Corporate Culture’s Impact on Innovation, Part 1

Stephen DeAngelis

August 5, 2021

Over the years numerous articles have been written about the importance of corporate culture and its impact on innovation. In fact, I’ve written a few. Last month, however, Emma Wilson, Digital Outreach Manager at H55, referred me to an article that openly questions the importance of corporate culture. The article, written by Kyle Bolton, CEO at SurveyBot, asks, “Is ‘company culture’ overhyped?”[1] The article points out that it wasn’t until 1951 that Elliot Jacques introduced the idea of “corporate culture” in his book entitled The Changing Culture of a Factory. Nevertheless, the article observes, “[Corporate culture is] a concept that many management consultants have relentlessly tried to optimize since. But, what if company culture isn’t actually the ticket to employee optimization we believe it to be?” For years, experts have insisted that corporate culture is essential to promote consistent innovation. The SurveyBot staff doesn’t appear to be questioning whether corporate culture has value, they are questioning whether it is being given too much credit for making a company a success. They explain, “Creating a positive company culture is not a bad thing. It just might not always be as effective as we are led to believe.”

 

Before delving a bit deeper into the topic, the SurveyBot staff defines the term “corporate culture.” They write, “Company culture is the defined set of values, mutual assumptions and beliefs that all members of a company subscribe to. The culture underpins decision making, leadership styles and ethical considerations. Company culture is articulated through value sets, missions and visions to impress upon new hires and prospective clients how they can expect to be treated. Most often there is one culture prescribed to all employees in all branches for uniformity of standards.” In some cases, corporate culture is more aspirational than factual — and that can be problematic. The SurveyBot staff explains, “Company culture sits upon a fractured premise — that employees experience everything in the same way from the top of the org down to the bottom. It suggests that the values, perks and vision of a company are equally appreciated by all members of staff which fundamentally is not the case. … Corporate values actually have a very limited role in the day-to-day experience of employees.”

 

As I’ll discuss below, in some ways the SurveyBot staff has created a straw man fallacy. The staff at the Excelsior Online Writing Lab explains, “A straw man fallacy occurs when someone takes another person’s argument or point, distorts it or exaggerates it in some kind of extreme way, and then attacks the extreme distortion, as if that is really the claim the first person is making.”[2] In this case, the SurveyBot staff’s stress on “values, assumptions, and beliefs” means they assume words are more important than actions. Nevertheless, most of their conclusions are important. In the first part of this article, I want to focus on why corporate culture is so controversial. In Part 2 of this article, I will focus on ways corporate culture (or environment) can benefit innovation efforts.

 

Is Corporate Culture Overhyped?

 

One of the reasons the SurveyBot staff believes culture is overhyped is because it is not exportable. They explain, “Company culture is most often reflective of local customs to start out and doesn’t automatically fit elsewhere. … The insight to take away is that while company culture is an exceptionally strong starting point; it meets a ceiling in expansion.” Here is where the SurveyBot staff establishes a straw man. Company culture isn’t always “reflective of local customs.” For example, corporate culture can include being ethical, obeying laws and regulations, and being tolerant of failure (especially important for a culture of innovation). Those values are not based on local customs. I do agree that transnational corporations need to understand and adapt to local customs; however, some basic values and practices are universal. For example, do corporate promotion policies favor people whose success may come at the expense of others or do they favor collaborators? Are managers of failed experimental projects shamed or lauded for their efforts? In my mind, corporate culture is more defined by actions than by words.

 

Because corporate culture is an ambiguous concept, the SurveyBot staff is not alone in questioning its value. Everett Harper (@everettharper), CEO and Co-Founder of Truss, writes, “‘We have a culture of innovation’ is a statement found on crumpled banners, rolled up posters and trashed brochures of failed startups and shuttered businesses. Companies and investors have tried to shift, fund or shock their employees into becoming innovative. … The problem is that many companies misdiagnose the nature of innovation. Innovation and culture are complex problems, not complicated ones.”[3] For his money, Harper believes “an infrastructure for innovation beats a culture of innovation.” He adds, “Infrastructure doesn’t mean roads and bridges — it refers to systems that link people, technology, and operations.” Successful businesses have always focused on optimizing the value of people, processes, and technologies.

