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How to Build a Culture of Innovation—Part 1 Understanding Innovation

 

It’s hard to pick up a business book or magazine without seeing the word “innovation.” I believe that’s a good thing because innovation is the life-blood of any business—it’s how we serve our customers and differentiate ourselves from the competition. However, many business leaders privately tell me how much they struggle with innovation. They find it difficult to generate new ideas, their employees sometimes resist needed change, and the higher the stakes the more challenging innovation becomes.

I believe businesses struggle with innovation because they think about it in the wrong way. Innovation isn’t a one-time event—a eureka! moment—it’s about how the business works every day. To succeed at innovation, business leaders need to build a culture of innovation—and to foster that culture continually.

What is innovation?

When I give talks on the topic, I usually start by asking, “What is innovation?” The silence is sometimes deafening. You see, for all the buzz about innovation, most leaders struggle to define it. Here’s my favorite definition:

Innovation: Something that creates incremental value by providing a new or better solution to a customer’s problem.

The three most important parts of this definition are “incremental value,” “solution,” and “customer’s problem.” Without providing both value and a solution to a customer’s problem it’s an invention, not an innovation. When Albert Einstein developed his theory of relativity, it didn’t create incremental value, so it was an invention, not an innovation. Inventions may later go on to be come innovations when they’re applied to an identified problem, but until that happens they remain inventions.

This definition also avoids a trap many leaders fall into: believing that innovation needs to be about technology. There are many instances of very valuable innovation that have little or nothing to do with technology. My favorite is the UPS “no left-hand turns” example. In 2004, the shipping and delivery company realized they could optimize their business by avoiding left turns.

It turns out that idling truck engines while waiting to make a left turn consumes significant amounts of gas and time. Since then the company has saved 10 million gallons of gas (approximately $29.7 million in savings) and reduced its carbon emissions by approximately 100,000 metric tons. That’s the equivalent of removing 5,300 cars from the road for an entire year—all through a simple innovation that has little to do with technology.

Pattern-breaking vs. pattern-optimizing innovation

The UPS example also brings to light another important thing to understand about innovation: the difference between “pattern-breaking” and “pattern-optimizing” innovation.

Pattern-breaking innovation is about creating something entirely new that meets the criteria of innovation. Facebook is a great example of pattern-breaking innovation. The social network solved the problem of making social connections in a way that had never been conceived of before. Another great example of pattern-breaking innovation is Twitter, with its notion of communicating through “micro-blogs.”

An interesting aspect of pattern-breaking innovation is that it often goes on to create entirely new forms of behavior. Consider the advent of the Facebook “Like”—an entirely new term in our lexicon. Twitter dramatically impacted the way we interact as a world-society. It has provided new ways to communicate during times of disaster, and governments even monitor Twitter traffic for purposes of national security.

Amazon, on the other hand, is a great example of pattern-optimizing innovation. We ordered items through the mail long before Amazon. However, Amazon allows us to order in a much more efficient way.

Many leaders overlook extremely valuable pattern-optimizing opportunities because they only seek pattern-breaking ideas.

Disruptive innovation

In our fast-paced world, the concept of “disruptive” innovation is becoming increasingly important to business. Disruptive innovation occurs when an idea creates a new market and eventually displaces the existing one. A great example is digital photography. Not only did it quickly replace most of the film and chemical developing business, but it also replaced much of the camera business once smart phones became cameras.

Why innovation is hard

Digital photography is also a great example of why innovation can be so hard. Most people know that Kodak was ultimately driven into bankruptcy by digital photography. However, few know that Kodak actually invented the first digital camera in 1975. So what happened?

Human behavior is what happened. Kodak’s leaders grew up in the film business and were unable to imagine a future where most photography wouldn’t involve film. Their lack of imagination and fear gave Kodak’s competition an insurmountable head start and had drastic consequences. Innovation means change—often drastic—and that can be scary.

Leading the way toward innovation

To create a culture of innovation and invite out-of-the-box problem solving, leaders can model productive behavior by taking proactive steps within their own organizations. Here’s how to start:

  • Initiate productive conversations about innovation.
  • Clearly define innovation so teams stay focused on creating value by solving customer problems, rather than becoming distracted by inventions.
  • Communicate the value of both pattern-breaking and pattern-optimizing innovation so that important opportunities aren’t missed.
  • Be mindful of the fear of change that can hamper creative thinking.

In my next post, I’ll examine specific organizational behaviors that foster innovative cultures, how leaders need to encourage those behaviors, and the challenges to overcome.

 

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