What do Innovative Work Cultures and Inclusive Work Cultures Have in Common? –R-E-S-P-E-C-T
I. Most organizations fail at becoming innovative or diverse, for similar 
reasons.
Many leaders say they want their companies or agencies to become “more innovative.” Most of their initiatives will fail because the leaders themselves won’t be willing to make the changes necessary for creating cultures that are conducive to innovation. (The term “innovation” means much more than breakthroughs in new products and services. Most often, it relates to the continuous improvements that streamline processes, lower costs, and improve customer satisfaction.)1
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With for profit companies, failures to maximize both efficiency and adaptability in a rapidly changing world often results in financial losses that end in closures or takeovers.(40% of companies in the S&P 500 will fail in next ten years; projections are even higher for small businesses and startups.) 2
Similarly, many leaders talk about “increasing diversity.” Some are motivated to jump on “the diversity train” in order to improve public relations or because it seems the thing to do. They may have heard that companies that reflect society’s changing demographics sometimes grow market share. (Especially through the use of Employee Resource Groups (ERGs).)3 For whatever the rationale, most organizations fall short of significantly increasing diversity across their workforce and within senior management.
Here again, the failure is due to the general unwillingness of most leaders to do what it is required of them to embed the inclusion piece of “Diversity & Inclusion” (D&I) into their cultures. Human resource departments can recruit for candidates from varying identity groups all day long, but if the work environment is not one in which all employees feel included, meaning that they know their perspectives and input matter, the best and the brightest won’t stay longer than they have to, regardless of their cultural or gender identity groups. In many “top-down” organizations, a substantial percentage of employees “check out” and do only enough to get by, while counting the days until they can go elsewhere or retire.
What is the common thread to these two “failures to launch”? — A lack of respect and trust. The inability to create either innovative or diverse environments both result from deeply entrenched hierarchical approaches to management. “Hierarchy” is actually the polite or PC (politically correct) term for “elitism.” Most management in the U.S. is still based on 
the 19th century industrial elitist model, which maintains that the smartest people should be running things from “the top,” and employees’ roles are merely to carry out the instructions of the smart big bosses. Management typically believes their superior capabilities entitle them to be paid considerably superior salaries. (Sometimes, the organizational benefits of their tenures are irrelevant; thus, the “golden parachutes” even for those who bring financial ruin to their companies.)
“Respect” is an organizational value commonly cited in annual reports and on company plaques, but top-down management approaches neither reflect trust nor respect for rank and file employees. Given that the “important thinking” is left to those up the food chain, employee voices are generally absent from the table, other than when absolutely necessary (i.e. unions) or for show. “The mindset is that managers have all the answers and their jobs are to dictate them — not to learn from workers. These beliefs run very deep in most organizations.” 4 As a result, the trust or respect employees might have for senior management is limited, as is their would-be engagement.
II. What is Missing? Both Innovation and Inclusion Require Listening, which is tied to Respect and Trust
Although command and control leaders generally assert that departmental “silos” 5 are necessary for efficiency, these structures actually serve to control the flow of communications and ideas in order to maintain the power dynamics. They inevitably slow everything down due to continual bottlenecks.
Continuous improvement requires the input and creative problem solving from workers throughout the organization. Innovation is generally the result of a diversity of perspectives from numerous people asking questions and looking at issues with fresh eyes. “Kaizen” is the Japanese word for “improve.” Through rigorous application of the Kaizen system, each employee at Toyota is expected to submit no less than nine ideas per year on ways to do everything more efficiently. And thus, Toyota has become known as the most efficient car manufacturer in the world. (Yorke & Bodek: All You Gotta Do Is Ask)
There is nothing either mysterious or elusive about employee engagement. ”Carrots” are not required. Employees invest a considerable amount of their waking hours and their skills into their jobs. The future and security of their livelihoods are linked to decisions made by management. And so, it is only natural that they feel a sense of ownership and organizational pride when they are respected enough to be included in important discussions that tie to the success of their companies or agencies. As the book title above reflects, if you want to engage employees, “All you gotta do is ask.”
