Sunday, May 19, 2013

Creating an Innovative Corporate Culture

One of the most enjoyable and important parts of starting a new business is creating a “corporate culture”; in other words, an environment in which your employees are able to perform at a peak level with the least supervision while developing new products and services that meet the needs and wants of customers while growing your business.

That being said, it’s not always easy to make this happen.  Many if not most businesses are so driven by the day by demands that little thought is given to where the company is going and how it’s going to get there and by what route.

For example, innovation is always a hot topic in the business press.  How does a company foster innovation?  The short answer is by creating a corporate culture in which innovation is encouraged and rewarded.  Research shows that people innovation when they are given the freedom to explore those things that interest them based on their internal motivation.  Telling people that they must innovate actually stifles innovation.

Corporate Culture Is The Most Important Factor In Driving Innovation
According to a study published by Rajesh Chandy, a professor of marketing at the University of Minnesota's Carlson School of Managemen, Gerard Tellis of the University of Southern California, and Jaideep Prabhu of Cambridge University, "Corporate culture is, above all, the most important factor in driving innovation."

"It is important to realize that all innovative companies look alike. They share a common culture no matter where they are located," states Chandy.

Looking at data from 759 firms across 17 countries the researchers found that location is not the determining factor in the degree to which any given firm is innovative; but rather, innovative firms share key internal cultural traits such a “product champions, incentives and an ability to change quickly with an eye to the markets of the future.”

Owners and managers “have control over the fates of their firms in that they can help build a culture of innovation."

So How Does an Entrepreneur Develop an Innovative Culture?
According to research published in March, 2013, if a company wants to develop something radically new they should not listen too much to what the customer wants, according to a study on service innovation.

It has become increasingly popular for companies to cooperate with their customers.  This has even led to the term co-creation, which is about how companies and customers can create experiences, new products and services together.  Research has previously shown that under the right circumstances customers can develop products which are both creative and have greater value for the users that what the company's own developers come up with.

Professor Anders Gustafsson at BI Norwegian Business School and Karlstad University in Sweden believes that profitable co-creation with customers largely concern communication and interaction between the company and its customers.

How should companies communicate with their customers? When is it profitable to listen to what they say?

Dialogue with customers
"Having a good and extensive dialogue with customers is viewed as a success factor when companies are developing new products and services," says Gustafsson.

Gustafsson, together with researchers Per Kristensson and Lars Witell at Karlstad University, have conducted a study to find out how you can communicate optimally with the customers to achieve successful development of new products and services.

The researchers conducted a survey among 334 managers who all had experience with innovation to create new products and services.  The researchers selected 284 real development projects that they divided into two main groups:
  • Incremental innovation: 207 of the projects dealt with minor improvements of products or services.
  • Radical innovation: The remaining 77 projects dealt with development of radically new products or services not previously known to the market.
Customer conversations can create value
The BI researcher and his colleagues have looked at how a company communicates with customers. Both how often and in what manner, as well as the actual content of the communication.

The study shows that companies can achieve better results in its product development if customers are given the right pre-requisites for participating actively in the company's development processes.  The gain is in the form of enhanced creativity, improved user value and a more successful launch.

For minor improvements to products and services it is advantageous to talk frequently with the customers and have two-way communication between the company and customers. The researchers also saw that it is wise to listen carefully to what the customers actually said.  Users will often know better what is needed to make them even more satisfied with products and services. Customers will also be able to tell you what types of improvements they are willing to pay for.

On the other hand, the study shows that no particular means of communication make a positive contribution to successful innovation.

Don't listen to your customer
When a company aims to develop a product or service entirely new to the market (radical innovation), it can still be advantageous to talk frequently with customers.

The company can familiarize itself with the customer's situation through frequent communication and obtain a better understanding of what is important for the customer. 
Companies that listen too much to what customers say are less successful.

On the other hand, you should not listen too much to the customers' specific proposals. The researchers saw that companies that listened too much to what customers said were less successful with radical innovations than those which placed less emphasis on the contents of conversations.

"The customers base themselves to a great extent on previous experiences. The really radical solutions are difficult for customers to imagine because customers base their observations on experiences with current products," Gustafsson points out.

