A culture that encourages innovation benefits a company’s financial success and is valued by organisational leaders and employees. In a formal survey by Gary P. Pisano, Professor of Business Administration at the Harvard Business School, hundreds of managers were asked if they preferred working in an environment where innovative behaviours are common, and none responded negatively.
Innovative cultures are often described as enjoyable. When these managers are asked to characterise such cultures, they readily provided a list of traits similar to those praised in management literature: a willingness to experiment, tolerance for failure, psychological safety, collaboration, and a lack of hierarchy.
Despite the desirability of innovative cultures and the claimed understanding of their components by most leaders, they are challenging to establish and maintain. This is perplexing. How can seemingly universally embraced and enjoyable practices be so difficult to implement?
The reason lies in a misunderstanding of innovative cultures. The appealing behaviours that receive much attention are only one aspect of the equation. Somebody must balance tougher and less enjoyable behaviours. Tolerance for failure necessitates intolerance for incompetence. Experimentation requires discipline. Psychological safety demands openness to candid feedback. Collaboration must be complemented by individual accountability. Flat organisational structures require strong leadership. Innovative cultures are paradoxical. With careful management of the tensions they create, attempts to foster an innovative culture will succeed.
Tolerance for Failure, but No Tolerance for Incompetence
Since innovation involves exploring uncertain and unfamiliar territory, it is unsurprising that tolerance for failure is a key characteristic of innovative cultures. Some of the most celebrated innovators have experienced failures. Consider Apple’s MobileMe, Google Glass, and the Amazon Fire Phone.
However, despite emphasising tolerance for failure, innovative organisations are intolerant of incompetence. They set exceptionally high performance standards and recruit top talent. While exploring risky ideas that may fail is acceptable, mediocre technical skills, sloppy thinking, poor work habits, and inadequate management are not tolerated. Individuals who fail to meet expectations are dismissed or reassigned to roles that better suit their abilities. Steve Jobs was known for dismissing employees he deemed inadequate. Amazon employs a forced ranking system, culling the lower-performing employees. Google, while known for its employee-friendly culture, maintains rigorous hiring standards. Pixar replaces directors who struggle to keep projects on track.
Setting high-quality employee standards may seem obvious, but many organisations must catch up. For example, a pharmaceutical company with one R&D group had just discovered a new drug candidate over a decade ago. Despite poor performance, senior leaders made no significant changes in management or personnel. Under the company’s egalitarian compensation system, scientists in the underperforming group received salaries and bonuses similar to those in more productive units. A senior leader admitted that, aside from ethical violations, the company rarely terminated underperforming R&D staff.