III. Success in both Diversity and Innovation Management Requires Courageous Captains to Venture Beyond “The Known World”
There are countless documented examples of companies becoming highly profitable industry leaders as the result of leadership initiatives that flatten organizational structures and apply Servant Leadership6 or other collaborative management models (i.e. Southwest Air, Toyota, Harley Davidson, Starbucks, Whole Foods, and Virgin Air). So why does resistance continue to persist within the wider managerial field? Senior managers generally pride themselves on their rationality. But where is the logic in ignoring all of the data gathered by innovative organizations and in resisting recommended best practices and the opportunities they present?
2,500 year-old lessons from The Buddha: When people are not behaving in constructive or rational ways, there are generally strong underlying emotions at work. There is a Buddhist teaching that I find valuable for “root cause analysis.” It asserts that all human behaviors result from one of two sources: they are either motivated by fear, or love. The object of our love can be humanity, learning, trying new things, adventure, creating, making a difference in the world, and so on. At various times, we have all been animated and driven by this kind of love, which has been at the center of human advancement for millennia. Love is an expansive and outward energy.
However, when we turn away from options that positively affirm and help others or that would allow us to grow in new ways, our decisions are fear-based. Fear causes us to shrink away from others or opportunities and go into “self” protective mode. It is a contracting energy. Things such as self-centeredness, deception, and betrayal are manifestations of fear, but fear is the underlying driving emotion.
The ongoing entrenchment of command and control management that flies in the face of potential benefits for our workforces, organizations, missions, and society, is due to leaders’ fears. The fear may be of not having full control of outcomes as processes become more collaborative or experimental, or uncertainty of one’s role as leader when information becomes more 
transparent and solutions emerge from across the organization. Or there may be trepidation of working with employees or colleagues whose ethnic, religious, or gender identities differ from one’s own and of saying anything that displays a lack of awareness. It is sad that there is so much truth to the saying, “Better the devil you know, than the devil you don’t.” Initiatives to create more inclusion are often sabotaged by managers who find themselves outside of their comfort zones, because one foot never leaves the old, known turf. Without 100% commitment on their parts, there are too many mixed signals. Incremental approaches to the necessary management and organizational culture changes generally fail.
It is not that the leaders of innovative and inclusive organizations have never experienced any trepidation in democratizing their organizations. Most humans go through some amount of self-doubt when venturing onto unfamiliar ground and sensing the loss of full control. As has been said, courage is not the absence of fear, but rather learning to face one’s fears and insecurities, and forging ahead despite them. These leaders recognize and value the opportunities that increased diversity, inclusion, collaboration, and agility present to their organizations, and then push beyond their own fears, learning to navigate through increased ambiguity,7 and embracing the collective magic their teams create.
Leaders Eat Last: Unfortunately, most MBA programs spend far more time teaching students to correctly interpret balance sheets than to substantively explore the role of character, integrity, and courage in leadership. Regardless of one’s political persuasions, many of us would agree that integrity is in increasingly short supply among our political and corporate leaders. Our captains of industry and the public sphere would benefit from the training that our captains of the military receive. In his book, Leaders Eat Last, leadership consultant Simon Sinek shares some of the valuable lessons he gleaned from interviews with admired leaders from both the military and other fields.
As Sinek explains, standout leaders create "Circles of Safety” that foster trust and cooperation throughout their organizations. Good leaders earn respect, not through their rank or prestige, but through the respect they demonstrate towards those within their charge. These leaders know that respect is not an abstract concept, but is known through its actions. Taking their responsibilities for their teams seriously, they insure they have the tools they need to do their best work, listen to their input for operational improvements, provide them with opportunities to develop and lead, and are open to learning from them. The respect exhibited from the leadership for those in the ranks increases success throughout the entire organization.
IV. In closing: Choosing Respect and Trust, and Following Through
In order to help their organizations to gain the benefits of diversity and innovation, organizational leaders need to start by making a basic choice: hierarchy or inclusion.
They then must commit and follow through with the path they have chosen.
Many managers are not ready to lose the comfort of top-down approaches to running their organizations and to support broader participation and input from their employees. And that is certainly their choice to make. Institutions have succeeded for decades and centuries using top-down approaches. – However, the cost to maintain a higher level of predictability is that other possibilities and agility are lost. There may come a time that such organizations will lose capacity and/or be forced to close their doors for failure to adapt. The managers of these organizations should simply recognize that the benefits of diversity and innovation that they say they want will remain out of reach.
