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Assessing Innovation Environments

Assessing Innovation Environments

Abstract

The Problem: The need for innovation in a capitalist market is consistent. This leaves organizational survival dependent on growth, yet the corporate model of efficiency stunts innovative thought.

Why It Happens: The corporate ecosystem is designed for standardization and control which runs counter to an innovative environment that enables creative thought.

The Solution: Evaluating the areas of environment, workflow, team dynamics, and leadership behavior enables leadership to make cultural improvements that will elicit greater creativity.

Key Words: Creative Culture, Facilitating Innovation, Leadership Behaviors, Team Dynamics & Workflow

Procter & Gamble’s King of the Innovation Mountain

The personal healthcare company Procter and Gamble, better known as P&G or the king of innovation, was founded in 1837 in Cincinnati by brothers-in-law William Procter and James Gamble. Their business was a budding enterprise that experienced steady regional progress during the mid-19th century. It then exploded with growth during the Civil War. Winning Union contracts to provide soap and candles to the war effort. By the turn of the century, they had expanded across the United States and then internationally.  Above all, they made everyday items from toilet paper and shampoo to fabric softener and toothpaste. Over the last 50-years, P&G continued their evolution absorbing companies and becoming one of the top global conglomerates at one point reaching $83 Billion in annual sales. They had become an iconic company of personal healthcare and a standard in the American household.

Annual Growth

Today’s corporate environment calls on mature companies to create 5% of organic growth a year to maintain market share and stock stability. For P&G that equates to $4 Billion a year in new business. While many corporations look at this as a continual innovation crisis, P&G has positioned themselves to systematically introduce new products on a routine basis. This begins with their investment in 26 research and development (R&D) centers around the world while spending ~$2.1 Billion per year in these efforts.

This renewed commitment came in the year 2000. Their performance of new products was achieving a return on investment in only 15% to 20% of each new product introduction. A renewed focus and investment back onto innovation proved successful. Wherein 2008 P&G achieved a success rate of 50% to 60% on new product introductions. Surprisingly enough, their goal is not to achieve a higher percentage of successful product introductions. They believe that strategy would be too limited by risk management. They wouldn’t be pushing the edge of innovation far enough.

Culture of Innovation

Their culture of innovation has led to P&G being not only a hub for human talent but also an American mainstay in the corporate lexicon. They do this in simplistic terms by maintaining their focusing on the customers’ needs. Everybody in the company plays a role in innovation, not just the R&D department. Their goal is to achieve a cross-pollination of different groups to blend ideas. This counteracts the natural evolution of a very large company to become insular and parochial.

Crest Whitestrips film came from this type of interaction where specialists from paper products, the bleach from fabric products, and glue from production came together for a unique product. P&G points to two main elements of their environment which have renewed their success in facilitating innovation with the first being their culture of experimentation and the second being their changes in recruiting from hiring the smartest to searching for the most agile and flexible.

Importance of Innovation

The United States continued the philosophical model for which Adam Smith laid the groundwork. Capitalism is the economic and political model where a nation’s trade and industry are run by profit-seeking private individuals. Instead of government control, private individuals place the importance of innovation and growth to make capitalism work.  Brought to prominence during the Industrial Revolution in England, it was later recognized as the hallmark of the Americas.  Unique to capitalism is the theory that as businesses begin providing value to their customers. Next, they create enough demand that employs more individuals to create more value. With more employed, purchasing power increases, ultimately continuing the cycle of growth.

Macroeconomics

On a macroeconomic scale, it is essential to maintain continuous growth for capitalism to continue to work.  Because this leaves businesses with the charge to continue to develop their businesses. As a result, the company increases its revenue on a consistent basis.  This continuous growth is not a simplistic feat and has spurred companies to invest heavily in research and design. Their goal is to create new products or services to continue that growth pattern.  Furthermore, this creates a situation in numerous organizations where inducing innovation daily is a means to survive market fluctuations, which have the potential to derail an industry.

How Environment Contributes to Creativity

Virginia Mason prides themselves on their creativity and self-designed production system. Modeled after the Toyota production system. To call this a production system is only half true. The meat behind the system is the culture of continuous improvement. Following a belief of customer empowerment, the hospital’s goal is to achieve internal and external transparency. Their goal is to be accident-free, but they get nervous if safety issues aren’t identified. Because this is an indicator that people are fearful of repercussions because of their reporting of safety issues. To help counteract this, they instituted a no-blame culture. Hence the goal is to learn from those issues as to never repeat them.

Virginia Mason

Virginia Mason has one specific value that shapes its continuously improving ecosystem of putting the patient first. As a result, they talk openly with patients to build a deep level of respect, the rural areas around the state of Washington send patients to Virginia Mason for back surgery. These surgeries are high risk, extremely painful, and considered a final option by many doctors. Through this process, 58% of these patients don’t go through with the costly surgery because there are better options for recovery. Because these values guide the direction of the doctors to look for multiple options, the creative options that are in their patients’ best interest and not in the best interest of the hospital’s revenue stream.

