It is crucial for organizations to build and maintain a culture of continuous innovation to be successful. Organizational culture is a set of values, beliefs, and ways of thinking shared by members of the organization (Schein, 2010). According to Gliddon (2006), “as innovations become more radical, management of organizational culture is key” (p. 20). Innovation leaders are able to foster and promote organizational cultures that spark creativity and risk-taking, motivate and reward employees to think out of the box, and channel ideas to increase stakeholder value (Ahmed, 1998). However, these characteristics are not easily replicated by those organizations most in need of developing a culture of continuous innovation. In this chapter, you will gain an understanding of how innovation leaders assess, clarify, and communicate an organization’s culture and values; how they design and implement a new organizational culture; and how they build new roles and responsibilities to support innovation.

Description

Innovation creates a mindset to envision, shape, and attack the future (Davila, Epstein, and Shelton, 2012). Although much has been written about innovation, it often remains an organizational initiative shrouded with uncertainty. Many organizational leaders do not know where to begin, how to unleash the creative potential of their employees, or how to equip leaders with the right competencies to lead innovation. In other words, many understand the ‘why’ of innovation but are still unclear about the ‘what’ and ‘how’. Building a culture of continuous innovation can help to address the ‘what’ and the ‘how’ of innovation. In this chapter, we will answer for the three key questions:

Likewise, we will explore the role of the innovation leadership in building a culture of continuous innovation because one of the biggest influences on innovation is an organization’s culture.

Research foundations

Organizational culture is reflected in the way that people relate to each other, to the organization, and the organization’s environment (Ahmed, 1998; Lau and Ngo, 2004). An organization’s culture responds to the organizational environment, structures day-to-day work assignments, and rewards the talents of its people. Besides performance, an organization’s culture uniquely distinguishes an organization from other organizations. Employees internalize values, beliefs, norms, and behaviors to fit into the culture of the organization, do their work, and interact with each other professionally. An organization’s culture develops over time and is subject to a variety of positive and negative influences. The vision of a founder who has since left the organization, conditions that are not typical or expected to repeat, and practices that were coincident with, but not actually responsible for, the organization’s success are examples of such influences. Thus, as an organization grows and matures, the culture may encourage and reward practices and policies that are not appropriate for or counter-productive to the needs of a changing organization, especially for a culture of continuous innovation.

Changes in the market, customer needs and preferences, technology, or the availability of resources all point to the need for developing an adaptive culture that can effectively carry an organization through most situations. If there is misalignment between the organization’s strategy, its vision for the future, and its current organizational culture, an organization may be less likely to meet its goals. Thus, to be successful, leaders need to develop an organizational culture that fits an organization’s objectives with its strategy (Butts, 2012). For example, work processes need to be tailored to the types of products or services offered and value-driven human resources practices should be aligned. If organizations pursue and articulate an innovation strategy, the organization needs to have a culture of continuous innovation aligned to its innovation strategy.

In a culture of continuous innovation, there are cultural relationships among creativity, innovation, and implementation in a dynamic cycle (see Figure 5.1) such that: (a) creativity is the wellspring of ideas that feed innovation, (b) an innovation happens when creative ideas are transformed into realistic action plans, and (c) implementation fosters additional creativity.

Considering creativity, organizations can establish creativity as a core organizational value and criteria for acquiring and developing talent. In regard to innovation, organizations can communicate the importance of innovations and their quantifiable impact on the organization. An organization can then set measureable innovation goals and allow employees the freedom to choose how they are to be achieved. During implementation, organizations can streamline work processes into project-based activities, review performance and progress toward goals, and provide rewards for achieving goals.

Once the dynamic cycle of creativity, innovation, and implementation in a culture of continuous innovation is initialized, organizations can begin to change their culture. Strong culture has been linked to organizational short-term performance (Denison, 1990; Gordon and DiTomaso, 1992). However, strong cultures do not necessarily create sustainable long-term performance. Therefore, cultural change should be linked to the organization’s climate and core strategy. Organizations commonly change to a culture of continuous innovation to develop a strategy of sustainable growth. Although it is sometimes challenging, changing an organization’s culture is possible if it is managed in steps (Lewis, 1996). The following is a set of steps organizations can use to develop a culture of continuous innovation. Innovation leaders should help members of organizations answer the questions included in each step.

