Nominations for the AFR BOSS’ 2023 Most Innovative Companies list recently closed, with the winners to be announced in September. But regardless of who makes the final cut, innovation is crucial for all organisations in today’s rapidly evolving world. The combination of technological change, such as AI; economic shifts such as inflation; and geo-political challenges, such as trade embargoes, means companies need to continually deliver new ideas, methods, products and services. Does your organisation want to be more innovative? Then look closely at your workplace culture.
There’s a clear connection between organisational culture and innovation: data from winners of the AFR BOSS 2022 Most Innovative Companies list showed that the most innovative companies are 40 per cent more likely to actively challenge the status quo, and that senior leaders at the most innovative companies are 35 per cent more likely to encourage their teams to try new ways of doing things.
Why innovation is essential
Culture is key to continuous innovation because having a lot of ideas – and acting on them – can only happen when teams feel safe to do so. And the regular sharing of ideas, with implementation of the best ones, is essential in the current business climate.
Many of our clients at Serendis are finding they must constantly problem solve and innovate to keep up with today’s warp-speed pace of change. For example, hybrid working arrangements mean our commercial property clients are trying to anticipate what the future of work will look like; online shopping is seeing shopping centre owners shift from creating ‘a place where you buy things’ to ‘a place where you have experiences’; and exporters faced with embargoes on Australian imports are being forced to quickly find new markets. Other clients are navigating how to bring workers together to foster creativity and innovation, when they spend much of their week working remotely. Organisations are looking to us to help them create an environment where their teams are willing to share ideas, debate opinions and provide constructive feedback, in order to find solutions to difficult problems.
At Serendis, we see three factors as being essential to creating a culture of innovation:
- Healthy conflict
- Psychological safety, and
- Radical candour.
Without them, innovation in the workplace will be stifled.
- Healthy conflict
Disrupting conventional thinking isn’t easy. But organisations which encourage healthy conflict will be on their way to encouraging diversity of thought, which is a precursor to innovation.
Disagreement is often seen as a negative. Most of us don’t want to disagree, or even know how to do it. Amy Gallo writes that “we’ve come to equate saying “I see it differently” or “I don’t agree” with being angry, rude or unkind”, which makes us uncomfortable. Indeed, humans are biologically wired to get along with people in our in-group. And many of us have been socialised to avoid conflict. (Don’t rock the boat. Don’t make waves.)
But vigorous debate over work-related tasks is actually part of a healthy company culture, and the development of big ideas requires disagreement. As Liane Davey, psychologist and author of The Good Fight: Use Productive Conflict to Get Your Team and Organization Back on Track writes, “when you and your coworkers push one another to continually ask if there’s a better approach, that creative friction is likely to lead to new solutions. Conflict is the source of true innovation.”
In our work with leaders, we discuss the importance of surrounding yourself with people who think differently to you, being open to their perspectives, and valuing those differences. By doing so, leaders can harness the collective power of diverse thoughts to create the most robust decisions and outcomes – especially when solving complex problems.
For innovation to flourish, then, we have to learn to disagree more, and leaders need to create an environment where people feel comfortable dissenting, debating and expressing their true opinions. That requires psychological safety.
- Psychological safety
An environment of Psychological Safety is an environment where people are not limited by interpersonal fear and they are prepared to take the risk to speak up with ideas, questions, concerns or mistakes. Without psychological safety, people won’t share their thoughts, which stifles problem-solving (and can even lead to disaster, such as the two fatal accidents of Boeing aircraft in 2018 and 2019). Psychological safety is also crucial for creativity and innovation. As Harvard Business school professor Amy Edmondson says, “Innovation thrives when we can share out of the box ideas, so creativity is not something you see a lot of in a fearful setting.”
Psychological safety is also one of Serendis’ nine dimensions of inclusive and high performing cultures. Here are our tips for how leaders can promote psychological safety in their teams:
- Formally and frequently invite participation from colleagues, asking them to share ideas, concerns, perspectives and lessons learned from failure.
- Proactively meet with more introverted team members to get their views.
- Role model to encourage others and consider showing vulnerability when leading meetings. This includes sharing your own experiences and learnings.
- Create a habit of sharing your struggles, making it okay to learn from mistakes.
- Normalise conflict and reframe it as learning.
