Six Traits of Highly Innovative Companies

Companies often contact us at InnovationOne because their long-range financial forecasts are on a southbound train. Or, they are facing fierce competition from industry disruptors that have a new technology, newly applied technology in their industry, or a better business model. Sometimes their innovation projects have not produced tangible results. Or, they tried a new, promising technology solution (such as crowdsourcing, which can be an excellent tool when used well), but it has not moved the needle. Sometimes, they contact us simply because they want to assess and benchmark their innovation culture within their industry to see what they could be doing better.

We have learned a lot about successful innovation through our practice and from our landmark research study, Innovation Nation? Innovation Health Inside the Fortune 1000[i], one of the largest empirical studies to date on the state of innovation with the Fortune 1000. The study is based on a scientifically rigorous survey of 1,127 executives and senior managers in Fortune 1000 companies.

What we learned in the study is that there are six traits of highly innovative companies. The disruptive companies practice these traits as if they were on steroids.

The Six Traits of Highly Effective Companies

  1. Executives embrace innovation, create an innovation strategy, and relentlessly communicate it. With many of the companies we work with, this is often the one action executives can take to improve innovation. While the executives themselves don’t have to be the innovators, they need to signal to their workforce and external partners that they embrace innovation and have a strategy for it. When the question was asked in the study, “What has been your biggest innovation challenge?” 26% of the answers pointed to executive leadership and issues, such as organizational structure and culture: openness to risk, inertia, and moving from the status quo.

This quote from a survey participant says it all, “Our greatest hindrance to innovation is organizational inertia. We are a mature company that has developed a risk-adverse orientation. Having a brand that is one of the most widely known in the world means that there are continual moves to protect that brand, which inhibit innovation and risk-taking.”

These are issues that only executive leaders can begin to address. For innovation to be successful, executives need to embrace it, articulate an innovation strategy, create a transparent and collaborative culture, and invest in it.

  1. Employee creativity is unleashed. There is usually no shortage of creativity and suggestions from employees. Executives must create collaborative, transparent cultures of innovation and give employees permission to ask questions, make suggestions, and collaborate.

Many executives tend to hoard their most recent market data, customer feedback, and latest trends. This is the wrong instinct for innovation. Executives need to share what they know (short of proprietary information, of course) and invite employees to look for business opportunities as well as solve problems. When employees are intrinsically aligned with the purpose of the company, believe that their suggestions will be taken seriously, and know they will be recognized for their achievements, a fountain of innovation will flow forth.

  1. A clear process exists to move ideas forward. Many innovative ideas die on the vine because there is no clear process to advance the idea, experiment with it, gather analytics, try it, compare it with competing ideas, and decide which idea to move forward. These processes need to be dynamic and highly interactive. They should also be transparent. This is an area where collaborative digital technology can be helpful, but without a culture that supports innovation, even technology can fail.
  1. An innovation knowledge management system is in place. This response from a survey participant expresses the need for knowledge management, “Our organization gives a tremendous amount of lip service to innovation; however, no processes are place to aggregate creative solutions for employees.”

While having a process to move ideas forward is important, companies also need to have systems to manage the ideation and knowledge. This can take the shape of rapid ideation sessions involving employees with diverse professions and background, external experts, and better yet, customers. For more regulated industries, sophisticated stage gating processes can be very effective in evaluating, funding and moving ideas forward. An organization’s culture needs to encourage expertise sharing and collaboration, experimentation, analytics and making decisions, based on up-to-date market and customer expectations and needs.

Many companies hesitate to involve external experts and thought leaders. They are unable to fully assess the needs of the future market place, customers, and potentially disruptive social trends. Transparent, open innovation cultures are vitally important to guard against “not invented here” thinking and closed mindedness.

Even when effective knowledge management systems are in place, if the company’s culture is too risk adverse, the next big innovation will never be commercialized. Here is an observation from one of our survey participants, “As a company, we have measurement criteria to ensure that innovative ideas are monitored from inception through commercialization that are restrictive to quick movement. This is coupled with a conservative approach to investment to make an atmosphere that at times seems overly restrictive and risk-adverse.”

  1. Investment: resources, skills, time, and space are dedicated to supporting innovation. Innovation needs investment, and the investment isn’t necessarily expensive. In some industries, the investment is simply time. Time to allow employees to experiment. The investment often includes training employees on collaborative behaviors. For company’s dependent on sophisticated technology, however, such as the pharmaceutical and aerospace industries, the investment may be more expensive. This requires a culture of rapid experimentation. Fail fast, frequently and often. What was learned today? What is tomorrow’s experiment? It includes investment in applied technology, clinical trials, capital equipment, labs, training employees on new technologies, and regulatory evaluation. But, innovation is an expense that must be made. The status quo is a failing business strategy.
  1. Performance management systems incent and encourage innovation. For many mature companies, performance management systems reinforce a safe, status quo culture that discourages risk taking and collaboration. To be innovative, a company’s performance management system needs to create expectations for innovative behaviors as well as reward initiative, reasoned risk-taking, and collaboration.

Based on our research at InnovationOne, we have discovered that these six traits are fundamental for innovative companies. Our research also shows that, when companies score high on these traits, they lead their industries in financial performance.[ii] To learn more about our research, the InnovationOne Health Index Assessment, blueprint planning process and workshops, or receive a free copy of Innovation Nation? Innovation Health Inside the Fortune 1000? Go to http://innovationone.us/research/.

Does your organization have these six traits of highly innovative companies? Join the discussion.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and is a Managing Partner of InnovationOne. He consults on innovation, talent management, developing agile leaders and teams, and other strategic initiatives. Questions? Please e-mail Victor at victorassad6@gmail.com or visit www.victorhrconsultant.com. For innovation visit www.InnovationOne.US.

[i] Dr C. Brooke Dobni and Dr. W. Thomas Nelson, Jr. (2013) Innovation Nation? Innovation Health Inside the Fortune 1000. Available for free at InnovationOne.US.

[ii] Dr. C. Brooke Dobni, (2011), “The relationship between innovation orientation and organisational performance,” The International Journal of Innovation and Learning, Vol 10, No.3 Pages, 226-240.

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