PBTO48: Your Organisation’s Culture is Your Last Competitive (Invisible) Advantage with Soren Kaplan

Who is on the show:

In this episode we host, Soren Kaplan. Soren is the bestselling and award-winning author of Leapfrogging and The Invisible Advantage, an Affiliated Professor at the Center for Effective Organisations at USC’s Marshall School of Business, a writer for FastCompany, a globally recognised keynote speaker, and the Founder of InnovationPoint, an innovation consulting company.

Why is he on the show:

His Wall Street Journal bestseller, Leapfrogging, was recognised as “Best General Business Book” by the International Book Awards and “Best Leadership Book” by the Axiom Book Awards. He is a sought after keynote speaker and is part of the Thinkers50 think-tank, which constitutes the top 50 innovative thinkers of our times. He has just released his 2nd book The Invisible Advantage and we are talking about the concepts behind the book.

What are we talking about:

In this free-wheeling conversation, we talk about:

  • Leapfrogging and the power of surprise in the process of innovation.
  • The last competitive advantage that organisations now have – their culture.
  • How does one go about building a culture of Innovation
  • Some of the common mistakes leaders do in the process
  • The book that has had the biggest impact on his thinking in recent times (Under New Management by David Burkus)
  • And what he thinks is so obvious but we all still miss.
Build a culture of Innovation. This is your last competitive advantage - @SorenKaplan Click To Tweet

How can you reach him:

You can reach him on twitter at @sorenkaplan or his through his website.

 

Building a Culture of Innovation by Creating A Structure for Unstructured Innovation

The need for innovation has never been more acute for businesses than it is today. Every CEO of any sizable business is worrying about which startup from which garage is going to change the rules of their game and disrupt them. They are looking for ways to find (internally, within their organisation or externally, through acquisition/partnership/investments) innovations that can give them enough breathing space to grow their businesses and give their shareholders a good return on investment (and in the process make a lot of money for themselves :-))

However, what most organisations don’t get is that there is only one way to produce innovations at a sustainable pace – through creating a culture which not just encourages & rewards innovation but also nudges people to constantly think of innovation.

Innovations can be incremental, sustainable and disruptive in nature.

Disruptive Innovations:

These are innovations that are non-linear and usually are a result of an insight that someone in the organisation developed. Usually, these result when someone is surprised (positively or negatively) and gets curious about the reason why they were surprised. These innovations, in my experience happen at the fringes of the business. This is the reason, most large businesses have set up incubators, partner with startup accelerators, invite VC’s to be part of their board meetings and even create platforms for their employees to meet with and learn from startups.

Sustainable Innovations:

These are innovations that are logical next steps for the business and usually are the result of the strategy of the business and is through the formal innovation process and structure that the business has in place. Some examples of these include launching brand extensions, product extensions, moving into new markets, etc.

Incremental innovations

Incremental innovations are those that allow you to constantly and consistently improve the way you work – the way you produce your product or sell your product or service your customer or manage your internal operations.  These are critical as the presence of these innovation, is probably the best indication of a culture of innovation in action. This is also the kind of culture which allows a business to follow-up on a creative insight, which could potentially lead them to come up with a disruptive innovation.

How to build a culture of Innovation

So, what can businesses do to not just encourage their employees to constantly be on the look out for potential areas for incremental innovations – Create a structure for Unstructured Innovations.

Soren Kaplan, author of the best-selling book – Leapfrogging and the upcoming book – The Invisible Advantage, shares in the video below, how some creative organisations go about doing just this.

He shares the examples of how Intuit, Adobe and Atlassian have created structures (Intuit Catalyst Toolkit, Adobe Kickbox & Atlassian ShipIt days, ) for their employees within which each employee can actually tinker, experiment and therefore potentially come up with an innovation (in any area/function of the business) that works. The important aspect of each of these examples is that the business not only gives its employees time to work on these projects but also provides them with innovation frameworks and in Adobe’s case also with some basic funding to do some research and prototyping.

There is a lot that businesses can learn from these organisation to empower their employees to tackle any challenges that they face head-on, without waiting for permission and with the support of the business itself. This is when you start seeing a culture of innovation starting to take hold in the organisation.

The probability of disruptive innovations coming from within the organisation can go up significantly, once this starts happening across the business.

How To Build Organizational Culture

Recently, I was moderating a design thinking workshop and talking about how it is critical to foster a culture of innovation within the organization and that it is responsibility of the leaders to build & nurture this culture.

Some one stopped me and asked the following question:

” As a leader, what can i do to build the culture that i want for my team or organization”.

For a moment, i was lost for the right words. I then took a pause and collected my thoughts and responded such:

Building a culture is like gardening. Irrespective of what you do or dont do, something will grow. As a gardner,

  • its upto you to have a vision for how you want your garden to look like (full of flowers or vegetables for self-consumption, etc).
  • You then need to identify the right seeds or saplings to plant in the garden. You need to understand the right combination of plants to plant.
  • You then need to tend (water, sunlight, trim, fertilizers, etc) to them as they grow.
  • You need to remove the weed that grows in the garden. You need to protect the garden from insect attack or diseases.
  • If a particular plant doesn’t seem to take to the soil, you need to replace it quickly.
  • You need to build a habit of tending to the garden everyday.

As a leader, you are the gardener. The plants that you plant are your people and the garden is your organizational culture.

If I have to expand this analogy to an organizational setting, I think that culture is at the intersection of “People, Performance & Process”.