There are other leaders whose desire for the benefits that increased diversity, inclusion, and innovation can bring is greater than their fear of change and uncertainty. They are willing to make the necessary adaptations within themselves, and then to the structures and cultures of their companies or agencies. Fortunately, they will have at their disposal numerous roadmaps left behind by those who co-led their organizations to new levels of success based on the basic principles of mutual R-E-S-P-E-C-T. These principles are the DNA, the thread that binds leaders with employees, teams, and potential with a thriving future.
Sing it – Aretha! 
3. Employee Resource Groups are voluntary identity or interest-based groups that organize to provide professional development support to members, while providing their organizations with ideas related to recruiting, on-boarding, marketing, and service ideas for current prospective identity-based customer groups.
4. https://hbr.org/2011/06/how-toyota-pulls-improvement-f
5. Siloes are distinct hierarchical departments in which all information must travel up and down that department’s chain of command, and communication between departments by lower level employees is frequently discouraged.
Originally posted August 2011. Revised January 2018.
A colleague told me he hadn’t realized that when I talk about innovation I am often referring to improvements in processes, workflows, and efficiency, in addition to new product and service developments. So, let me set the record straight.
According to The Oxford American Dictionary, innovation is defined as: n. Change, alteration, revolution, upheaval, transformation, metamorphosis, breakthrough; new measures, new methods, modernization, creativity, ingenuity, inspiration….
Therefore, "change" and "new methods" can be something as modest as altering the steps in verifying data to ensure greater accuracy, or ordering a piece of equipment so that fewer people need to be involved. Minor “tweaks,” collectively, can be world changing. Toyota became the largest and “most efficient” car manufacturing company in the world not based on revolutionary, head-turning Tesla-like designs (although it has certainly has had breakthrough designs of its own). What Toyota has mastered is a whole other realm of innovation:
"… Small incremental innovations [have] snowballed over time into huge improvements in productivity, efficiency and output."
Improving Processes — Keeping it Simple in the Spirit of "Kaizen"
It is important not to conflate an openness and commitment to improving processes with adopting formal process improvement systems such as Lean and Six Sigma. A future blog post will provide a high-level overview Lean and Six Sigma, as well as Agile. In short (while there is some interrelationship between them) these are disciplined, multi-step methodologies for revealing and eliminating: a) waste in time, energy, and resources (Lean); b) inconsistencies in production quality (Six Sigma), and c) for speeding up development and leaning cycles (Agile). The latter, Agile, has been primarily used in software development, but many believe its use would improve the outcomes and efficiency of most projects.
There are times when these frameworks utilize creative thinking, and at others, the intense drive for speed and exact measurement can stifle it. In order to maximize the benefits of divergent thinking, depending on the stage of the cycle within any one of these methodologies, process leaders must hold fast to a commitment to balance, and ensure there is sufficient time for the creative ideation and reflection process.
Toyota has honed each of these systems to a high art. But they are viewed only as tools within their overarching approach called "Kaizen,” which is Japanese for “change for the better” or “continuous improvement.” Kaizen itself is not a specific tool, but rather, it is a mindset or value system, and a "journey."
With the belief that everything can be improved and performed more efficiently, and that continuous improvement is everyone's business, just as the stand-out leaders in the IBM CEO study did, Toyota requests every one of its employees to help "identify problems and then develop and implement ideas to solve [them]." (My most recent information estimates all Toyota employees contribute an average of ten improvement suggestions per year, from line-workers, to administrative assistants.)
In the spirit of Kaizen, in this article, we are referring to improving processes in its simplest form. On any given day at our work, most of us have ideas pop into our heads for how things could be more efficient or effective. Innovation management expert Langdon Morris writes that “seeing things as they are and things as they could be” is the creative tension that is foundational to innovation.
Many American companies that have adopted Lean and Six Sigma tools have fallen short of achieving the results that their Japanese counterparts have. Some ascribe this to a failure to fully understand the art of kaizen and the balance between:
- Applying the rigorous systems of Six Sigma, and Lean
- With taking adequate time for divergent thinking and stepping back
- With drawing creative continuous improvement ideas from the ingenious rank-and-file humans who come to work for them every day.
