Mt5003 - Building An Innovative Organisational Culture

MT5003 Creativity and Innovation

Building An Innovative Organizational Culture

LIM CHING WU LESLIE [email protected] HT0063039Y

Centre of Management of Science & Technology MT5003 Creativity and Innovation

Introduction Organizational Culture is the attitudes, experiences, beliefs and values of an organization [1]. It has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization. Organizational values are beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behavior organizational members should use to achieve these goals. Organizational values develop organizational norms, guidelines or expectations that prescribe appropriate kinds of behavior by employees in particular situations and control the behavior of organizational members towards one another. In the changing paradigm of the new economy, organizational culture that supports and encourages creativity and innovation is critical for success.

Success is linked to constant innovation. In the new paradigm, most linear processes are easily automated or outsourced [2]. Companies can achieve the real competitive advantage through their ability to master nonlinear skills such as the unique design of goods and services, as well as the creative blending of linear processes.

Recently, Business Week and Boston Consulting conducted a study of The World’s Top 50 Most Innovative Companies [3]. Some of the most successful firms in the world, such as Apple, Google, Toyota Motor, General Electric, top the list. 3M, the leading representation of innovative companies for its invention of the Post-it Note by Art Fry, also came in seventh in the list. Besides technology firms, leading firms in other industry such as Procter & Gamble (household products), Walt Disney Co. (media), Starbucks (restaurants), and Wal-Mart (food

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

and staples retailing), also achieved top ranks in the list. Exhibit 1 in Appendix A shows the complete chart of the Top 50 Companies.

There is a strong correlation of innovation in the organizational culture and success in these firms. This paper investigates on two cases of organizational culture of innovation, Google and 3M, to understand how innovation and creativity are used as a strategic tool to achieve success. While the emphasis is on building a creative organizational culture, this paper also briefly discusses on the issues to be aware of when pursuing innovation in the company, such common mistakes in innovation and Amara’s Law.

Google Inc. From a small internet search startup by two Stanford University graduate students (Sergey Brin and Larry Page) to a company of 4,200 with revenue hitting almost $3.7 billion, Google’s rocket to success has been built on its ability to harness wild ideas for business innovations. Marissa Mayer’s, the Vice President of Search Product and User Experience, role in bridging the PhDs and the MBAs of Google, helped the firm to remain competitive against competitors in the search domain, such as Microsoft, Yahoo and Technocrati.

Hatching New Ideas Marissa Mayer described the five ways in which Google generates new ideas [4]: 1.

Free Thinking Time – Google gives all engineers one day a week to develop their pet projects. Such free days can be accumulated if work gets in the way. Pet projects do not have to be aligned with Google’s central mission. Google News was produced in this process.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

2.

The Idea as List – An idea list is available company-wide for the inputting and vetting of thoughts on technology and business ideas.

3.

Open Office Hours – Managers open their office for discussions with staffs two to three times a week. The Google personalized homepage was produced in this process.

4.

Big Brain Storms – Brainstorming sessions consisting of about 100 engineers are conducted eight times yearly. In these sessions, six concepts are pitched and discussed for ten minutes each. The goal is to build an initial idea with at least one complimentary idea per minute.

5.

Idea Acquisition – Companies with interesting initiatives are acquired by Google. The company Keyhole that it bought in 2004 allowed Google to offer maps with satellite imagery in Google Earth.

Innovation Drivers From these five ways to generate new ideas, Innoblog (public blog of Innosight, Clayton Christiansen’s consulting firm) summarized them into three main innovation drivers [5]: 1.

Rigor and Discipline – Besides creativity, the key to the success of Google is in the rigor and discipline of their approach. This can be seen from the brainstorming sessions conducted each year and the results expected from the process.

2.

Lead from Top – Supporting processes are instituted by the top management to encourage the generation and experimentation of new ideas. The open office hours by managers and one day per week for pet projects are example of this driver.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

3.

Act like a Venture Capitalist – Google looks at great ideas outside the company. This resulted in key acquisitions that allowed them to roll out successful products such as Google Earth.

This paper proposes that there are at least two other key innovation drivers. The first is Google’s ability to provide the environment for innovation to mature before they take flight. Generating many ideas from many brilliant minds in the company does not necessary translate to successful innovations at the marketplace. In Stevens and Burley pointed out that on the average of only one idea is successfully commercialized from 3,000 raw ideas [6]. Google is able to provide such environments to let these innovations slowly take shape. One example is the Google Labs where it showcases some prototypes which are not ready for the market yet. This platform allows users to directly comment and influence on the development of the innovations.

