We are witnessing an acceleration of innovation across the globe, driven by an urgent necessity to adapt to the current environment. Topped by innovations in pharmaceuticals and healthcare, other innovations in logistics, retail and hospitality, and financial services are making their way. New business models, product platforms, and novel ways to engage customers are key areas where companies innovate these days.
The need to build an innovative culture in organizations has never been as pressing as it is now because an organization’s culture can make or break digital transformation efforts. Chief executive officers (CEOs) have realized the need to transform company cultures into innovation-driven ones.
Even before the pandemic, forward-looking business leaders already recognized the need to transform their organizations’ cultures due to the advent of the Fourth Industrial Revolution and fast-changing consumer preferences. That’s why in our consulting work, we have been helping companies in both their digital and culture transformation strategies.
One diagnostic tool that we use is the Six Building Blocks of Innovation. This framework, propounded by Jay Rao and Joseph Weintraub close to ten years ago, posits that innovative culture rests on a foundation of six building blocks: resources, processes, values, behavior, climate, and success.
These building blocks are dynamically linked. “For example, the values of the enterprise have an impact on people’s behaviors, on the climate of the workplace and on how success is defined and measured”, Rao and Weintraub said.
Values. Values drive priorities and decisions, which are reflected in how a company spends its time and money. Truly innovative enterprises spend generously on being entrepreneurial, promoting creativity and encouraging continuous learning. The values of a company are less what the leaders say or what they write in the annual reports than what they do and invest in. Values manifest themselves in how people behave and spend, more than in how they speak.
Behaviors. Behaviors describe how people act in the cause of innovation. For leaders, those acts include a willingness to kill off existing products with new and better ones to energize employees with a vivid description of the future and to cut through red tape. For employees, actions in support of innovation include doggedness in overcoming technical roadblocks, “scrounging” resources when budgets are thin, and listening to customers.
Climate. Climate is the tenor of workplace life. An innovative climate cultivates engagement and enthusiasm, challenges people to take risks within a safe environment, fosters learning, and encourages independent thinking.
Resources. Resources comprise 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 organization’s values and climate.
Processes. Processes are the route that innovations follow as they are developed. These may include the familiar “innovation funnel” used to capture and sift through ideas or stage-gate systems for reviewing and prioritizing projects and prototyping.
Success. The success of an innovation can be captured at three levels: external, enterprise, and personal. In particular, external recognition shows how well a company is regarded as being innovative by its customers and competitors, and whether an innovation has paid off financially. More generally, success reinforces the enterprise’s values, behaviors, and processes, which in turn drive 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 run a 54-question survey across the organization that rates the employees’ perceptions on a scale of 1 to 5 in these six building blocks of innovation. The resulting average rating is what we term as the organization’s innovation quotient, with 5 being the highest.
So far, we have evaluated the culture of several companies in manufacturing, energy, technology, and financial services in the Philippines. Highly innovative companies scored above 4 – way advanced in their transformation – while those in the early and middle stages hover between 3 and 3.9.
What is interesting is that in all the organizations we evaluated, the tangible tools-oriented building blocks – resources, processes, and success – scored lower relative to the people-oriented determinants of innovative culture – values, behaviors, and climate. The latter usually score higher in Western-world companies. Does this mean that employees in Philippine companies have the right mindset and behaviors toward innovation but CEOs and boards are underinvesting in tools, technologies, and methods? Most likely.
That’s why in our consulting work, we help organizations transform their resources-processes-success building blocks through planning, process audits, and innovation programs. More importantly, we align these with transforming employees’ mindsets, behaviors, and skills – the soft side of innovation – to ensure a sustainable and institutionalized culture change.
The author is founder and CEO of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is the chairman of the Information and Communications Technology Committee of the Financial Executives Institute of the Philippines (Finex). He is Fellow at the US-based Institute for Digital Transformation and teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at firstname.lastname@example.org.
The views, information, or opinions expressed by the writer do not necessarily reflect or represent those of Finex and its Board of Directors.