any of the new creativity you unleash.

Not everyone in an organization is an innovator in a specific sense. Many business leaders have taken some kind of strengths test, but not everyone finds out they’re a creative thinker as a result. The Gallup Strengths Finder, for instance, has 34 talent themes, and only a handful are “creative types,” such as Ideation or Futuristic. Many more are Arrangers, Command types, Focus-ers, and Maximizers.

Companies will always need sales teams, supply chain experts, and business development pioneers. The business falls apart without their know-how, and expecting every employee to sit around in bean bag chairs or open floor plans and come up with new ideas distracts from their essential work. But despite every employee not being identified as an “innovator,” they can and should still find ways to contribute to the system.

It’s about the system

What so much of the advice for instilling a culture of innovation really aims at is setting off an ideas contest within your company. Every employee is empowered to come up with new ideas, and hopefully some of them become the next big thing.

It’s not possible to overhaul the culture of your whole company and generate more revenue, because not everyone employee should be tasked with thinking up new ideas.

Culture does matter, of course, especially in terms of allowing strategic risk-taking and allowing your risk-takers to fail. Experimenting is necessary for discovery, and part of any experiment is failure, but the right kind of failure can be a rich learning experience. Your company needs people who are eager to try new things, and they need an environment where they can thrive.

But the goal is not to turn your whole company into an ideas shop. It’s just not practical.

The good news is you don’t need a new corporate culture to innovate. So, don’t worry about changing the culture of your whole company. Instead, invest in building a systematic process for learning.

All this requires is a fundamental belief on the part of executives that a system matters – that money and time should be budgeted for continued learning regardless of your leadership role within an organization. Focus on scouting, experimenting, and implementing. That’s the whole process.

Most companies don’t look broadly enough to identify emerging technologies and how they’ll impact their business. To stay on the cutting edge, you need to go deeper than a passive scan of analyst reports, white papers, and tech rags.

Scouting means going to trade shows, engaging with the venture and startup communities (through incubators or university labs, for example), or participating in open source development projects.

You also have to let your employees experiment with emerging technologies. Instead of turning your whole company into an ideas shop, set up “innovation teams” within your company, like internal startups. In PwC’s Digital IQ survey, only 43% of companies said they had a dedicated team for digital innovation.

To be successful, an innovation team needs stakeholders from the line of business their project will impact. If emerging technology is considered a side project, it’s unlikely to ever have lasting impact.

A team working off to the side on a brand new innovation for the biggest product or go-to-market team won’t be aligned on focus, timeline, or product design. Ideally, the people leading the impacted business will be key members of the innovation team.

Once your innovation team has an idea and has tested it, you’re ready to roll it out. Your innovation teams need an engine to feed its ideas into, a system for sharing results from pilot projects and quickly scaling them throughout the enterprise.

Implementation is where you really need support from top leaders, and you will need to engage in change management, but you don’t need to change your culture. You can innovate with the culture you already have.

A culture of calculated risk-taking and support from the top of the organization can foster an environment for innovation. But there is more to innovation than simply acknowledging culture – the system of continued learning, experimentation and implementation will ultimately drive the most tangible results.

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