The second key innovation driver which this paper proposes is Google’s recruitment culture. Google is able to bring in creative people to form its innovative organizational culture. Stringent recruitment processes, coupled with some of the best benefits, attract talented and innovative individuals to work in all functions of the organization.

3M Co. By nurturing the talents of its employees, and fostering a climate of innovation, 3M is possibly one of the most innovative firms of the present time. It is famous for household brands such as Post-it Note, Scotchgard, Scotch tape, etc. In the company’s over 100 years history, it has created over 55,000 products and served 30-plus core technologies and leadership in major markets worldwide.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

Creating Innovative Organizational Culture The 3M Story highlighted some of the features in its organizational culture which foster innovation [7]: 1.

Recruiting and Retaining Talent – 3M recruits people who are creative and have broad range of interests. It is thought that people with broad range of interests are willing to learn and explore new ideas. 3M codified six traits of innovative people in its recruitment brochure: Creativity, Broad interests, Self motivated, Resourceful, Hard working, Problem solvers.

2.

Creating a Challenging Environment – New business units were spun off. These newly established divisions had to develop new products and find new markets independently. This “Renewal” process increased the diversification of 3M.

3.

Knowledge Sharing – 3M encourages staffs to network, interact and share their knowledge and problem.

4.

Rewarding Innovation – 3M rewards its staff for being innovative. The dual career ladder paths allow technical staffs to be promoted to the role of vicepresident level without taking administrative or managerial responsibilities.

5.

Mentors, Sponsors and Champions – 3M has a mentor, sponsor and champion program. Champions have strong credibility and are persuasive “lobbyists” for new ideas and products. They are willing to take risks and those successfully mentored often later successfully mentor others.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

Innovation Drivers Collins and Porras summarized five innovative drivers from the 3M findings [8]: 1.

“Give it a try, and quick!” – 3M has a process to try out many things and keeping what really works. The key is to do something and keep on trying something new.

2.

“Accept that mistakes will be made” – 3M learns and move on from mistakes. It treats failures as part of the innovative process and does not repeat the same mistakes again.

3.

“Take small steps.” – Conduct experiments in small scale and develop in full scale when it seems promising. 3M conducts many inexpensive experiments to create funnel for would-be innovations.

4.

“Give people room they need.” – Staffs are given time, incentives, job security and room to experiment. This is illustrated in the “15 Percent Rule” where technical staffs spend up to 15% of their time on projects of their own choosing or initiatives.

5.

“Mechanism – build that ticking clock!” – Practices and tangible mechanisms for experiment for staffs to try new ideas and innovate.

After examining the approaches of nurturing a innovative organizational culture in Google and 3M, the next two sections discuss the issues to be aware of when pursuing innovation.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

Common Mistakes in Innovation Dev Patnaik pointed out five mistakes which companies make when trying to spark innovation but less willing to make the change in organizational culture to get the results [9]:

1.

Over-reliance on Pilot Initiatives – Some companies initiate projects that focus on single product idea or promising near-term opportunity. The scale and impact expected is too big to depend on single approach such as brainstorming. Successful companies such as Procter & Gamble take the portfolio approach to innovation. The process of innovation is a series of multiple experiments using different methods and consultants.

2.

Unhealthy fascination with Unique Charismatic Examples – Charismatic business leaders from successful firms do not always serve as good role model for other companies.

3.

Misapplication of other Companies’ Approaches – It is enlightening to learn from successful companies’ approaches but dangerous to blindly emulate. Mechanical application of inappropriate methods may lead to failure of the innovation program.

4.

Descent into a Cycle of Self-recrimination – Innovation planning teams may feel that their problems are insurmountable after benchmarking against other companies. Companies can look into their past success factors to capitalize on their organizations’ strengths and capabilities. This creates sustainable growth appropriate to their inherent cultures.

5.

Resignation to Superficial Changes – Some companies choose cosmetic changes over structural improvement. Such initiatives insufficient to change the organizational culture.

Companies should be wary of such pitfalls when trying quick methods to transform their organizational culture.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

Amara’s Law Roy Amara, former president of the Institute for the Future states that [10] “We tend to overestimate the effect of technology in the short run and underestimate the effect in long run.”