Culture as the intersection of People, Process & Performance.
Culture as the intersection of People, Process & Performance.

People:

As leader, you need to:

  • Ensure that cultural fit to be a critical aspect of your hiring process. This is similar to know what seeds/saplings you want to plant in your garden.
  • You need to continue to train and coach them well. This is like tending to the plants that you have planted.
  • You need to identify wrong hires (from a cultural fit perspective) and fire them quickly, but respectfully. This is like ridding your garden off weeds.
  • As Gary Veynurchuk says, he is the Chief HR officer for his company. You can listen to him share his thoughts on this topic here.

Performance:

As a leader, it is critical for leaders to

  • Consistently provide feedback to your people so that they can continue to improve.
  • Reward behaviors first rather than results. By rewarding for behaviors, you are setting expectations that it is critical to put in the effort irrespective of the results. Once everyone puts in the effort, results will automatically follow and will be consistent rather than being unpredictable.
  • Set clear expectations from their people. Identify lead indicators and create KPI’s around them. Monitor them consistently and course correct whenever necessary.
  • Remain consistent in your evaluation of the performance. This is a key aspect in building any culture.

Process:

As leaders, it is your responsibility to

  • Identify critical aspects of your business and create a process for these aspects which have zero tolerance. Use the 80/20 principle to set process only for the 20% of the activities that create the 80% of value for your business.
  • Think processes as organizational habits. You need to cultivate good habits and replace bad habits. Read “The Power of Habit” by Charles Duhigg to learn about creating and replacing habits.
  • Remember that no set process is also a process – using individual judgement. Trust the judgement of your people and they shall repay you for the rest of the 80% of processes. Do make it clear that you do expect them to use their best judgement.

I think the analogy of the gardener and the garden was well received by the participants in the workshop. What do you think? Is there any other analogy that could explain this better? Please share it with us.

Innovation Isn’t an Idea Problem, Nor is it a Recognition Problem

In a recent HBR article with the same title, David Burrus argued that Innovation is a recognition problem. He also went on to propose a solution to this problem, one that Rhode Island based Rite-Solutions is already using. The general idea is that people are given a certain fixed amount of virtual currencies (say 10000$) which they can invest in any of the idea that is proposed on their internal idea site. This could eliminate the bias of any one or a set of executives, who are usually responsible for deciding on the feasibility of any particular idea. In my opinion, Innovation isn’t an idea recognition problem either as argued by David. In my opinion, Innovation is a culture problem. No matter how many processes you set-up or programs that you run in your organization to foster innovation, you can truly support innovation only if the entire organization culture supports innovation. Some things that an organization needs to inculcate in its culture to foster innovation in their organization are:

  • Clearly define Innovation: Adding new features or functionalities in an existing product or services don’t qualify as innovation. These are product/service improvements and should be treated such. In my opinion, Innovation is only when you are able to create a new product/service, a new way to deliver or distribute it, a new business model, etc.
  • Set-up boundaries within which you want to innovate in. It is very well known that we are more creative when we work within a set a boundaries. Still almost all organizations fail to set-up boundary conditions within which they want their employees to think about.
  • Transparency in the process: It doesn’t matter how the organization wants to manage the ideas that their employees generate. What matters is that these employees know who/how is their idea being evaluated by. This transparency ensures that employees do know that their ideas will get a fair audit.
  • Option for employees to continue to develop their ideas inspite of it not getting through the process: This is another step where almost every organization fails. They have in place an idea management process, they pick the ideas (based on whatever is their criteria) that they want to continue to invest in and the rest of the ideas are rejected. However, history shows that some of these rejected ideas have gone on to become multi-billion dollar enterprises. Instead of rejecting these ideas, organizations can provide an option for the employees to continue to work on their idea based on the following conditions:
    • The organization will provide x% of the funding. The employee brings in the other rest of the funding. They are free to get their share of funding from whatever means that they are able to. The conditions for a successful project is clearly articulated (a big bonus or a share of the new business if it leads to a new LoB).
    • Till the employee is working on the project, he/she stops getting their salaries (Maybe they can provide a small % of salary to encourage more employees to go this route).
    • Once the funding is exhausted, and the employee is not able to procure further funding (internal or external) for the idea, the employee is absorbed back in the organization.
  • Rewards/recognition: The rewards and recognition policies also need to be in place. Ideally, this should be a combination of non-monetary and monetary recognition and in that order. The recognitions should not just be limited to those who have had a successful idea. The organization should also celebrate the employees who tried to innovate and were not successful. Both the successful and the not so successful people should get to share their story with the organization. 
  • Connect & Combine: Organizations should be willing to support and nurture networking across organization. One of the most important attribute to build a culture of innovation is for your employees to be exposed to different points-of-views. They should be able to build a network of people who are willing to mentor, partner and promote the employee when needed.
  • Executive Buy-In: One of the most critical aspects of building a culture is executive buy-in. It is the CEO’s job to ensure that there is continuous investment and progress made in building and sustaining the culture of innovation. It is his job to define the boundary conditions. It is his job to not only celebrate the organization successes but also to talk about their failures and the lessons learnt from them. This is one single action that can go a long way to building the culture of risk taking and innovation.

These are some of the steps that an organization can take to create a culture of innovation. Unless employees see this culture, no organization will be able to sustain their ability to innovate on a continuous basis.

What do you think about innovation and how to build the capability of sustained innovation in an organization? Do share your thoughts on the same so we can continue the discussion.

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