Unless leaders put processes in place for employees to share their ideas, and then to vet them and experiment with those that may be viable, rhetoric aside, they are not creating innovative workplaces. The cost of not implementing these is a tremendous loss of brainpower, opportunities, and financial and human resources. Regardless of what great employee benefit programs are offered, their organizations' rates of dissatisfaction and turnover will be higher than had they engaged the talents of their employees in continuous improvement.
Other Forms of Innovation:
Now that we've explored the over-arching concept of process improvement, let's look at some other viewpoints. Brownell Langdrum of Draw Success (www.DrawSuccess.com) supplemented her own list of types of innovation with those generated by a group of chief innovation officers from companies such as Google, Mattel, and Hewlett-Packard. A few of these are included below; some overlap, and some "hairs might be getting split." But it's an interesting prompt for thinking through the various areas where we can take our questions and wonder if there might be better ways… (In looking at her full document, you will find that some of the descriptions are quite original themselves.)
Improvements in internal operations:
- Efficiency Innovation delivers ways to improve efficiency and the speed of effectiveness. It can include internal systems and processes or ways to expedite the customer/client experience.
- Financial Innovation conveys ways to increase sales, reduce costs, improve tracking of expenses, and reduce accounts receivable, along with other ways of managing finances to enhance profitability. It also includes ideas to improve tax/audit compliance.
- Process Innovation encompasses the implementation of a new or significantly improved production or delivery method.
- Systems Innovations includes introducing a new infrastructure or system, which could produce new sectors, and induce major change across several areas of business.
And now for the Flashier forms of Innovation:
- Breakthrough, disruptive or radical innovation: These involve launching entirely novel products or services. Breakthrough innovations are rare because of the risk and uncertainty, but they can deliver tremendous rewards. They require large leaps of thought and a high risk tolerance.
- Business Model Innovation involves changing the way business is done, whether in terms of sales and distribution, marketing, pricing or any other core business strategy.
- Incremental Innovation is when one adds something extra to a product or service that the competition doesn't have or isn't doing. Or, when one makes something last longer, makes it more convenient, or faster.
- Marketing Innovation involves development of new marketing methods with improvements in product design or packaging, product promotion, communication or advertising, pricing or distribution.
- Product Innovation is the introduction of a good or service that is new or substantially improved, which may include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.
- Service Innovation: Compared to goods or product innovation or process innovation, service innovation delivers ways to improve the delivery of a service or expertise and is both interactive and information-intensive.
- Technological Innovation may include coming up with new technologies to solve a problem or new uses for existing technologies. Solutions may be high-tech (i.e. computer systems) or low-tech (a better mouse trap).
In summary, when hearing or using the term “innovation,” be aware that it often refers to simple improvements in workflows and processes. Creating environments that challenge all employees to help lead continuous improvement can result in organizational benefits that go far beyond what any one mind could ever have imagined.
While doing research for a training program I delivered last week on structures and processes needed for organizations to shift their cultures so they become conducive to creative thinking and innovation, I came across a sobering 2010 report compiled by the Boston Consulting Group (BCG). Although 51% of the global leaders polled in the IBM CEO study said they didn't believe their organizations were prepared to succeed in the increasingly complex global environment (second blog post), this BCG report summarized below makes the IBM study look like a Hollywood romance by comparison.
As I wrote in the launch of this blog, my interest in and commitment to this topic comes from a deeply-held conviction that our imminent economic future as a nation depends on U.S. organizations getting on board the innovation train, quickly. Certainly for me, the BCG study strongly reinforces that perspective. In addition to the business case, when it comes to our myriad environmental and social problems, as Albert Einstein said, "We can't solve problems by using the same kind of thinking we used when we created them."
(The report is cited by permission of The Boston Consulting Group. Click on the link below to see the full report.)
"Innovation 2010: A Return to Prominence–And the Emergence of a New World Order":
Working in partnership with BusinessWeek and its Market Advisory Board, The Boston Consulting Group (BCG) conducted a survey for the seventh year in a row, gathering input data from 1,590 executives from around the world representing a range of markets and industries.
