Sustained innovation is the outcome of an organizational culture

Culture is everything. Ultimately what any company does when it is successful is merely a lagging indicator of its existing culture – Satya Nadella, CEO of Microsoft

Creative Churn

In the Age of Unicorns and Decacorns, disruptive startups displacing established industry giants across diverse domains, markets, and geographies is the norm. Exponential technologies and business model innovation has led to the emergence of new leaders (such as Uber, Airbnb, Facebook, Netflix, Amazon, Salesforce etc.) and creation of entirely new markets that didn’t exist before. This era is also marked by ever shortening lifespan (or longevity) of companies. Consider the following stats:

• Average tenure of a company in S&P 500 was 33 years in 1965

• In 2016, it was 24 years and forecast to be around 12 years by 2027

• In 2017, 26 companies exited S&P 500 and 26 companies entered the list

Source: Innosight

Technology and business model disruption is happening at an unprecedented pace, never seen before in human history. This churn not only resulted in the creative destruction of companies such as Eastman Kodak, Blockbuster, Yahoo and many others, but also simultaneously led to the emergence of new giants!

Built to last – a few giants from the past are still standing!!

In spite of the massive corporate churn that we are in the midst of, a few iconic businesses from the past are still standing pat on their feet, and some of them were founded in the 19th century!! Companies such as Pfizer, Procter & Gamble, Toyota, Microsoft  and many more continue to impress with their ability to withstand fierce competition and thrive.

Most of these companies were led for sometime by charismatic founders who were perhaps instrumental for their initial success. Over a period of time, all these companies became huge multinational corporations, with thousands of employees and $ billions in revenue. Even after they have far outgrown the sphere of influence of their founder leaders, they continue to be remarkably successful.

What’s the secret for their longevity?

In any industry, maintaining leadership over the long run is a tough task. Other than entrenched monopolies and/or commodity-driven businesses, most companies which managed to survive and succeed over the long run, have one crucial common characteristic that separates them from the rest – their ability to innovate, and that too consistently. Success of those companies is the result of a culture of sustained innovation and not the result of an isolated burst of inspiration.

Culture drives innovation

Whether it is the Toyota way, Google way, or Microsoft way, these iconic companies which have stood the test of time, have established a robust culture of innovation, that transcend individuals and is deeply embedded into their organizational DNA. And it is this culture that drives innovation at these iconic businesses, and also helps them sustain it over a long period of time.

I don’t believe in the myth of ‘Lone Genius Innovator’. Even though significant discoveries or innovations could result from individual brilliance, making a success out of the innovation is invariably result of a collaborative, team effort. Therefore, it goes without saying that when a team is involved, the way things are done (in terms of process and routines) become as important as who does it. In a nut shell this is what organizational culture is.

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Cultural manifesto

Even though having the right organizational culture is equally important in any industry or domain, it is critical in innovation-driven domains such as software products and services. I believe that the following building blocks are essential to build and nurture an organizational culture that can drive and sustain innovation:

• Hire good people with the right skills and values!

• Adopt a disciplined process, smart routines, and a culture of continuous improvement

• Value team accomplishment rather than individual success

• Embrace risk-taking and accept failure

• Maintain organizational flexibility and avoid cultural lock-in

I strongly believe that this cultural manifesto enables companies to create, nurture, and sustain a robust culture of innovation, and will help them deal with the breath-taking technological advances and disruptions in the market. These building blocks will play a crucial role in creating the right organizational culture, which is essential for sustained innovation.

History has proven that companies with the right organizational culture are better prepared to deal with disruption, respond to fast-changing market conditions, take advantage of new opportunities, survive and thrive for a long time. Those who fail to develop the right culture will be footnotes in history!!