Swedish Neuroscience Institute

Also, in the Seattle area is the Swedish Neuroscience Institute. Their unwritten value system was more surgeries equaled more revenue and greater revenue was the expectation. Later exposed was that they routinely had doctors running multiple operating rooms at the same time and that this was a production model and not a care model which led to a number of patient safety issues, significant nurse resignations, and the eventual firing of the CEO. This culture became synonymous with being grossly understaffed, cost-efficient, showing favoritism, and fear of retribution. Fortunately for leaders, they have the decision point of what culture they want. For each industry, each organization, and each team the cultural and environmental needs are different. Some may require a high performing environment, some a high quality, high production, or an innovative one.

How to Evaluate Innovation Environments

It is a difficult task to understand a workplace environment, let alone to diagnose what is happening in it. Outlined below, the framework of how to evaluate innovation environments by looking at the ecosystem through four evaluation areas of culture, operational model, team dynamics, and leadership behaviors. Starting with organizational environment and the level of autonomy that is awarded to the subject matter experts. Awarded autonomy varies from person to person. For creativity purposes, the entire organization must have a high level of independence in how they complete work. Linked with autonomy are the true values of the organization.

Many organizations post-nominal value statements across the organization but only reward the values that they believe in. For example, numerous organizations list innovative thinking as a core value, yet they subtly punish or discourage their workforce from voicing their novel insights. Similarly, organizations have written and unwritten rules. These norms control the environment with customs and traditions. Intertwined in this is a dichotomy of what the organization says and what they expect. A tradition in many technology companies is having a playful environment where having a ping pong table fits that narrative. However, managers discourage employees from using the ping pong table because it gives poor optics that they are goofing off and not engaged in their work.

Culture

Evaluating a culture also includes how the organization defines poor performance. A lack of productivity, quality, or ingenuity are across the board indicators, but an organization will typically choose one focus area which indicates their true concern. For example, some organizations will accept work that is delayed or late as long as it is of the highest excellence, while other companies will avert their eyes from poor quality as long as production goals are met on time.

In terms of innovation, is the organization stressing that risks are being taken, that the learning process is heavily embedded into pilot programs, or is it stressing no tolerance for failure? Lastly, the organizational structure represents the facilitation of ideas or the gatekeeper to idea generation. While a hierarchical or command and control structure represents a model of standardization and alignment, it is also the structure that kills multiple ideas as it tries to pass from the bottom to the top of the structure.

Furthermore the Operational Model

Linked with culture is the organization’s operational model. This workflow creates value. The Ford production line that takes raw materials and turns them into a vehicle. To understand if the work model is conducive to innovation, the evaluator must look at what the type of work is. The creative arts of graphic design or software programming easily lend themselves toward innovative types of work where standardized and process driven fields naturally inhibit creative thought. Project kickoffs give insight into the working model and how the design enables creative thought. Does the project manager or facilitator take time to introduce the team and explore the problem or do they jump in and layout here is what we need to accomplish with very little flexibility?

Also, Flow of Operations

The third indicator of if the flow of operations helps facilitate innovation is the actual workplace location set-up. Is the office virtual, is it an open office layout, is it a cubicle farm, or something in between? The fad of the 2000s has been to build large open office space under the belief that it would create interactions between people that didn’t usually connect. Random connections generate novel thoughts, unfortunately, the open office becomes a public library where talking out loud is discouraged.

The evaluation key is to look at if the office has a mixture of both interaction and areas for an individual to achieve deep and uninterrupted thought. Depending on the office setup, are the tools in place to help facilitate their efforts. This ranges from project software and design tools to all of the other materials needed to help create. Lastly, does the workflow move in a smooth pattern or is it consistently interrupted? Is the original intent distracted, and sidetracked consistently?

Because of Team Dynamics

The third area of focus is on team dynamics and how well the group creates together. Research consistently finds that individuals outperform groups in terms of idea production and quality. However, the default is team innovation. Problems and product complexity require that multiple experts with specific domain knowledge to identify solutions. Unfortunately, this approach handicaps the innovation process.

To understand if the team helps or hinders innovation the first checkpoint is understanding their level of candor and encouragement. A refined team understands that they must provide idea feedback to question, understand, and build upon ideas. Also, their approach has to encourage further dialogue instead of stunting it. This helps the interplay of having a cognitively diverse team. This variation in how the team members analyze, apply logic, and explore solutions should be varied. Variation provides unique results.

