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3 Steps to Cultivate an Innovation Culture

Despite R&D being risky and expensive, businesses are betting big on innovation to fuel growth and competitive advantage. Companies like Amazon, Apple, Alphabet, and Meta are investing billions annually. The R&D budgets from the top 100 innovation leaders total over $720 billion, an increase of 15.3% from the prior year. But evidence suggests that executives remain dissatisfied with their company's innovation performance. As the world rapidly changes, businesses and people must change. Culture is the one thing that impacts everything. An innovation culture supports beliefs and feelings about the importance of innovation, as well as habits that encourage research and development. Here are three proven steps that will move your company closer toward an innovation culture.

Benefits of an innovation culture

It is no secret that culture is a powerful force multiplier for your company's mission and values - and when properly harnessed, it can become a powerful competitive advantage. Companies with a positive culture experience 8x more profitability than S&P 400 firms.

Organizational culture defined is "a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems." Edgar Schein

Although innovation requires taking risks, failing to innovate can be fatal to a business. The proven benefits of innovation include:

One modern innovation that is impressive to watch is SpaceX's reusable Falcon 9 (watch the video below). Space travel alone is challenging, but reusing a rocket by landing it on a drone ship takes the complexity to another level.

A financial services company engaged in investment banking and capital markets estimated the customer benefit of the Space X Falcon 9 reusable rocket. If Space X passed on 50 percent cost savings to its customers, this one innovation could reduce company costs by 21% or $48.3 million per launch.

A recent study found that only 12% of companies claim to have a program in place to define and improve culture. Although only one in four employees strongly agree that they can apply their company's values daily. Here are the three steps leaders can take to cultivate a culture of innovation.

Innovation Culture Step 1: Defining Your Culture

Trying to define and change company culture is overwhelming. When you don’t have a shared understanding of culture, it's difficult to create a plan to transform it. You waste time and money on ideas that don't move the needle, you guess instead of following a proven process, and employee performance stalls (or worse) dips.

Defining an innovation culture in measurable and actionable terms is essential for a thriving company culture.

The Competing Values Framework created by Dr. Kim Cameron and Dr. Robert Quinn identified four fundamentally different cultures. This tool can be extremely useful for defining the current and desired culture of any organization.

  1. Clan Culture creates a collaborative atmosphere like a family. This culture emphasizes the value of teamwork, participation, and a consensus decision-making style.

  2. Adhocracy Culture creates an energetic and entrepreneurial atmosphere. This culture stresses the importance of research and continuous improvement.

  3. Market Culture creates a competitive, fast-paced, results-oriented environment. This culture highlights coming in first.

  4. Hierarchy Culture is a top-down formal rule-based atmosphere. This culture emphasizes efficient, reliable, and cost-effective performance.

Note: Adapted from Cameron and Quinn (2011).

Innovation Culture Step 2: Overcoming a Fear of Failure

Fear of failure is the enemy of an innovative culture. An organizational fear of failure limits experimentation, risk-taking, and failure, all of which are necessities of innovation.

In three separate studies, researchers found that the fear of failure triggered by an objective or psychological reaction is detrimental to decision-making and reduces opportunity-seeking behaviors. The acceptance of failure as learning is fundamental to innovation but challenging to comprehend.

Watch the following short video to see why Honda accepts failure and suggested it is the secret to their success.

A step toward learning to overcome the fear of failure is to reframe that failure is necessary and learning is the opportunity. I like adopting the paradigm of experimentation.

The following are three proven strategies leaders can use to help employees overcome a fear of failure:

  1. Game Theory: Game theory can be used in a safe environment without the harmful consequences of the real world to teach employees about failure as learning.

  2. Mindfulness: Mindfulness-based stress-reduction meditation training has been shown to have a positive outcome in overcoming the fear of failure. Mindfulness meditation is defined as learning to focus on purpose at the moment without judgment of experiences.

