Innovation: Why culture is key

New Booz and Company research on public companies supports what many leaders have known all along: culture is the key to innovation. They might know it, but surprisingly few manage to align their company’s business and innovation strategies with corporate culture, Booz’s 2011 Global Innovation 1000 has found. Worse, nearly 20 per cent of respondents said they didn’t have a well-defined innovation strategy at all. Two findings stand out: there is no statistically significant relationship between financial performance and innovation spend, and “culture matters, enormously”. In fact, the authors say, “companies with both highly aligned cultures and highly aligned innovation strategies have 30 per cent higher enterprise value growth and 17 per cent higher profit growth than companies with low degrees of alignment”. While spending on research and development increased during the survey period, that doesn’t automatically translate to financial outcomes. Pharmaceutical, IT and auto companies dominate R&D spending, yet when respondents were asked to nominate organisations they thought the most innovative, only three appear on both top 10 lists: Microsoft, Toyota and Samsung. Yet again, 3M was included among the world’s most innovative companies, despite coming in at 86 for R&D spend. Chief Technology Officer Fred Palensky credits 3M’s collaborative approach. “Our success is driven much more by culture than it is by structure or organisation,” he says. As well as its much-emulated program allowing technical staff to spend 15 per cent of their time on individual projects, 3M has more than 300 joint programs with various divisions and businesses. “All of this creates a community of collaboration,” Palensky says. “It ensures that everybody has some skin in the innovation game.”

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