For example, in the case of iPod, its effect on the production of music has not been fully understood. There are huge longer-term implications. Similarly, RFID is more than about tags. There are huge implications for how businesses operate and how society accepts the potential of being tracked. The dot-com bubble burst in 2000 was another example of the result of Amara’s Law. It was then predicted that Internet-based business model was the next big thing. However, $5 trillion in market value was wiped out [11]. Seven years later, the potential of Internet-based business model has been realized. Internet start-ups like Amazon.com, Google, Alibaba.com have successfully acquired real business with many customers.

The significance of Amara’s Law to organizational culture is that innovators in firms must understand that innovations, which are not mature for the marketplace at the moment, may have great impact next time and should not be put down quickly. On the other hand, innovations that succeed today, may present other opportunities next time. Innovations such as mobile phones have greater impact on people than predicted. It is better to exploit an innovation incrementally so as to cope with the uncertainty of the market.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

Conclusion Creativity and innovation are absolutely critical in today’s economy for firms to stay competitive. This paper discussed the ways in which successful firms build innovation as part of their organizational culture. Some of the similar key drivers for innovation in Google and 3M include: recruiting the innovative people, giving staffs room and space to innovate (1day-per-week-rule in Google and 15 Percent Rule in 3M), creating incentives for innovation, and progressing in small and patient steps. Firms can learn from the approaches in the cases of Google and 3M to build in their own DNA for Innovation. However, the ways to innovate and generate ideas are constantly changing. The best approaches for these firms may not be the best for other firms. It is necessary to recognize the importance of innovation in the organizational culture, and adapt the success formulas from innovative companies to suit individual firms.

This paper also briefly highlighted some of the pitfalls which firm should be aware of when they embark in pursuing the innovative organizational culture. Firm must be willing to make necessary changes to successfully transform to an innovative culture. Finally, the Amara’s Law underlines the importance of assessing the long term impact of innovations. It is necessary to exploit innovations incrementally to counter market uncertainty.

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Centre of Management of Science & Technology MT5003 Creativity and Innovation

References [1]

Organizational Culture, Wikipedia, 2007.

http://en.wikipedia.org/wiki/Organizational_culture Retrieved on 1 Nov 2007.

[2]

O. Parr-Rud, Business Intelligence Success Factors, Business Intelligence Network,

2007. http://www.b-eye-network.com/view/4127 Retrieved on 1 Nov 2007.

[3]

The World’s 50 Most Innovative Companies, Business Week Magazine, 2007.

http://bwnt.businessweek.com/interactive_reports/most_innovative/index.asp?chan=innovatio n_special+report+--+2007+most+innovative+companies_2007+most+innovative+companies Retrieved on 6 Nov 2007.

[4]

How Google Innovates, Business Week Magazine, 2005.

http://www.businessweek.com/magazine/content/05_40/b3953095.htm Retrieved on 6 Nov 2007.

[5]

N. Painchaud, Google’s Culture of Innovation, Innoblog, 2005.

http://www.innosight.com/blog/index.php?/archives/36-Googles-Culture-of-Innovation.html Retrieved on 6 Nov 2007.

[6]

G. Stevens, J. Burley, 3000 Raw Ideas = 1 Commercial Success, Industrial Research

Institute, 1997.

[7]

A Century of Innovation – The 3M Story, 3M Company, 2002.

[8]

J. Collins, J. Porras, Built to Last, Random House Business Books, 7 Sep 2000.

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[9]

D. Patnaik, Five Common Mistakes in Innovation, Business Week, 19 Oct 2007.

http://www.businessweek.com/print/innovate/content/oct2007/id20071019_786269.htm Retrieved on 6 Nov 2007.

[10]

T. Espiner, Accenture’s King of Blue-Sky Thinking, CNet News.com, 30 Oct 2007.

http://www.news.com/Accentures-king-of-blue-sky-thinking/2100-1011_3-6216087.html Retrieved on 6 Nov 2007.

[11]

Dot-Com Bubble, Wikipedia, 2007.

http://en.wikipedia.org/wiki/Dot-com_bubble Retrieved on 6 Nov 2007.

Cover Picture taken from Business Week. http://images.businessweek.com/ss/07/05/0503_innovative_co/index_01.htm?chan=innovatio n_special+report+-+2007+most+innovative+companies_2007+most+innovative+companies

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Appendix A: Tables and Charts Exhibit 1: Top 50 World’s Most Innovative Companies Chart.

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