  3. Rewards: Innovation behaviors need to be rewarded and recognized even if they do not directly achieve the desired goal. I am not advocating for rewarding the result of failure. However, reinforcing desired innovation behaviors increases the behaviors necessary for innovation.

Innovation Culture Step 3: Leadership

The role of leadership is to encourage, guide, and empower innovative behaviors. Cultural change should be approached with purpose and caution. Cultivating an innovation culture is not a one-off initiative.

Leaders can increase innovation effectiveness by clarifying the gap between the current and desired state, identifying and removing barriers to innovation, and clarifying innovation processes.

Innovations are dependent on leadership's ability to deliver:

  • Effective leadership

  • Company innovation integration

  • Controlled change volume and focus

  • Creativity and innovation value realization

  • Reward and recognition for desired behaviors

  • Internal and external diverse relationships and talent

  • Remove barriers and negative reactions to innovation

After setting expectations, leaders need to align what they regularly pay attention to, how they respond in a time of crisis, where they allocate resources, what they reward, and how they buy, build, and bounce employees with the defined behavioral expectations of the innovation culture.

A culture of innovation comprises many different attributes, and learning quickly is critical to building an innovation-based culture. Cultures that produce innovation adhere to three basic rules:

  1. Creating innovation teams and addressing the "lack of time" barrier

  2. Holding employees accountable and providing persuasive prompts for innovation

  3. Recruiting, rewarding, recognizing, and developing innovation champions

An empirical study of over 800 organizations found that effective innovation characteristics are not the same for product innovation and process innovation. For example, the research demonstrated that increasing problem-solving freedom among employees decreased product innovation.

We can help you cultivate a culture of innovation

Organizational culture is often complex to describe making change difficult and confusing, while busy leaders and employees lack access to high-quality training, proven tools, and over-the-shoulder guidance necessary to create positive culture change.

Our solutions accelerate positive culture change, create committed employees, and drive your business growth.


Beswick, C., Bishop, D., & Geraghty, J. (2015). Building a culture of innovation: A practical framework for placing innovation at the core of your business. Kogan Page, Limited.

Cantaragiu, R., & Hadad, S. (2013). The importance of play in overcoming fears of entrepreneurial failure. European Conference on Knowledge Management, 833.

Çokpekin, Ö., & Knudsen, M. P. (2012). Does organizing for creativity really lead to innovation? Creativity and Innovation Management, 21(3), 304-314.

Gierczak-Korzeniowska, B., & Gołembski, G. (2017). Benchmarking in the process of creating a culture of innovation in hotel companies. Economics and Business Review, 3 (17)(2), 101-113.

Hjeltnes, A., Binder, P., Moltu, C., & Dundas, I. (2015). Facing the fear of failure: An explorative qualitative study of client experiences in a mindfulness-based stress reduction program for university students with academic evaluation anxiety. International Journal of Qualitative Studies on Health and Well-being, 10(1), 27990-27990.

Kollmann, T., Stöckmann, C., & Kensbock, J. M. (2017). Fear of failure as a mediator of the relationship between obstacles and nascent entrepreneurial activity—An experimental approach. Journal of Business Venturing, 32(3), 280-301.

Loeb, W. (2018). Amazon Is the biggest investor in the future, spends $22.6 billion on R&D. Forbes.

McKinsey & Company. (2021) Global innovation survey.

Schein, P. (2017). Organizational culture and leadership (5th ed). Wiley.

Tucker, R. B. (2008). Driving growth through innovation: How leading firms are transforming their futures. Berrett-Koehler Publishers, Incorporated.


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About Dr. Jeff Doolittle

He is the founder of Organizational Talent Consulting in Grand Rapids, MI, and Program Director of online graduate and continuing business education at Olivet Nazarene University in Bourbonnais, IL. Executive leaders who work with Jeff describe him as thoughtful, decisive, intelligent, and collaborative. Jeff is a business executive with over twenty years of talent development and organizational strategy experience working with C-suite leaders in Fortune 100, Forbes top 25 private, for-profit, non-profit, and global companies in many industries.

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