How to build an innovation culture
What is an innovative culture?

'Culture' means the behavioural norms of a group as exhibited by what they do, not by what they say.

'Innovation' is
the ability to create and deliver novel solutions that better solve problems.

An 'innovative culture' is then a set of behavioural norms conducive to the execution of creating and delivering novel solutions to problems.

5 Cs: the behaviours of an innovative culture

What are the behavioural norms conducive to innovation? We like to refer to the 5 Cs as the most basic model.

4 mechanisms for shaping your culture

There are four mechanisms that you can influence as a leader which will influence your culture. Our objective is to influence the culture towards exhibiting the above norms mentioned above in the 5 Cs.

Using process to drive culture change

A process is a series of actions/steps taken in order to achieve an outcome.

Process matters because when well designed, it leaders to greater efficiency and consistency in achieving a particular end outcome.

Your existing processes in your organisation are not optimised for innovation or encouraging innovation behaviours. As such, you need to design new processes that help your people practise the innovation behaviours.

You can change this! Say you want to encourage continuous improvement, you could make it part of the teams' weekly process that they must do a retrospective identifying improvements to make the following week, which are integrated into their weekly tasks.

This forces continuous improvement, ultimately changing the behavioural norms. Work with your project management office if relevant, and brainstorm together what steps you could add into your employee processes that would encourage the right behavioural norms.

Establishing the right incentives

Amazon example of the right incentives: the compensation policy at Amazon skews your compensation towards equity over salary the more senior you become. Why? It means your self-interest (compensation) is aligned with the long-term growth of Amazon because more of your compensation is in equity.

As organisations, we are often guilty of incentivising the wrong behaviours. The question to ask, how can you incentivise someone to be customer-centric, to be courageous, to continuously improve? 

Incentives don't need to be cash. They can be social rewards. An email from C-Suite telling someone how awesome their idea is elevates their status within their group, others start to copy because they want that status elevation - this is a social incentive.

You want incentivise courage? Make an award for the people who do 10 product experiments that month. Even if all 10 fail. We want to incentivise the input we control (doing 10 experiments), not the output we don't control (success of those experiments).

Using strategy to drive culture

Something we do at Alto is input goals and output goals.

Output goals are our desired business outcomes: a 80/100+ net promoter score on a product.

Input goals are the things we control that drive those business outcomes: "to conduct 20 product improvement experiments over 3 months".

By separating the outputs and inputs, our team knows the behaviours that matter that drive our desired outcomes. An input goal of 20 experiments encourages courage - willingness to experiment, to fail.

All you can ask as management is - are people hitting the right inputs to achieve our desired outcomes? You don't control the outcomes, there is luck (e.g. COVID), so why create a strategy that relies on luck rather than the inputs you control?

Role-modelling the behaviours that matter

The behaviours you role model publicly and visibly matter! 

Refer back to the 5Cs, how many of these behaviours do you currently exhibit in a way that your employees can see?

Do you reflect every single day on how to improve in your role? Can your team see these reflections? If the answer is no, here's the truth: you aren't exhibiting continuous improvement, so why would your employees?

An expected objection: you're too busy to be worrying about role modelling these behaviours, you have your job to do and a lot on your plate. But, if these behaviours really are your desired culture which will help the business grow long-term, then isn't it beneficial for you to live them as well?

Why role modelling is so effective (psychology): we are social animals. Our successful evolution has been based on our ability to fit in with our group. In an organisation, that group is led by you, the management and leadership. As such, you have the highest social status in that group, and your behaviours are what everyone watches and copies.