The economy might be slowing, but now is not the time to stop innovating and let your competitors gain the upper hand. KOSMAS SMYRNIOS and AMANDA GOME explain how you can foster a culture of innovation in your business.
By Kosmas Smyrnios and Amanda Gome
The economy might be slowing, but now is not the time to stop innovating and let your competitors gain the upper hand. Here is how you can foster a culture of innovation in your business.
Times are dangerous. Many companies are thinking about cutting their costs, however this can also send a message that staff should maintain the status quo and that new ideas are not welcome.
The last recession taught smart companies a valuable lesson – while poorly-managed companies bunkered down in survival mode, innovative companies snuck up and took the hibernating companies’ market share.
Consumers, starved for new products and services that are cheaper, better and more exciting, supported these innovators. As the cycle turned, poorly-managed companies hit the mid 1990s with diminishing revenue and market share, and nothing in the product pipeline.
So as times get tough, it is imperative that companies foster a culture of innovation. But how? RMIT University recently studied 92 fast growing companies to look at how these entrepreneurs develop a sustainable culture of innovation.
Here are the top 10 ways they foster an innovative culture.
Innovation starts with the leadership qualities of the founder or CEO. The research found that nearly all the entrepreneurs had similar qualities – they were passionate about their work, had a positive and optimistic outlook, do not allow setbacks to hinder their drive and vision, are forward thinkers, determined, thrive on difference and change; surround themselves with like-minded individuals, concentrate on team culture, learn from their mistakes, and aim to resolve problems quickly.
The entrepreneurs make sure they share the long term vision with everyone in the company and that they have a clear business mission that is innovative, such as “to revolutionise the marketplace globally”.
This is the mission statement at Service Central, but the online service company also has another saying, says founder Daniel Ahchow. “Create, then recreate. This highlights to staff that nothing is ever set in stone, and that the organisation is always on the lookout to find more efficient and effective systems and processes,” he says.
The entrepreneurs have distinctive cultures that are reflected in their recruitment practices, an emphasis on training and learning, and an astute awareness of the importance of a functional working environment.
By creating a strong organisational culture, they devolve power down to employees to innovate.
Employees are encouraged to think outside the box. Moreover, employees help to chart the direction of the firm, business units have a well-defined vision, and staff are empowered and rewarded for their performance.
They do this in several ways.
First, the founders create relaxed, fun, and open plan environments – nurturing and growing an internal culture that is young, dynamic, fresh, and continually striving to achieve.
Second, they try to keep staff motivated, productive, and happy.
Third, they empower staff through confidence building, and provision of autonomy and necessary resources, including opportunities for staff to develop.
Fourth, they give staff the freedom to think outside of the box without fear of critical review. They let staff experiment with new processes and procedures and encourage them to be on the look out for improvements and opportunities.
Anthony Russo, founder of Pizza Capers, says: “We love new ideas. Our staff are encouraged to come up with new ideas, including menu items, IT or marketing. Some of the best ideas have come from a staff member picking up the smallest thing.”
These entrepreneurs come up with smart, simple ideas that grab the attention of their employees, such as an “ideas bank” where ideas are stored for future use.
Wholesale trader LaRoo has an ideas book for people to write things in when they come up.
Anthony Nicholls, founder of finance and insurance company Carlingford Fleet, says: “We have a saying; ‘shake the tree, and see what falls out’.”
Once they have the vision set and the organisational culture in place, they establish a team approach to innovation.
Entrepreneurs report that they are establishing teams as a platform to share information and provide members with a sense of ownership and camaraderie.
The teams are encouraged to have regular team meetings for reviewing processes and projects. They are encouraged to question traditional methods and embrace new technologies and marketing initiatives.
The teams can breach borders. The entrepreneurs encourage teams to involve international networks and invite people from overseas (for example, for conferences) to expand the innovative capacity of their staff.
Hezi Leibovich, from retailer Catchoftheday, says: “We foster a culture of innovation by creating a very innovative working environment. Unlike the majority of other businesses, our team members all have the power to change anything they want in the business.”
The entrepreneurs ensure that there is communication, both top-down and bottom-up. They encourage informal feedback during projects and formal feedback at the completion of assignments. They also seek views and feedback on new ideas, and work towards implementing sound ideas.
They welcome free speech, debate, and open contribution about any subject from team members.
They also encourage regular brainstorming sessions between different business units (for example, sales and production, and members of the supply chain).
Some use business coaches to assist with creative thinking and product development. Others say they offer regular training programs, which exposes staff to new ideas and knowledge and encourages innovation.
The communication is not just focused on creating new products and services but also on building the business. IT company Revolution IT, for example, says it encourages staff to giver feedback to senior management “on things we could do better, things we are doing well, and ideas they have for either improving the company or improving products and services we offer clients.”
The entrepreneurs spent time in the recruiting process looking for innovators and lateral thinkers. Some run scenarios by interviewees to work out whether the potential staff member is an innovative thinker.
They also employ people from other industries that can bring new ways of thinking to their business.
Entrepreneurs also reward initiative and creativity by creating specific and measurable
ways for innovators to benefit from their work.
Some have a quarterly bonus structure incorporating a “matrix” that measures staff participation/contribution to business innovation. Other companies reward staff financially when a product gets to market.
Education firm Brightstars pays its staff on KPIs linked to innovation. “This means that our team are looking for ways to get paid more,” says founder Ben Macpherson.
IT company Intellitrac says that all staff are given incentives and two annual bonuses based on their performance and creativity.
Where do many ideas come from? The entrepreneurs encourage their staff to understand customer requirements and wish lists. They create opportunities to listen closely to clients, identifying the new products they want. Advertising agency The Faith Agency, for example, conducts workshops with clients at least once a year to go back to basics and to examine if it can develop new ways to meet objectives.
The entrepreneurs also encourage staff to take ownership of problems presented by clients. “It is my belief that the sales team are in the field and have the access, through listening to clients’ needs, to identify what new products they want,” says founder David Trussler.
How do the entrepreneurs know they are innovative?
First, they do not create in a vacuum. Many of the entrepreneurs report that they know what their competitors are doing. They are avid scanners of the marketplace and also travel regularly to trade fairs.
They also benchmark their products and processes against global best practice.
The Chefs Toolbox, for example, says that every new product, service or process is benchmarked against global (not Australian) best practice. 2easy Telecom says it learns from the strategies and tactics of its competitors.
Many of the entrepreneurs are early adapters. They have a genuine interest in new technology. They also encourage employees to review and report on new technologies as a way of educating staff on innovation.
The management structure of these innovative companies tends to be flat, enabling opportunities for open communication and encouraging confidence. In fact the entrepreneurs talk a lot about fostering a no-blame culture and encouraging all staff to contribute ideas.
Wholesaler STAR Safety Traders and Resellers says that by giving staff autonomy and resources, and having a flat structure where everyone can talk to everyone, encourages innovation. “We have an open style of management where everyone feels they can speak up,” says principal David Pope.
The Faith Agency’s Trussler says: “We believe no one has a mortgage on good ideas, and our brainstorming sessions within the agency encourage as wide a cross-section of staff as is reasonably possible.”
Some of the entrepreneurs work hard to make sure all stakeholders, from suppliers to bankers, understand their need to lead the market and constantly change. One company, manufacturer DKM, says even its supply chain understands the company’s constant need to differentiate itself.
Professor Kosmas X Smyrnios is director of research in the School of Management, RMIT University. Amanda Gome is adjunct professor of business at RMIT University.
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