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The word “innovation” gets overused these days. It’s an all-purpose word that leaders use to describe how they’re thinking about business in a forward-looking way to keep customers happy and the organization at the top of its game. There’s also no denying that building a culture of innovation is at the top of most corporate agendas. 

The problem is one key group of stakeholders often gets left out when we talk about innovation.


The Most Crucial Ingredient to Business Innovation: Your Employees

They should be at the center of any strategy involving change, transformation and, yes, innovation. After all, employees are on the front lines. They’re the ones making innovation happen. They’re uniquely positioned to understand the intersection of business operations, product development pipelines, and customer demand. New growth ought to be spurred from within the organization. But far too many companies fail to truly appreciate this. It’s why attempts to build a culture of innovation – where employees share new ideas and then develop more efficient processes to bring breakthrough solutions to market – often fall flat.


One of the biggest problems with innovation efforts is that they’re top-down, or “center-led”, as one PwC leader described it. Employees are expected to “stay in their lane” and not contribute their ideas more broadly. But by highlighting the different areas in which employees can be involved with innovation, and emphasizing that their ideas are wanted, companies can help employees add value wherever they have deep knowledge and a desire to get involved. 

When you push employees to think outside of their own boundaries, their efforts can take the company in directions that were previously unthinkable.  Such “citizen-led” innovation is much more fruitful.

Companies may invest in innovation programs to bring in new ideas, but that won’t happen if individuals don’t have the necessary skills or tools to bring those ideas to fruition. This means organizations need to develop a process where they’re allowed to develop traction.

There’s no silver bullet or single right way to build a culture of innovation. But here are five strategies that your organization can consider when laying the groundwork and involve your  most valuable assets – employees. 

Be clear on what kind of innovation you want to foster. 

Yes, innovation can often equal the development of new products. But this means that employees with non-customer-facing roles are either left out or forced to brainstorm new product ideas despite a lack of knowledge about customer needs. Business strategies tend to align with a need for bottom-up innovation across several domains – most notably the 4 P’s: profit models, processes, products, and policies. By highlighting the different arenas in which employees can be involved with innovation, companies can help employees add value in areas where they have deep knowledge. Microsoft’s innovation team does it differently. It actively encourages employees to get involved with three forms of innovation: product, business model, and policy. This is why Microsoft, which is in the midst of a remarkable rebirth as a high-growth company, has moved in new directions, business lines, and thinking. For example, earlier this year the process helped bring free versions of Office to the Android and iOS platforms. That idea previously would have been unthinkable at Microsoft.

Empower champions to drive change. 

The reality is that while a company may preach the benefits of innovation, middle managers are still tasked with ensuring day-to-day core activities are running smoothly. They have little desire or capacity to create change or jeopardize mundane responsibilities for unproven innovation efforts. That’s why employees often get an early “no” from their direct supervisors, return to their day jobs, and decide not to further waste efforts on unproven methods. They feel like their voices aren’t being heard. That’s why Capital One has institutionalized “innovation champions” within the company. These are people who help identify change agents within the workforce. Innovation champions help employees find friendly spaces to test their new ideas, while also providing a level of protection against managers who are focused more on day-to-day deliverables.

Invest in your employees and their skills.  

No industry has been impacted more by the rapid developments in technology than the banking sector. DNB ASA, Norway’s largest financial services group, has created a culture and management structure to increase the pace of innovation that not only keeps its customers satisfied but its employees thriving. The Norwegian bank has been able to accomplish this by strengthening specific areas of competency, including technology and data analytics, hiring practices, and upskilling staff through continuing education. As part of a digital transformation initiative, DNB has adopted a data-driven approach that not only optimizes and automates operations for sustainable business growth, but enhances the customer experience.

Create a safe space for experimentation.  

I hinted at this in No. 2. While a number of companies have embraced Lean Startup principles around fast and cost-effective experimentation, many stop short of providing a truly safe space to experiment. Cheap tests are good … as long as they’re successful. But that’s not how experimental really works, is it?  Despite the rhetoric that’s shared publicly, failures usually are not embraced as learning opportunities. They’re still regarded as failures. That’s a problem. It creates fear among those who might otherwise conduct worthwhile tests that ultimately help prevent the organization from over-investing in long-term, risky projects, and discourages the reasonable risk-taking we all claim to embrace.   

Redefine metrics and incentives.  

New innovative or emerging projects often struggle because they are judged by the same metrics used to evaluate established activities by the business. New initiatives can’t compete at the same level, and they’re killed off before they’re given a chance to prove themselves. Performance metrics often suffer from the same problem. While employees are told to be innovative, their performance goals and compensation packages don’t create incentives to do so. Be willing to redefine how as an organization you measure new initiatives.

Employees universally feel safer going with the status quo. It’s just human nature. Change is risky. It makes us nervous to raise our hand and stand out in the crowd. Going with the flow makes it less likely to lead to visible errors. (And thus, at many companies, blame). 

So, if you want employees to experiment, they have to know that their innovative efforts will be free from repercussions. The reality is that no matter what the industry, your company’s future success depends upon its ability to harness the power of emerging technologies like artificial intelligence and data science. To do that, you’ll need a workforce with the technical know-how for designing, deploying, and maintaining these systems as well as the soft skills for doing what machines simply can’t. When you create a learning culture, where upskilling is encouraged and available, employees are more likely to experiment and innovate.

There are no limits on what they can do when relevant training is available that’s designed to help them be more competitive and further their own careers.

How are leaders in your organization driving this culture?

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Lalit Singh
Lalit Singh
Lalit Singh is the Chief Operating Officer at Udacity. Prior to joining Udacity, Lalit led the digital transformation of HPE’s software business from on-premise and disjointed systems to the seamless and scalable cloud and SaaS-based architecture. Lalit began his career at GE across leadership roles in Customer Service, Engineering and Lean Six Sigma. He holds a B.S. in Electronics Engineering from Lucknow University and MBA in Finance and Marketing from Indian School of Business, India.