Creating an innovation culture in an era of lockdown

Becoming a connected company is more important than ever 

In 2012, Dave Gray wrote The Connected Company. It was a powerful eye-opener for me and my career. The premise was that customers had become more connected and empowered through social media, giving them a newfound ability to disrupt business and brand when disappointed by products and services. But equally, they could amplify your brand and increase reputation when delighted. To keep pace with connected customers, Dave Gray argued it was imperative for companies to also become connected by organising in completely different ways. To become intelligent organisms responsive to the new environment of shifting customer expectations.

Credit: Dave Gray / The Connected Company

The book’s arguments have returned to my mind frequently in recent months as we contend with the even greater disruption caused by the global pandemic and the promise of continued uncertainty. It’s become clear that organisations need to prioritise resilience over efficiency to enable rapid innovation, but exactly how you go about doing this is a central problem for our customers and businesses everywhere.

The lessons of Dave Gray’s book are key to the kinds of changes we need to make to usher in cultures of innovation and resilience as we recover from the shock of Covid-19. I’m going to adapt those arguments to address today’s urgencies:

  • What is an innovation culture?
  • How do innovation cultures work?
  • How do you lead an innovation culture?
  • How do you become an innovation culture?

What is an innovation culture?

An innovation culture is one that learns in the context of a goal, responds to feedback, and experiments.

Credit: Dave Gray

Early 20th Century companies, inspired by the efficiency and innovation of the Ford Motor Company, led to a paradigm of organisational design that depicted companies as hierarchical machines. For decades, the companies that embraced this machine model dominated markets, outperformed competitors and drew the best talent.

But the social media revolution connected customers and interest groups in unprecedented ways making the business world far less predictable. Machine-like companies became rapidly unsuited to their fast-changing environments. Following the collapse of business titans like Kodak and Blockbuster, who failed to adapt, it was clear the machine paradigm had been disrupted. So, what needed to change?

The central problem was that machines can’t learn, and therefore can’t easily adapt and innovate. Learning is a property of living organisms, so it was envisioned that companies act more like organisms to survive and thrive in changing environments. But organisms don’t learn aimlessly, they do so in the context of a goal. Without purpose and goals to drive innovation, it’s bound to be haphazard.

Innovation requires feedback to steadily improve an organisation and what it can do. This means feedback from the environment: society, the marketplace, customers, employees. And because the path to innovation is variable with many unknowns, it’s impossible to plot the way in advance, so people and teams must be free to experiment and try new things.

This machine vs organism paradigm shift has been echoed in a wide range of thought leadership on organisational design since the release of The Connected Company. For instance, this influential piece on agile organisations from McKinsey and Company in 2018.

How do innovation cultures work?

Innovation cultures learn and adapt by distributing control to points of interaction with the environment, where semi-autonomous pods pursue a common purpose supported by digital platforms to help organise and coordinate their activities.

The road ahead is complex. The good news is that many of the problems of addressing complexity have already been solved by the very people who started the complexity problem in the first place: technologists. The problem of technological complexity gave rise to agile development and service-oriented design, which in turn led to concepts such as service contracts, composability and loose coupling.

Credit: Dave Gray

Such concepts make it easier to envision companies that behave less like process driven machines and more like learning organisms. These innovation cultures are not fractured hierarchies but complex organisms in which each part is a fully functional whole in its own right – one term for such organisations is “podular”.

Podular means made from pods: small, autonomous, cross-functional teams authorised to deliver on the company vision in ways they see fit. Pods are flexible, fast, scalable, and resilient. And when they fail, they fail fast and share what they’ve learned with the whole. Future ideas and experiments are informed by what has and hasn’t worked well in the past.

One critical difference for podular organisations, is they require digital platforms to network pods together so they can coordinate their activities, share learning, and drive innovation. These digital platforms are like nervous systems in living organisms: they can’t function without them.

How do you lead an innovation culture?

Innovation cultures are living, learning networks. Power in networks comes from awareness and influence, not control. Leaders must create an environment of clarity, trust, shared purpose, and opportunity, while management focusses on tuning the system that supports learning and performance.

In innovation cultures, strategy happens at all levels across diverse groups and timescales, generating a rich pool of experiments for leaders to draw from. But if innovation cultures are networks of semi-autonomous pods, then what is the role of leader? Leaders must focus on creating an environment of clarity, trust, shared purpose, and opportunity so everyone knows what the company stands for. Then they need to get out of the way!

And what about managers? In machine-like companies, managers had a clear responsibility to keep their part of the machine running at maximum efficiency, but this doesn’t work for innovation cultures where each part is seeking to evolve intelligently in the context of a goal.

In podular innovation cultures, managers design and run the systems and processes that support the innovation culture. They tune the system to keep the company’s metabolism at the right temperature.

How do you become an innovation culture?

Any endeavour involves risk and innovation cultures are no exception. But in times of change and uncertainty, their ability to learn and innovate faster than competitors gives them a reliable edge. If you want to become an innovation culture, there’s no reason you can’t start today.

The speed and flexibility of innovation cultures gives them a clear advantage, but no advantage comes without risk. So where can things go wrong? There are three ways: failure at the pod level, failure at the platform level, and failure of purpose. At Future Worx, we’ve made it our business for the past 8 years to understand the best approaches to building innovation cultures by avoiding these three points of failure. That means:

1. Helping our customers understand and adopt a service-oriented organisational design and methodology for becoming truly podular.

2. Designing and implementing a purpose-built digital platform for supporting pods and connecting them together into an innovation community.

3. Getting crystal clear on purpose, vision and mission and how leaders project these so that the innovation culture is inspired and pulls together towards the right goals.

Future Worx can help you begin your journey towards an innovation culture in three ways: top-down change, organic growth, and pilot pods. Get in touch today to discuss what’s best for your company.

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