- Be conscious of language choice. Use collective language (we, us, our) and avoid using absolutes (never, can’t, won’t).
Netflix: a case study
Streaming service Netflix is an excellent example of the connection between psychological safety and innovation. Reed Hastings, Netflix’s CEO and co-creator, is now cited as the man who changed the way we watch television. But the company’s journey hasn’t been smooth or easy.
In 2011, Hastings made a decision about company structure which he quickly had to withdraw after the share price fell by 75 per cent. He later acknowledged his mistake and took 60 executives and directors on a retreat to share lessons learned. When Hastings’ team told him they lacked the courage (that is, psychological safety) to challenge his decision, he implemented new practices. Netflix now has a culture which makes a concerted effort to stimulate dissent. Failure is not just tolerated, it’s welcomed: Hastings encourages the team to make mistakes as way of improving the business, and to work together to ‘sunshine’ those mistakes. In an incredibly competitive industry, Netflix remains the market-leading streaming service. Unsurprisingly, radical candour is also a key feature of Netflix’s culture.
- Radical candour
Delivering honest feedback is essential to a culture of innovation – there’s not going to be much innovation if there’s more candour in the office kitchen than in meeting rooms where big ideas and important policies are being discussed. But radical candour is more than just delivering honest feedback. It’s giving candid feedback to others with their best interests at heart – Kim Scott, author of Radical Candor: Be a Kick-Ass Boss without Losing your Humanity, defines radical candour as ‘caring personally, challenging directly’.
Empathy can be a huge positive. But it can also be paralysing if you’re so concerned about another person’s feelings that you don’t tell them something that in the long run, they’d be better off knowing. At the same time, radical candour isn’t all about managers criticising their staff. Rather, it’s about soliciting critical feedback, and giving more praise than criticism. Given humans’ in-built negativity bias, together with the way many of us – have been socialised (If you don’t have anything nice to say, don’t say anything at all), radical candour requires intentional effort. Netflix, for example, describes its culture as one where positive and constructive feedback is part of daily life, not just an annual event.
Serendis consultants, inspired by Scott’s approach, recommend the following steps to implement radical candour:
- Ask for meaningful feedback: You don’t want to give honest feedback before showing you can take it. So, prepare a question you’re going to use to solicit feedback from your team, such as: “What can I do or stop doing that would make it easier to work with me / ensure we work more effectively together / deliver better value for our clients?’
- Focus on praise: Now that you’ve solicited feedback for yourself, offer praise to others. Then you’re in a better frame of mind to offer them suggestions, and they’ll be more receptive to it.
- Reframe the way you refer to ‘criticism’ or even ‘constructive feedback’. These terms trigger an immediate negative and defensive response from your stakeholders. The human brain treats feedback as a threat and if you don’t want to trigger defensiveness, you need to reframe the way you deliver it. You want to avoid making negative statements which are received as a judgement on their worth. Rather, you want to frame your comments as aspirational future focused possibilities. For example, don’t say: ‘your product is not responding to the needs of our customers’ (your stakeholder will try and demonstrate why they think it does). Instead, you can say: ‘our customers need x and I wonder how we can take the product in a different direction to meet our customers’ needs’.
- Reward feedback: When someone, especially someone who reports to you, gives you critical feedback, they’re taking a risk. If you don’t reward that risk, they’ll never take it again. Ever. Your brain immediate response will be to justify yourself or demonstrate why they are wrong. This is human. Instead, you want to train yourself to say: ‘thank you, tell me more’. This gives you a little bit of time to process the emotional trigger, rationalise what you are hearing and ask yourself: ‘what if they were right? What is one thing I can learn from what they are saying?’.
For innovation to thrive, it’s important to remember that there’s no such thing as too much positive feedback, but there is such a thing as too little critical feedback.
Innovation as art, not science
Experimenting with new ideas, products and services is more art than science; finding solutions to tricky problems isn’t as simple as following a formula. But while there’s no equation for being innovative, there are steps organisations can take to create a workplace culture which fosters innovation. By promoting healthy conflict, encouraging radical candour, and ensuring your people feel psychologically safe, leaders will create an idea-rich environment in which existing norms are challenged and opinions regularly exchanged. And who knows, with those features of your company culture firmly in place, you might even consider nominating your organisation as one of next year’s Most Innovative.