Why a Culture of Innovation Is Required in an Era of Digital Transformation

Few items should rank higher on the C-suite agenda than building a more innovative culture in their organizations. Innovation guides companies through uncertain times and helps them adapt to new market conditions with the agility and flexibility needed in today’s business ecosystem.

Modern business demands more innovation than ever. Recent surveys from McKinsey indicate that companies drastically increased the pace of digital transformation during the pandemic. What was considered “best-in-class” in 2018 became slower than average last year, while companies with the best technology capabilities, talent, leadership, and resources are operating at an exponential pace.

The reliance on hybrid, at-home and in-office workplaces has opened a door for organizations to rethink their IT infrastructure to find ways to apply artificial intelligence and enterprise automation, freeing up time for human workers to focus on what matters -- innovation and excellent customer experiences.

These are just some of the ways in which companies have had to adapt to rapidly changing times. The past two years have generated enormous change in the ways that people work, shop, and spend leisure time. And companies are adapting their technology and practices to align with this change. Even as some companies have added more e-commerce and hybrid work solutions to their technology stack, they’ve introduced IoT devices and Edge computing platforms to generate even more data than ever before -- data that can be analyzed to create even more value for stakeholders.

The companies that have successfully navigated digital transformations have one thing in common: a culture of innovation.

Turf wars, budgetary constraints, a lack of vision, and inadequate executive support can all stifle cultural change. The roadblocks to cultural innovation are numerous, and there’s a big difference between companies that want to build innovative cultures and those doing it.

How Can Organizations Build an Innovative Culture?

Encourage employees to try new things. Celebrate them whether they succeed or fail fast. By letting employees experiment with ideas -- making it clear that it is okay to fail at first -- we encourage employees to use those failings as learning opportunities. I know of no better way to help employees find meaning and value in their work than to empower them to solve problems.

Organizations can put this mentality into practice by implementing dedicated intrapreneurship programs that encourage all employees to contribute ideas without fear. By creating a program where employees can submit innovative ideas -- for products or even concepts outside the company’s typical business -- for review at any time, everyone can feel welcome to shape the next generation of cutting-edge business technology. Within my own team, we’ve put these ideas into practice. New employees spend about 75% of their time working on a new product or a project that builds the brand. The other time can be spent learning new technologies or exploring business problems that disruptive technology can solve. For certain high-demand roles such as data scientists or engineers, we’re hiring 150% of our capacity to make sure everyone has time to focus on innovation.

We also have a portal available at all times for employees to come in with their ideas, which has made a difference. Periodic campaigns and idea-thons energize those who might not be inclined to use the portal on their own. These steps have proven beneficial for idea generation and employee morale.

But how will organizations know when they’ve built a culture of innovation? This brings me to my next point -- measurement. But not the way we traditionally measure success -- organizations will need to rethink measurement relative to their innovation approach.

Measuring Success

If the goal is to build an innovation culture to encourage digital transformation, organizations must measure two things. The first is the rather squishy concept of culture. The second is digital innovation itself.

On the culture side, traditional culture metrics track things like turnover or employee sentiment through surveys or social media analysis, but there are also qualitative metrics. On the innovation side, companies often rely on the “Innovation Quotient” survey, which measures innovation across six dimensions. These assessments are often qualitative and highlight the degree to which measuring soft variables is exceedingly difficult. There is also a small handful of quantitative innovation metrics, like R&D-to-product conversion, and the degree to which new products contribute to revenue.

But innovation and culture feed into each other. If you give employees the ability to leverage their own creativity, you will see massive increases in job satisfaction. As a result, the business landscape can become more compassionate, collaborative, and focused on collective value between human innovation and automated processes.

The ultimate testament to building an innovative culture is adapting or incorporating ideas from fail-first programs into new or revised product offerings. Good ideas can come from anywhere, and often they arise from an earlier project that never quite took off. A telltale sign of success is when these ideas and programs start to come to fruition through the collaboration and ideation of individuals that help shape the future.

The bottom line: Innovation starts when you unleash the creativity and passion of your people, giving them the tools to navigate change, leverage analytics, and help build agility into the business. Building an innovative culture means that innovation never ends -- and that’s how it ought to be.