Application and implementation strategies

Innovation is one way organizations can achieve success by improving processes and creating a workforce that is more productive. However, several recent studies have stated that, if organizations fail to build a culture of innovation and properly address cultural issues, they may fail in pursuing organization-wide innovations (Patel, Kohtamäki, Parida, and Wincent, 2015; Van der Panne, Van Beers, and Kleinknecht, 2003). Therefore, we recommend assessing an organization’s culture as part of its innovation strategy. This will provide the organization with quantitative and qualitative knowledge about its culture. This knowledge can be used to compare the organization with other organizations that have successfully developed a culture of innovation. This knowledge can also be used to evaluate and select potential strategies for developing a culture of continuous innovation. Organizations that have started to develop an innovation strategy should consider conducting a cultural assessment after a six-month to one-year period. Organizations should seek to align their organizational culture with their strategy for innovation using an integrated view. This integrated view of organizational culture (see Figure 5.2) provides a comprehensive framework for understanding and assessing an organization’s culture.

How does an innovation leader decide if an organization’s culture enables or is a barrier to successful innovation? The first step in conducting a cultural assessment is to articulate the organization’s vision and innovation strategy to determine the culturally driven practices and behaviors that will enable them. The next step is an assessment of the current culture and an analysis of the gap between the current and the desired innovation culture. An organizational culture assessment, such as Park and Donohue’s Culture of Continuous Innovation Assessment can be administered to employees and is an excellent way to assess the current culture and obtain the information needed to conduct the gap analysis. When conducting an organizational culture survey, employees provide quantitative and qualitative information on the way organizational and innovation-focused policies and practices are actually working in an organization. An employee survey also provides information on how employees’ view their relationship with the organization. An examination of formal policies may not reveal whether employees believe they are being treated equitably, whether they trust management, or feel engaged in the organization. Because employee perceptions help to drive their work behavior, it is essential to gather this type of information. Employee data is more than employee opinion, it is essential information about the organization that can be used by innovation leaders to plan successful innovations and develop organizational sustainability.

Globalization has connected markets globally and has led to an increase in workplace and organizational activities abroad (Scholte, 2000). Globalization has created a need to understand how business is conducted in many different economic, social, and political environments. When considering the fit between an organization’s innovation strategy and its culture, a multinational organization must take into account the differing national values that may place constraints on organizational practices in its operations throughout the world. Globalization effects organizations in two ways. First, organizations need to reflect the culture in which they originate. South Korean employees, for example, in comparison to U.S. employees, tend to emphasize group behavior and performance over individual performance (Rhee, Park and Lee, 2010). Thus, an organizational culture that requires a high degree of teamwork may benefit from South Korean team-building strategies. Second, organizations doing business in countries with different cultures need to adapt their organizational culture to interact productively with businesses based on dissonant cultural values. For example, Company A from the United States believes in taking a fair amount of risk when expanding its business. However, its branch office abroad does business in an environment that does not value financial risks. To expand its business in that country, the branch office may have to borrow money locally, but local banks will not consider the organization a good candidate for a loan because they perceive its behavior to be too risky. Thus, multinational organizations need to adapt their cultures and strategies to be compatible with local organizational practices and national cultural values. Modern trends in globalization may someday lead to a relatively homogeneous global culture that will soften national differences in organizations (Guillen, 2001; Larson, 2002). However, in today’s business world, it is essential to pinpoint and resolve existing conflicts between national and organizational culture for successful innovation (Tödtling and Trippl, 2005).

Discussion

The ability to innovate is a critical benchmarking criterion that differentiates high performing companies from the ravaged ones (Hull and Rothenberg, 2008). Innovation can make a drastic difference in an organization’s success by reducing time-to-market for new products and services, improving processes, creating cost efficiencies, and fostering a workforce that is better informed, more productive, and finds greater fulfillment in the workplace. Sustainable innovation requires a positive culture. Innovative organizations foster and develop a culture of continuous innovation that encourages employee creativity and motivates them to improve performance. Innovation is more than just the buzzword of the week. Therefore, short-term cultural development programs are ineffective without long-term strategies. Employees become inured and resistant to a one-time flurry of attention and activity followed by business as usual. What is needed is fundamental and lasting change in all aspects of the organization. Thus, it is important to review and update the HR function in areas such as job descriptions, training and development, compensation, benefits, organizational structure, staffing processes, and employee safety and security initiatives.