This most recent 2010 report postulates that as a result of the U.S. and other mature economies' general lack of commitment to and investment in innovation, "a new world order in innovation is taking hold, one in which rapidly developing economies (RDEs), led by China, India, and Brazil, will increasingly assume more prominent positions, while the United States and other mature economies continue to play major roles but gradually become less dominant." (p4)
Apple and Google were ranked by international executive respondents as the two most innovative companies, with Apple once again as the hands-down winner (a rank it has held in this survey since 2005). Yet, more than half of those who participated in this survey expect that U.S. will lose its standing as the leader in innovation within the next five years.
These predictions are similar to the warning flags waved by Thomas L. Friedman in his book, The World is Flat. Among the precipitous trends, Friedman points to:
- America having recently slipped from 1st to 4th place in the number of patent applications.
- The increasing dearth of math and science students training in U.S. universities just as our nation’s top scientists prepare to retire.
- Tightened U.S. immigration policies that have caused a significant drop in foreign math and
students attending American universities and who now have considerable job opportunities in others countries that are investing more heavily in innovation.
- And funding cuts to the National Institutes of Science.
If these trends remain, then it only goes to follow that American business will lose even more of their global market shares with our nation losing considerable economic strength.
Implications for Leaders:
BGC attributes the low level of U.S. investment in innovation to companies “hedging their bets about the economy” with incremental improvements versus “moving aggressively to discover, invent, and capitalize on new growth areas.” The report ends by offering the following recommendations to business managers in the established economies who have yet to “fully come to grips with” the consequences of not making innovation strategic priorities.
1. Becoming better at innovation is probably the single most important thing that you can do this year. (p20)
Why? Although you survived the Great Recession – so did your competitors. Like you, they too largely "mastered the cost, productivity, and operational excellence playbook." However, many of them, upon realizing they had survived, saw innovation as a top strategic priority and started investing heavily in it around the middle of 2009. If you are not one of those companies – you are about a year behind (when this report came out, mid 2010).
2. If you don’t get better at innovation, your boss (or board) will eventually either stop spending money on it – or find someone who can improve things.
“Part of the issue may be that most companies can’t even define what they really mean by innovation, let alone measure it. And while there is no right or wrong definition, you do need a definition that everyone agrees on and that aligns with your company’s strategy.” – Get a clear, shared definition. (p21)
3. Top management is really going to have to get its head in the game this year.
“In every highly innovative company we know, the CEO truly has innovation near the very center of his or her radar screen. Indeed, the difference between a company whose CEO and leadership team have an “all in” mentality regarding innovation and one whose leadership supports innovation merely at an abstract level is unmistakable – and so is it’s impact on culture and results.
If you think your company can win at innovation without your being truly committed, you are wrong and will be increasingly exposed. Too many companies are being led by fully committed and engaged leadership teams that have linked innovation to the company’s business strategy, put in place the needed measurement systems, and are investing to see the results.” (p21)
4. Your company cannot afford to cut back on its innovation investments in the BIC countries and other RDEs.
If you thought competition was tough in the past, just wait. …As can be seen from our list of the most innovative companies, the “BIC*-plus” world has arrived on the innovation front and is quickly moving into the mainstream. *(BIC stands for Brazil, India, and China.)
‘To deal with this new reality, you need to increase your investments in these countries, not decrease them. …Lower your investments in these countries at your own risk.” (p21)
The report concludes:
“Keeping pace, let alone flourishing in this environment will demand a two-pronged attack. Your company needs to be actively innovating both in and for the slower-growth, mature economies, which remain very large and profitable. Simultaneously, you need to be ever more focused – no matter how focused you think you already are – on the much faster-growing developing economies, especially China, India, and Brazil, with their promise of large markets and newly innovative competitors. Striking the right balance here will obviously be highly challenging. But the potential competitive rewards of hitting the mark are vast – as is the downside of coming up short. Indeed, skillful leadership in innovation has never been at such a premium.” (p21)
Dramatic natural disaster photos aside, I hope I've won over a few more believers that we need to rally and inspire others and send wake-up calls around our organizations that the time is upon us to do whatever is needed to engage the other half of our brains.
With the belief that everything can be improved and performed more efficiently, and that continuous improvement is everyone's business, just as the stand-out leaders in the IBM CEO study did, Toyota requests every one of its employees to help "identify problems and then develop and implement ideas to solve [them]." (My most recent information estimates all Toyota employees contribute an average of ten improvement suggestions per year, from line-workers, to administrative assistants.)