 

Business consultant and writer Stephanie Denning (@stephdenning) sees corporate culture more in terms of environment than a set of defined values, mutual assumptions, and beliefs. She agrees with Steven Johnson, author of Where Good Ideas Come From: The Natural History of Innovation, who argues good ideas depend on the right environment.[4] Johnson writes, “Good ideas may not want to be free, but they do want to connect, fuse, recombine. They want to reinvent themselves by crossing conceptual borders. They want to complete each other as much as they want to compete.” In other words, good ideas — the first step in innovation — can blossom in the right environment (i.e., the right culture). At the same time, the opportunities to “connect, fuse, and recombine” ideas relies on the infrastructure Harper discusses. Author and innovation guru Kumar Mehta (@mehtakumar) insists the most important thing a company can do to be innovative is to “build an environment where innovation happens consistently.”[5] He notes, however, “Few companies have built such an environment, what I call an innovation biome. The companies that have built this environment are the ones we admire as they are the ones that bring the most innovative offerings to the world.”

 

Fostering an Innovative Environment

 

Before one can discuss what an innovative environment looks or feels like, a definition of innovation is required. My preferred definition of innovation is contained in the innovation formula, which is: innovation = new x valuable x realized. If any of those variables is zero, there is no innovation. A new idea is not innovative unless it is implemented and it only helps a company if it creates value. When considering how best to foster an innovative environment, Harper suggests four steps your company can take. They are:

 

Step 1. Share Your Vision: Harper writes, “Leaders declare a vision, outcome or problem to solve. Shift from needing to know the answer to inviting others to join in. This is especially true in the work of innovation where the outcome is unknown but the vision and problem are clear.” Most innovations start with a problem that needs solving. The innovation process starts with a “new” idea about how to solve the problem.

 

Step 2. Go to the Edge: According to Harper, “Innovation occurs at the edge of your knowledge. Leaders model and incent teams to adopt an experimental mindset, and invite diverse people and perspectives to help in the process.” I will discuss this important concept more fully in Part 2 of this article. In going to the edge, companies can generally find out if a new idea is going to be valuable.

 

Step 3. Implement Ideas: “Leaders,” Harper writes, “move new insights into the core business process, influencing governance and often creating innovations in core operations. This is often the hardest part to introduce and sustain, however if your company doesn’t shift, another disruptive company will.” Simply stated, if an idea is never implemented, it can’t result in an innovation.

 

Step 4. Change Management: Harper asserts, “Leaders center the organization around winning innovations, restate purpose, ensure alignment and apply leverage to scale the operation in that direction.” The late Harvard Business School professor Clayton Christensen, in book written with his colleagues Karen Dillon (@KarDillon), Taddy Hall (@taddyhall), and David S. Duncan, argued businesses need to adapt their operations to solve their customers problems. They based their work on the “Theory of Jobs to Be Done.”[6] According the book’s introduction, that theory helps companies understand their “customers’ struggle for progress and then [creates] the right solution and attendant set of experiences to ensure [they] solve [their] customers’ jobs well, every time.” In other words, they center their business around winning innovations.

 

Companies that have clearly understood the job for which their customers hired them often find their company names becoming synonymous with that job. In England, for example, it is more common for people to say they are going to “Hoover” their carpets than it is for them to say they are going to vacuum them. When mimeograph machines were replaced by copiers, people were just as apt to say “Xerox that for me” as they were to say “Copy that for me.” Today, people are just as likely to say “Google It” as they are to say “Do an Internet search.” Get innovation right and success generally follows.

 

As I noted at the beginning of this article, in Part 2, I want to delve deeper into what companies can do create an environment in which innovation flourishes.

 

Footnotes
[1] Kyle Bolton, “Is ‘Company Culture’ Overhyped?” SurveyBot, 9 February 2021. (email Emma Wilson <emma@h55.online>)
[2] Staff, “Straw Man Fallacy,” Excelsior Online Writing Lab.
[3] Everett Harper, “A Culture Of Innovation Is Not Enough,” Forbes, 16 April 2018.
[4] Stephanie Denning, “The Driver Of Innovation: Environment Or People?” Forbes, 28 December 2017.
[5] Kumar Mehta, “The #1 Reason Innovation Efforts Fail,” Forbes, 18 February 2019.
[6] Clayton Christensen, Karen Dillon, Taddy Hall, and David S. Duncan, Competing Against Luck: The Story of Innovation and Customer Choice, Harper Collins Publishers, 2016.