How to create a culture of innovation

Companies are increasingly looking to IT to develop new products and services. Here’s how to transform your IT organization into an innovation engine.

How to create a culture of innovation

A culture of innovation is not the first description that comes to mind when talking about a 90-year-old domestic manufacturer, but it's something officials at John Matouk & Co. are actively implementing as a key part of their digital transformation.

Matouk’s drive to innovate echoes that of many organizations: to stay relevant and compete effectively against more nimble companies, as well as attract and retain talent. While the company prides itself on the quality of its products, brand experiences and customer relationships, “there’s a risk in thinking, ‘We’ve been doing this for almost 100 years and there’s an authenticity to our heritage, so people will keep purchasing from us,’” says Stuart Kiely, vice president of digital strategy at Matouk, which makes fine linens and luxury bedding.

And because he came from a tech background, Kiely knows it’s not a good idea to rest on your laurels. “Home textile and luxury linens companies are feeling pressure from digital disruptors and competitors who claim to offer better quality than ours and cut out the middle man and lower costs,’’ he says. Those young companies approach marketing from a digital-first framework, and “it’s that kind of pressure that prompts us to … stay on our game and be able to compete and continue to innovate” their manufacturing processes as well as their front- and back-office systems.

Why culture change is needed

In today’s highly dynamic business world, a culture of innovation is king. To get there, organizations must move beyond adding digital features to their products and services and instead revamp their business processes — what IDC refers to as “DX 2.0,” the second phase of digital transformation.

“DX requires a radical rethinking of a business' strategy and processes: how it interacts with its customers, how it drives operational excellence, how it approaches innovation, and deciding which technologies to use as the foundation,” the firm says.

But change does not come easy. Eighty-seven percent of IT decision makers report their departments are struggling to adapt to a growing role that includes both adopting innovation initiatives and keeping mission-critical systems running effectively, according to the 2018 Insight Intelligent Technology Index. The department’s perception of itself may be part of the problem, with 38 percent of IT professionals describing IT as a cost center, compared with only 20 percent who view it as an innovation center.

The need for culture change is driven in equal parts by fear in the C-suite “about how everyone’s going to be disintermediated,” and “an appetite for opportunistic growth,” says James McKeen, co-author of Driving IT Innovation: A Roadmap for CIOs to Reinvent the Future, who is also senior vice president and chief technology officer at Empire Life Insurance in Kingston, Ontario.

Organizations are looking to IT almost exclusively to innovate and come up with new products and services that will help them sustain their ability to generate revenue, adds Heather Smith, the book’s co-author, who is also a senior research associate at Queen’s University, in Kingston, Ontario, and a research associate with the Society for Information Management.

“The problem has always been: The business says, ‘Show me the money and the business case,’ and IT says, ‘We don’t know the business case yet, but we know it’s important and we have to prepare for it,’” Smith says.

Instead, IT must turn this approach on its head, consider the business case first, and focus on business optimization, which is putting wheels under the business and making it slicker, and transformation, which is about changing the business model, McKeen says.

Doing so is the first step toward initiating a culture of innovation.

Innovation starts with leadership

If executives and senior leaders lack a mindset to be innovative, it’s likely the rest of the business won’t be open to change.  

“I think if you look at resumes of those individuals, you’re probably not going to find people who have been entrepreneurs before or who have started non-profits or clubs,” observes Derek Chin, director of innovation strategy at digital business consultancy Nerdery. Rather, they’ve grown through the ranks to build things of scale, he says.

“When executives aren’t inherently innovative themselves, they’re not going to understand how to be innovative or what will create a culture of innovation because they are low on that learning curve,’’ he says. Much of Nerdery’s work involves helping senior leaders build skillsets to create new things, he says; a process that “doesn’t happen overnight.” But when those leaders begin to see what it takes to be innovative “and really believe it is the path to creating new value, that trickles down to the organization and the things they invest in go a long way toward bringing the rest of organization on board.”

But it isn’t just senior leadership that can lack that mindset. Often it’s middle management that doesn’t see the big picture, observes Geoff Woollacott, a senior strategy consultant and principal analyst at TBRI. “They know their task well; they likely are not aware, nor do they care how their task impacts other divisions,’’ he says. While the CEO will meet with the direct reports and they all agree they need to implement change, “the science of the real is getting the hearts and minds to follow.”