To Boost Customer Satisfaction, Pay Attention to Employee Job Satisfaction
"You might think that as an owner, you only need to pay attention to the customers, providing them with what they want. Yet, in a study published the Journal of Service Research in 2011, researchers found that keeping your employees satisfied with their work experience, providing them with challenges and allowing them to have a sense of ownership in the business can have a tremendous effect on customer satisfaction and loyalty," said Christopher Groening, assistant professor of marketing in the Robert J. Trulaske, Sr. College of Business.

"The link between customer satisfaction and customer loyalty is almost twice as strong when you have high employee satisfaction compared to when they are not satisfied with their jobs  The relationships among the CEO, the employees and the customers are all linked. It's important for CEOs to know that they can have a large impact on customer service without ever talking with a customer or implementing a new customer service policy."

Following his study, Groening recommends the following actions to increase employee satisfaction:
  1. Train and empower employees so they have the tools to make decisions. This allows them to make decisions that are beneficial for the company and each individual customer -- instead of following a simple flowchart and possibly upsetting a customer with the final outcome.
  2. Hire managers who serve as examples and also can be mentors with employees. If a company policy is established, it should be honored by managers as well as employees.
  3. Managers should help employees know what is expected of them in order to advance in the company.
  4. Create good working atmospheres. Offer incentives or intangible benefits, such as flexible working hours, if possible.
"While many of these actions might seem like common sense, they can be very difficult to maintain," Groening said. "It's also very important to hire the right people in management positions who will take part in these activities -- for example, serving as mentors -- or employers might have difficulty meeting their goals."

Unique Research On Inner Life of Google
"Google's organization and its capacity to boost innovation in the company has developed and changed with time, which is necessary in a changing world."
Google is one of the world's most innovative companies. Why? Ask Swedish researcher Annika Steiber at Chalmers University of Technology. She has been seeking answers inside the company's headquarters Googleplex for nearly a year for her thesis that was published in 2012. No other researcher has ever had such access.

On site in California Annika Steiber has spent nearly a year studying how Google is managed and organized so as to be able to maintain its high innovative capacity. The study is based on in-depth interviews with 28 employees. Among other things, they were asked to rank various possible explanations for Google's success in constantly developing new services that people want to use.

"Many factors play a huge role, above all the corporate culture that the founders brought with them from the outset and that has then been deliberately developed to steer the whole company in the direction of constant innovation," says Steiber.

"It's also striking to see the focus Google has when it comes to bringing in the right individuals to the company and developing them."

These two factors interact. The status of the individual is very strong at Google. The company devotes great resources to comprehensive recruitment processes in which many associates have their say in order to bring in the right people for the organization. Thereby the company ensures that people with differing experience and backgrounds come to Google, at the same time as they cultivate a shared set of values regarding behavior among colleagues, but also toward the outside world, according to Ms. Steiber.

Being Googley
The organization is also structured to reinforce the culture and to help its individuals to perform and create innovations in line with the company philosophy. Being "Googley" means that an employee behaves in accordance with company values. This concept is internally documented today at Google and consists of eleven "characteristics." Three of them are,
  1. having a passion to change the world through the Internet,
  2. being smart, and
  3. being non-political.
  4. Another value is "Don't be evil," always do good.
Many interviewees testified that they were attracted to the company because of these stated values.

One of Google's primary focuses is to retain its unique and strong culture, which functions as a daily guiding rule for all employees and generates desired behaviors. To this end, the company has created the role of Chief Culture Officer, CCO. It has local culture teams all over the world. The company also monitors, in a transparent manner, that employees observe the company's stated values.

The attitudes and composition of top management -- and also its board -- are the foundation of Google's drive for innovation, according to Steiber. The founders are also the creators of the company culture. Many of today's values are based on convictions that the founders had when they started the company. These values are now well integrated in the management style, organizational structure, processes, and incentives, Steiber concludes.


  1. Radical Innovation in Firms Across Nations: The Pre-eminence of Corporate Culture. Journal of Marketing, December 2008
  2. Anders Gustafsson, Per Kristensson, Lars Witell. Customer co-creation in service innovation: a matter of communication? Journal of Service Management, 2012.
  3. H. Evanschitzky, C. Groening, V. Mittal, M. Wunderlich. How Employer and Employee Satisfaction Affect Customer Satisfaction: An Application to Franchise Services. Journal of Service Research, 2010.
  4. Swedish Research Council (2012, April 23). Unique research on inner life of Google. ScienceDaily. Retrieved May 19, 2013, from

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