An organization’s HR strategy is influenced by its cultural values. When the HR strategies and practices are not aligned with the organization’s overall strategy, productivity and performance can suffer. For example, an organization whose strategy requires continuous innovation, development of new products and teamwork will be more effective if the organization also values and practices knowledge-sharing among teams and employees. Understanding the practices associated with effective HR and the values underlying these practices will help organizations to optimally align their culture with their organizational strategy. In addition, a culture of continuous innovation can attract and retain employees and help to develop their talent.

To build a culture of continuous innovation, innovation leaders should focus on achieving a lasting competitive advantage, developing new roles that support innovation, encouraging high performance, and implementing employee reward systems that measure innovation. Assessing your organization’s culture is a great place to start. By measuring the culture’s alignment with its strategy, innovation leaders are able to quantify the organization’s cultural gaps and create actionable steps. The structured, analytical approach described in this chapter can unleash the creativity of employees and help your organization to develop a culture of continuous innovation.

Summary

This chapter discussed the importance of building a culture of continuous innovation. It explored the relationship between an organizational culture and innovation. It reviewed the dynamic cycle of creativity, innovation, and implementation, and its foundations. In addition, this chapter discussed how to assess, identify, and communicate the organizational culture and its values to support innovation. It reviewed a set of steps organizations can use to develop a culture of continuous innovation. This chapter looked at the role that HR plays when developing a culture of continuous innovation. In this chapter, we answered three key questions:

References

Ahmed, PK, 1998, ‘Culture and climate for innovation’, European Journal of Innovation Management, vol. 1, no. 1, pp. 30–43.

Butts, JB, 2012, ‘Ethics in organizations and leadership’, In JB Butts and KL Rich, eds, Nursing ethics: Across the curriculum and into practice, 4th edn, pp. 399–427, Jones & Bartlett Learning, Sudbury, MA.

Davila, T, Epstein, M, and Shelton, R, 2012, Making innovation work: How to manage it, measure it, and profit from it, Wharton School Publishing, Upper Saddle River, NJ.

Denison, DR, 1990, Corporate culture and organizational effectiveness, Wiley, New York.

Gliddon, DG, 2006, ‘Forecasting a competency model for innovation leaders using a modified Delphi technique’. PhD. The Pennsylvania State University.

Gordon, GG, and DiTomaso, N, 1992, ‘Predicting corporate performance from organizational culture’, Journal of Management Studies, vol. 29, no. 6, pp. 783–798.

Guillen, MF, 2001, ‘Is globalization civilizing, destructive or feeble? A critique of five key debates in the social science literature’, Annual Review of Sociology, vol. 27, pp. 235–260.

Hull, CE, and Rothenberg, S, 2008, ‘Firm performance: The interactions of corporate social performance with innovation and industry differentiation’, Strategic Management Journal, vol. 29, no. 7, pp. 781–789.

Larson, R, 2002, ‘Globalization, societal change, and new technologies: What they mean for the future of adolescence’, Journal of Research on Adolescence, vol. 12, pp. 1–30.

Lau, CM, and Ngo, HY, 2004, ‘The HR system, organizational culture, and product innovation’, International Business Review, vol. 13, no. 6, pp. 685–703.

Lewis, D, 1996, ‘The organizational culture saga – from OD to TQM: A critical review of the literature part 2 – applications’, Leadership & Organization Development Journal, vol. 17, no. 2, pp. 9–16.

Patel, PC, Kohtamäki, M, Parida, V, and Wincent, J, 2015, ‘Entrepreneurial orientation‐as‐experimentation and firm performance: The enabling role of absorptive capacity’, Strategic Management Journal, vol. 36, no. 11, pp. 1739–1749.

Rhee, J, Park, T, and Lee, DH, 2010, ‘Drivers of innovativeness and performance for innovative SMEs in South Korea: Mediation of learning orientation’, Technovation, vol. 30, no. 1, pp. 65–75.

Schein, EH, 2010, Organizational culture and leadership, 4th edn, Jossey-Bass, San Francisco.

Scholte, JA, 2000, Globalization: A critical introduction, Palgrave, Basingstoke, UK.

Tödtling, F, and Trippl, M, 2005, ‘One size fits all? Towards a differentiated regional innovation policy approach’, Research Policy, vol. 34, no. 8, pp. 1203–1219.

Van der Panne, G, Van Beers, C, and Kleinknecht, A, 2003, ‘Success and failure of innovation: A literature review’ International Journal of Innovation Management, vol. 7, no. 3, pp. 309–338.