If that middle management tier doesn’t appreciate or comprehend why something needs to be done differently, “then that resistance and non-compliance is sand in the gears of automation.” There’s a place, Woollacott believes, for the old and the new ways of thinking. The impediment to IT acceleration “isn’t an IT problem, it’s a business rules and data governance problem.”

Grassroots change

McKeen and Smith say implementing a culture of innovation is very challenging. You’ve got the “knee-jerk manager who says, ‘Okay, we can just mandate that we want you to become innovative,’ and that’s idiocy,’” McKeen says.

Instead, the organization must nurture the shift by finding “naturally innovative people” from within and encouraging their ideas, he says. Many times, “these people fly under the radar; so first, to engender culture of innovation is to not mandate it but go hunting for people naturally gifted in that way,” he says. These staff members will then encourage others, starting the company on the path of fostering a culture of innovation.

But most people feel the need for permission to innovate, notes Doug Tedder, principal consultant at Tedder Consulting. “It has to be part of ‘business as usual,’” and no one more is more qualified to identify areas for innovation than people on the front line, he says. “You have to define what innovation means and give them permission and the ability to do it.” Just because someone is not on the “innovation team” doesn’t mean they don’t have ideas, he says. “If you want an innovative culture, that culture has to be inclusive.”

Woollacott also advises IT to “burnish the consultative selling skills. That’s how you’re going to get line of business leaders to buy in to what you know you have to do to deliver the type of service they expect.”

The innovative mentality

A good way to gauge whether you have culture of innovation “is when bold ideas are brought to the table, are your people creating an environment of criticism or creation?” says Chin. “Are they shooting down those bold ideas that may be making them feel uncomfortable or are they creating ways of bringing those ideas to market and into the organization?”

Both Chin and McKeen say it’s critical to make sure failure is acceptable. It’s important to create an atmosphere “where it’s okay to fail, because you don’t get a success every time,” McKeen says. “You need a culture of experimentation.”

“With innovation, recognize that no one’s done it before and if it was a product it would [already] exist. So you need to be more flexible and patient with … the development of the ideas,’’ says Chin. “When moving to innovation, it’s more about learning — not executing” and business leaders should be measuring on whether progress is being made.

Instead of measuring your ROI on an investment or net profits for a quarter, that might mean measuring whether there was a bump in customer satisfaction, he explains.

“The CIO is often measured for staying on budget and hitting their deadline,” Chin says. “That’s okay if you’re standing up 1,000 servers … but in the innovation space, no one’s done it before so it’s hard to put expectations on it.”

Business leaders should also shift their mindset from business first to user first, says Chin. The startups are doing this and are focused on how they can help their users accomplish what they need more quickly for less, he says. But Chin acknowledges that “it can be tough to say, ‘I’m going to take a lower margin on something because it’s in the best interest of my customers.’ But that’s where they need to be.”

And make sure what you’re building is compatible with your foundational roots, he adds. “You can’t just copy what Google or Amazon does. You have to find what works for you.”

Innovation in action

For Matouk’s Kiely, transitioning the company’s core manufacturing and front-office systems to the cloud have helped Matouk “behave like a startup.”  

Once you have the right systems framework and the right world view, the third component is allowing employees to make decisions that are more creative and competitive, he says

But it helps to have a small IT department, he adds, and an atmosphere where people can iterate, put something in production, fine-tune it, and keep it moving through processes quickly. Like the others, Kiely says an innovative culture comes “where there is a willingness to try new things and be okay if they don’t work and get scrapped. Unless people feel comfortable taking chances, you won’t have that.”

Kiely says he is passionate about deploying technology that will have a high impact. “Whether or not it’s at a sexy Silicon Valley startup or a 90-year-old textile manufacturer is less important than how much you can be creative and put solutions in place where you’re going to see an impact,” he adds.

What also moves Kiely is “seeing this white space opportunity and … a CEO who is really at a crossroads at the company and said, ‘We need to put technology in place to move to the next level of where we want to go.’ To me, that’s exciting.” It is important to him to have the latitude to implement technology that can drive the business forward, “and I found that here,” he says.

In the final analysis, McKeen says, “We have to be innovative about being innovative.” 

Copyright © 2019 IDG Communications, Inc.

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