The true test of a team is to watch them solve problems together and the interactions that occur between members. Are they able to allow for reflection ensuring that everyone is able to digest and voice their thoughts? Do they encourage counter arguments or do they zero in on the most obvious solution wanting a quick resolution? Lastly, team engagement monitoring occurs because of the clearest sign that a team dynamic is faltering.  Because the voices of many will turn into the voices of just a select few.

Hence Leadership

The last focus area centers on leadership. Beginning with behaviors and how the leadership team inspires, encourages, and responds to disruptive innovative energies. Is the team comfortable with using different perspectives to solve problems or are they the only one solving problems? Is the leadership team capable enough to explore ambiguous thoughts or can they only stretch to certain mental blocking points? Leaders will inherently define what a top performer looks like. The stagnant organization will define its top performers as mirror images of themselves. A leader will struggle to achieve a single definition of a top performer knowing there are multiple versions.

Lastly, leaders will reward the desired behavior to encourage more of it. Does the leadership reward failure because something insightful was derived from the experiment? Are mistakes hidden and swept under the rug? The model of leadership plays a special role in the evaluation of an innovation ecosystem. It directly controls the other three key factors of culture, the flow of operations, and the team. In essence, if the leadership model doesn’t support the innovative environment, the culture, operations, and team never will either.

Methods of Research

Environment, process, team, and leadership are the model for how to define an innovative ecosystem. The next concern is how to understand and research into these areas. The first approach is a qualitative analysis. Which is the exploration of the underlying reasons for human behavior. This model consists of interviews with the workforce to develop a rich contextual description of the current situation. The data pulled from these interviews will be exaggerated, it can be loosely based, and it can be rumors. However, it will give the interviewer a sense of the organization. Also, it provides an understanding of why people made the decisions that they have. The second methodology is to conduct focus groups. These group interviews also develop a rich contextual description of the current situation. More importantly, they determine an individual’s level of comfortability with expressing their ideas in front of co-workers.

Another Qualitative

The second approach to the understanding of the organization is quantitative analysis. Therefore, searching to understand the current situation using objective measurements. Beginning with an organizational survey. Because this provides an anonymous method to collect feedback on the overall impression of the environment. Next, executing a market and customer analysis progresses the assessment. This helps determine an external perspective of the organization’s place in the market. Additionally, the analysis gives insight into branding, alignment towards market trends, and industry reputation. These two major data points determine customer perspective on innovation perceptions, customer satisfaction, and the future needs of the customer future.

Ethnographic

The third approach is applying an ethnographic method. This is the living the experience by the researcher embedding themselves into the organization. Due to time constraints becoming a fulltime worker is not feasible. However, being able to observe meetings and workplace interactions firsthand suffices. This observation of behaviors and actions in a non-obtrusive manner triangulates true organizational behaviors. Associated with ethnographic research is the fourth research approach of understanding of the organizational’ s operational model. Similarly, the flow analysis of how work gets accomplished. Insight is gained by understanding the type of work that is being produced. Understanding how people work together to complete a product. Lastly how their communication enables the work. These factors provide clarity on if their operational and communication model elicits innovative thought or eliminates it.

Conclusion

This approach to trying to understand an organization and its ability to innovate is an exhaustive and meticulous process. However, it provides insight as to what is restricting the organization’s ability to create. The organization can understand their cultural enhancers and detractors to the enablement of creativity with a full comprehension of its operational model and the flow of communications on how that impacts innovation in their organization. Included are an analysis of the team dynamics in place that make an impact and an exploration of leadership behaviors that can enhance or suppress unlock greater ideation. This understanding is the next step in moving the organization forward providing the ability to accurately develop a comprehensive strategy detailing key actions for organizational enlightenment.

Refrences

Aguilar, A. (2018, September 8). Q&A with Virginia Mason CEO Gary Kaplan on creating value-based care regardless of payment model. Modern Healthcare.

Baker, M. (2018, November 9). Furthermore, At Swedish’s neuroscience unit, some staff sees a better culture, CEO vows more improvements. Seattle Times.

Dyer, J. a. (2012, April 12). However, How Procter & Gamble Keeps Its Innovation Edge. Forbes.

Heilbroner, R. L. (1995). Hence The Worldly Philosophers The Lives, Times, and Ideas of the Great Economic Thinkers. New York: Simon and Schuster.

Huston, L. a. (2006). Connect and Develop Inside Procter & Gamble Above All New Model for Innovation. Harvard Business Review, 1-20.

Kaplan, G. S. (2018, November 9). Hence Building a Culture of Transparency in Health Care. Harvard Business Review.

Lafley, A. (2008). P&G’s Innovation Culture. Strategy+Business, 1-16.

Another United States History. (2019, January 6). Retrieved from Procter and Gamble: https://www.u-s-history.com/pages/h1811.html

Watson, M. (2018). Another Common Strategies and Practices Among Facilitators of Innovative Thinking in Organizations. Ann Arbor, MI: ProQuest.

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