I’ve incentivised innovation, why aren’t my employees innovating?
Despite attempts to portray the opposite, traditional financial organisations are struggling to innovate. In fact in many cases they are having to spend a fortune simply to stand still. As we highlighted in our recent report, this is due to three principal reasons:
Short-sighted funding models which privilege short term gain over long term success
Legacy ways of working which inhibit productivity
Technical debt from dated infrastructure
I spent ten years working for a major global bank, most recently as the Head of Intrapreneurship, where, amongst other things, it was my responsibility to remove the cultural blockers to innovation (with mixed results!). So I can offer some deeper insight into why legacy ways of working are preventing your company from innovating as I’ve been helping companies around the world to do so for the past 5 years.
What’s important to note here is that creating cultures of innovation isn’t solely about process and structure – it’s wider – it’s about the ‘water cooler’ conversations, the day-to-day interactions - what I call ‘soft’ culture. This moves beyond the more tangible elements of ‘hard’ culture - formal incentives to innovate and innovation processes - and focuses on how you create a truly empowered employee base in the day-to-day reality of an organisation. Put simply, hard culture is more about what it’s like to work in an organisation and soft culture is how it feels.
creating cultures of innovation isn’t solely about process and structure
This is also the reason why many interventions to create cultures of innovation have failed. They have focused solely on the ‘harder’ side of culture and not the softer side.
Here are four changes your organisation can make in parallel to the recommendations set out in our report (Rebuilding financial services from the inside) to enable you to innovate more effectively.
1. Stop focusing on products over people
We spend too much time focused on products rather than the people behind them. Innovation is inherently a human endeavour, we’ve been doing it for hundreds of thousands of years and yet seem to forget that behind great products are great people. As a result we spend a lot of time focusing on improving product development processes rather than developing the capabilities of the humans behind them. Great people will deliver cool things if you give them the space and training to do so. Process helps to guide them but it is not the driving factor in your ability to compete.
This is not to say that thinking differently about product development processes isn’t helpful. It’s just that there is only so much red tape traditional financial institutions can/should remove when a key part of their competitive advantage is trust and conservatism. So increasing the entrepreneurial capabilities of your employees to create products effectively within conservative frameworks is key. Further, by offering this training to your entire organisation, you’ll increase your ideation capacity. Thinking along these lines often comes under the heading of ‘intrapreneurship’.
New entrants to financial services are solving the new problems faced by customers more quickly than traditional financial institutions. This is partly because they are better at having human-centric product development approaches internally. They empower, train, and support their employees to be human and thus develop products that people actually want.
2. ‘Entrepreneurship’ needs to be viewed as an individual mindset rather than purely an organisational capability
Whilst I am a huge advocate of ‘internal entrepreneurship’, or intrapreneurship, it’s wrong to see this solely as a capability of an organisation rather than seeing it as an activity carried out by individual employees. Entrepreneurs are people in the same way intrapreneurs are people. Focus on developing entrepreneurship from the bottom up, at the scale of the individual intrapreneur, versus solely as a top-down umbrella term. Cultural transformation itself is both a top-down and a bottom-up activity. The difficulty, and the opportunity, is in coordinating between the two. It is important to prioritise human agency in your culture and develop this through both hard and soft approaches. The soft side is particularly important as, at the individual human level, incentivising people to be ‘innovative’ alone isn’t innovating.
Cultural transformation itself is both a top-down and a bottom-up activity.
3. Enable innovation to become a discretionary activity rather than making it compulsory
Attempts to incentivise innovation can often make it appear compulsory. In my experience this can actually be restrictive to innovation rather than enabling because it prevents innovation from becoming a discretionary activity. The advantage of enabling product development to occur within discretionary organisational space (DOS) is that this is proven to increase creativity. Secondly it also puts maths in your favour as it enables an entire employee base to get stuck in rather than product managers alone.
As an ‘intrapreneur’ I have spent a lot of time in DOS. Whilst it certainly helped me to be creative it also threw up some unexpected blockers. Part of the drive to be intrapreneurial is a desire to operate autonomously within the sphere of an organisation which, by its nature, has a desire to control. Too much autonomy can also be restrictive to progress. This is because the semi-governed nature of DOS leads to some strange dynamics where, amongst other things, the norms of organisational hierarchy go out of the window. This is good on one level but I found it means new cultures and norms need to be built. Of course this is positive in many ways but it’s also something of an unexpected burden, particularly when building organisational culture is not something you have experience of doing. The lack of structure can be inhibitive as there is no pathway to follow. Thus, paradoxically, the lack of structure is both an attractive quality and a blocker to progress.
Organisations need to think about how they structure DOS so that it still feels autonomous but also has enough structure to make delivery possible.
4. Start telling the right stories about innovation
Innovation is often portrayed as something of a ‘heroic endeavour’ rather than a human experience. I find the narratives we use often under sell the difficulty of innovating inside a corporate organisation. They ignore the human side of the story and focus instead on the output. A recent piece of research I conducted showed that there are negative mental health implications of getting this wrong. Innovation is a human journey, not just a case study. Let’s celebrate it, yes, but in a way which is a true reflection of what actually happened. Show the failures, celebrate them to a degree... but without the BS. Contrary to what you often read, celebrating failure for failure’s sake is not overly useful in creating a culture of innovation. Sharing the learnings and how they can be applied is.
Similarly viewing ‘innovation’ as a commodity and talking about it as something which can be obtained, or something which is solely judged by the output is unhelpful. We need to see innovation as a continuous process not an outcome in itself.
So, where to from here?
Empowerment is a core tenet of digital culture which sits right at the heart of the 11:FS ‘pyramid of culture’.
In order to truly empower employees, and create a culture of innovation, it is important to look at both ‘hard’ and ‘soft’ culture. It is also important to look at culture transformation as both a ‘top-down’ and ‘bottom-up’ activity and come up with a plan to coordinate between the two.
To remove some of the soft blockers to innovation it is important to empower your employees to become ‘entrepreneurial’ to navigate through organisational inertia. In my experience, the best way to develop entrepreneurial mindsets in your organisation is not through classroom learning but through experience. This involves setting up a number of curated experiments which enable experiential learning to occur. Issue problem statements to your employees and get them working on solutions side-of-desk. Don’t take the best ideas off the employees who conceived them but rather train, and empower the source of ideas, no matter what level, to develop them.
To respond to an increasingly dynamic world corporations must not just innovate how they innovate...but also innovate their cultures. Innovating culture can be a competitive advantage. In fact, it might become THE competitive advantage in saturated markets. The companies who recognise that they need to dedicate time and resources to cultural innovation now are likely to have an edge on the competition in the future.