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“Challenge your corporate governance system – does it actually promote or limit a innovative culture? If you do not do it – your competitors certainly will.”

Yesterday, the Nobel Prize laureates gathered in Stockholm to receive the prize from the Swedish king. A tradition that started in 1901 to reward those who contributed to humanity during the year in their field of expertize. Genius such as Albert Einstein and Marie Curie has through outstanding achievements received the prize. We are as humans fascinated by genius and their ability to think and do the impossible. But the fact is that between every great idea or contribution lays a great number of failures and thousands of hours of work. Also to work in an atmosphere that allows for creativity and innovation.

“Genius is 1 percent inspiration, 99 percent perspiration.” – Thomas Edison

In the corporate world, innovation can be viewed in the same way. It is rarely one man’s genius driving the innovation in a company but rather hard work of the whole organization. In the digitalization era, innovation is the key to corporate success and its importance cannot be underestimated. It is also clear that digitalization is not challenging the actual services and product the organization provides but rather the culture and values of the firm. How employees are viewed (trust) and level of control in the organization?

The Hofstedt Center has done research to understand the relationship between innovation and culture. There is a proven correlation between corporate culture and innovation. The Hofstedt Center has defined a cultural parameter called Innovativeness that indicates the level of innovation capacity in an organization. The parameter is dependent on two out of Hofstedt’s eight cultural dimensions – organizational effectiveness and work control. But what determines the right level of innovativeness in a corporation?

The institute has shortly defined what corporate culture that hinders and promotes innovation (level of innovativeness)? It is clear from the research that strict routines, strong control, risk avoiding employees where everyday is pretty much the same hinders innovation. A “command and control” culture that kills inspiration and motivation among staff, making only a limited effort in their job. On the other hand, a goal oriented and easy-going culture where failure and risk is accepted with loose internal structures, higher unpredictability and little control and discipline unleashes innovation and customer value. It is important to understand what culture that traditional governance (planning, budgeting and performance management) supports.

The Hofstedt’s conclusion about innovation culture is in perfect alignment the framework of agile IT performance management and Customer Intimacy IT strategy (see earlier blog posts). In all cases, a change in culture (based on trust and less control) away from tradition governance practices will not only improve innovation but also result in cost efficiency, customer value and revenue growth. The cost of traditional governance is increasing rapidly and it a heavy burden for many organizations. It is not a question if the traditional governance “bubble” with burst but when.

Recommendations

  • Challenge your corporate governance system – does it actually promote or limit a innovative culture? If you do not do it – your competitors certainly will.
  • How innovation is your corporate culture? It is today possible to measure the “innovativeness” of an organization using Hofstedt’s research. Contact me for more information.
  • Ensure that standardized and repetitive work is as much as possible taken over from employees by systems or have it outsourced.

Nobel prize laureates are often a product of creative thinking, hard work and the right atmosphere and culture. A place where ideas and “selected truths” can be challenged with limited restrictions of routines and control. The same applies to successful companies in the digital era. Companies that have an innovative culture (innovativeness) driven by agile governance systems will be the winners in the new business IT landscape. The digital revolution is ongoing at this moment and it is time to decide direction.

– Hans Gillior

Hans Legend 1