How to Create a Culture of Innovation

October 26, 2022

The importance of innovation to organisational success is widely accepted; “innovate or die” as the saying goes.  This is particularly applicable in rapidly evolving industries (such as technology) but even in more stable industries, innovation is nonetheless seen as critical to competitive advantage.  

However, innovation can be seen as a nebulous term, often being synonymous with new technologies or investment into R&D, and therefore being seen as beyond the average organisation.  But this is not the case. Simply put, innovation is an improvement on a product, process, or service and therefore within the grasp of any organisation.  Given this fact then, it is important that innovation is considered at the strategic level.

How Organisational Culture impacts on innovation

Organisational culture has the capability to either encourage or inhibit innovation.  And whilst there are some excellent examples of companies such as Amazon and Ford utilising open innovation (drawing on company-wide and even customer suggestions), there are plenty of other examples where innovation can be stopped dead in its tracks.

For example, in hierarchical cultures, new ideas from subordinates could be dismissed out of hand due to the organisational structure, and where ideas are “supposed” to come from.  Ideas that have a long-term view will invariably fall on deaf ears in an organisation that has a short-term orientation and an inflated view of itself – Kodak is a famous example of the disastrous consequences of ignoring innovations on the horizon.  

Even if innovative strategies from management are introduced, they could still be sabotaged by sub-cultures within an organisation that might deem a certain change to be a threat to their level of power. It is clear that unless receptiveness to innovation exists on a cultural level, innovation will die.  So how do you create the right culture to allow innovations to be fostered and implemented?

5 steps to a culture of innovation

Step 1 – Organise to capture knowledge 

The implementation of any strategy will create change and therefore the opportunity for innovation.  Emergent, even unexpected outcomes will invariably arise, from which new knowledge can be obtained. Furthermore, industries and environments are constantly changing, and paying attention to this can further boost innovative thinking.  In order to truly innovate however, new knowledge must be organised. This can be achieved through effective knowledge management, whereby organisational and environmental insights are collated and shared throughout an organisation.

In practice, it is useful to get people from all departments to report on lessons learned from localised strategies, assign horizon scanners within the organisation to report on developments from the industry, and to make someone responsible for gathering, collating, and distributing intelligence.

Step 2 – Break down barriers

Often the best innovations come from those who are working with a product or within a process every day and are often closest to the customer or end user.  As such, it is important to encourage sharing, disregarding seniority.  Several scholars have identified that hierarchy, bureaucracy, and social and cognitive boundaries inhibit innovation, as organisational members feel stifled in coming forward and sharing ideas.  As such, creating a forum where information sharing and helping are encouraged will free up employees to adopt an innovative mindset. Leadership also plays a key roll here, as leaders must understand that questioning existing processes and behaviours are an essential part of innovation and not to be seen as negative.

Step 3 – Prioritise learning

Learning is a prerequisite to innovation.  Soliman (2015) asserts that learning activities facilitate knowledge transfer which in turn, stimulate innovation. Thus, making learning (be it about the industry as a whole, the workings of a department within the context of the organisation, or continuing education in a particular discipline) a key part of employees’ roles will give rise to innovative thinking, and create a “learning organisation”.

Pedler et al. (1989), following a six-month research study of public and private sector organisations in the UK, established 5 common factors in “the learning company”:

  • Communication
  • Diversity of views
  • Questioning old values
  • Experimentation
  • Proactivity

They suggest that a Learning Company is one in which learning and working are synonymous; is populated by colleagues and companions rather than bosses and subordinates; where both inside and outside are continuously searched and examined for new ideas, new problems, and new opportunities for learning.

In summary of these first 3 points then, an organisation that has a mechanism for which to capture knowledge, a flat, non-hierarchical structure in which to share ideas, and a workforce committed to learning will be well placed to foster innovation and create opportunities for competitive advantage.

Step 4 – Use new insights in strategy development

Unfortunately, whilst many companies discuss innovation, very few actually implement it.  Even if the building blocks of an innovation culture are present, this doesn’t guarantee that new ideas will make their way into organisational strategy.  Unless time is spent in developing ideas and formulating a structure around implementation, innovations are unlikely to be realised.  Commitment to implementation is therefore crucial, but of course it is important to ensure that new innovations align with the direction of an organisation.

Oke and Goffin suggest an implementation framework for innovation in this regard in their Pentathlon Model (2001).  This ensures that ideas are congruent to the organisation’s strategy, they align to the values and capabilities of the people in the organisation, are open to selection and development, and that an implementation plan is created.  

It is worth noting however, that testing the viability of promising innovations before rolling them out is a critical exercise.  Many organisations pilot innovations in rapid cycle sub projects to test their wider suitability.  And from a cultural perspective, this shows that ideas are taken seriously, which can bolster enthusiasm for future suggestions.


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Oke & Goffin Pentathlon model (source: Cranfield University)

Step 5 – Share and celebrate success

Building on this, a critical part of creating a culture of innovation is to evidence to organisation members that their ideas can reach the top and play a key role in the future of the organisation.  Organisational culture is rooted in core beliefs and assumptions based on shared experience.  As such it is easy for a workforce to become disheartened and create the belief that ideas aren’t listened to if senior leaders don’t keep people updated on the progress of innovations, or don’t continue to make time to share and capture knowledge.  Conversely, if employees are kept in the loop, and fully realised innovations are broadcast and celebrated, this will be encouraging and embed the idea that the organisation listens to new perspectives.  Again, shared experiences create core beliefs and an underlying narrative around how the organisation operates, which ultimately influences behaviours. 

If this is done correctly, then an organisation might find itself with…

  • an enthusiastic workforce, committed to learning and sharing ideas, 
  • based on the organisation’s commitment to harnessing knowledge, and trialling and implementing innovations
  • that are shown to make their way into the organisation’s strategy and make a positive impact throughout the organisation,
  • and prove that the organisation listens and fosters a culture of innovation.

By paying attention to structure, learning, and leadership, it is clear that a culture of innovation can indeed be developed and lead to sustained competitive advantage.

How innovation can inform strategy (Source: Author)

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