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 Obtaining the title of Most Innovative Company of the Year is the aspiration of the vast majority of businesses.

In addition to selecting the most innovative companies of 2014, Boston Consulting Group's (BCG) innovation-focused research in 2014—consisting of more than 750 businesses in 17 diverse markets—revealed a number of surprising findings.

Clearly, the organizations that led the Innovation ranking utilized a methodical approach to managing Innovation. The study indicated that culture is a major catalyst for innovative ideas. People, financial resources, the state, and even cultural norms and beliefs were assessed to have a lesser impact on innovation than Organizational Culture.

The organizational culture is a guiding framework that fosters a specific set of behaviors. Experimentation and persistent evolution characterize the Organizational Culture of the vast majority of creative firms (adaptation).

A culture that is adaptive incentivizes behaviors that are crucial to encouraging innovation, such as initiative and risk-taking, creativity, and swift and rational Decision-making.

When establishing a culture of Innovation, Exploration, and Experimentation, firms always face numerous challenges.

  • Many businesses prioritize the creation of high-quality goods, the enhancement of productivity, and the reduction of expenses. These organizations are prone to invest too little in exploration, which is crucial for managing uncertainty, gaining experience from mistakes, and innovation.
  • Certain beliefs and behaviors that constitute an organization's culture are fostered by the organization. They adhere to one of the two civilizations that are diametrically opposite to one another:
    • A corporate culture of exploitation, efficiency, and predictability exemplified by job excellence, team loyalty, teams of reliable individuals, and perfection.
    • Startups embrace a culture of exploration, diversity, and unpredictability defined by aspirations, rule-breaking, mistakes, and perseverance based on failure-based learning.
  • It is challenging to create and manage enterprises that employ the best of both cultures.

Transforming the business from Exploitation to Experimentation requires the adoption of distinct Business Models, trial and error, and iterations. Integrating an exploitative culture with an explorative culture requires the firm to take the following steps:

  • Permit individuals to spend additional time on experimental endeavors in order to generate original ideas.
  • Designate specific resources for the incubation of ideas and foster a conducive environment.
  • Share talent, expertise, and ideas to break down silos and generate value.

The development of an Innovation Culture is inhibited by "soft" or human nature-based constraints.  For example: 

  • Individuals are resistant to something they have never encountered or thought before.
  • Experts in a certain field reject ideas or procedures that challenge their current methods.
  • Individuals value the short term over the long term, as well as rapid solutions over reflection and investigation.
  • People dislike ambiguity and change.

BCG's 2014 research on the most innovative businesses revealed that disruptive innovators combine 3 fundamental drivers for radical innovation:

  1. Management
  2. Governance
  3. Organization

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Let's examine the first 2 Innovation drivers in greater detail.

Management

  • Senior Management is the primary impetus for Innovation. Innovation must be deeply established in an Organization's Culture through the steadfast commitment of its leadership.
  • A firm is able to achieve groundbreaking Innovation and growth as a result of its management's embrace and support of revolutionary Innovation activities.
  • The BCG study underlined the crucial importance of management in monitoring disruptive Innovation initiatives through strategic KPIs, building effective Performance Management, Rewards and Recognition systems, and integrating these systems to disruptive Innovation KPIs.

Governance

  • Leading innovators classify innovation initiatives according to their innovativeness, as discovered (low or high).
  • They were observed to employ distinctive management practices for both revolutionary and incremental Innovation projects.

Interested in learning more about the and how to communicate them across the organization? You can download an editable PowerPoint presentation on the Drivers & Challenges of Innovation Culture here on the Flevy documents marketplace.

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