Confessions of an Entrepreneur: Fostering Creativity and Innovation

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Ask most entrepreneurs and business owners if they think creativity and innovation are important and they will most certainly say it is.

Unfortunately, just as is the case with many of the same business’ diversity and inclusion efforts, people often talk a better game than they actually do. In short, many firms could do much, much more to make creativity and innovation real and a part of their organization’s culture.

“Organization culture," for the purposes of this essay, is defined as the organization’s “way of life” and what is valued there. What types of behaviors are rewarded, and what types of behaviors are punished?

Here are my thoughts and observations on some of what characterizes the organizations that tend to be the most successful in developing a culture of creativity and innovation:

1. They have open management versus arrogant management.

I’m not sure I can add a lot to this statement. I think anyone who works in an organization could tell you whether or not their management is open to new ideas or if they think they already know everything and are afraid to do anything different.

Arrogant management is quick to discount anything new or innovative unless they are the ones who came up with it.

I am sure when I was a younger manager I was overly confident and self-assured and wasn’t as supportive of new ideas coming from anyone else as I should have been. Fortunately, as I matured and found myself heading up a larger business every year, I figured out I couldn’t do everything myself and came to value the contributions of others more and more over time.

2. They have a diverse workforce.

Striving to assemble a diverse workforce is politically-correct today — no question about that. You will see many companies “virtue signaling” by issuing statements about their commitment to that idea.

But while that is a worthy goal in and of itself because it is the right thing to do — there are many other benefits of a diverse workforce. The diversity of our culture in the United States is one of the reasons we have always been leaders in creativity and innovation. Monocultures, where the bulk of the members have the same racial/religious and cultural backgrounds, tend to be more conforming and less supportive of new and innovative thinking.

3. They hire people from outside their industry.

One way to get new ideas is to bring people in from other industries. Sometimes when people work only in one industry they can get myopic and conditioned to all of the conventional or prevailing wisdom about how things should be done. That doesn’t encourage creative and innovative thought.

This is a huge problem in the architecture and engineering field where I spent my entire professional career. Management of firms in that “industry” are quick to discount or disregard how things might be done in other industries and as a result, too many of these firms do things exactly the same way their competitors do.

4. They have a culture of experimentation with "freedom to fail.”

Again, this the politically correct thing to say if you run a business today, i.e., that you want your people to have freedom to fail. But saying it doesn’t make it real. If the reward system is tied strictly to meeting short term profitability goals that is what you will get — short-term profitability.

And my contention is that if that is the preoccupation of your people you will not have any time or resources to devote to experimentation and any experimentation that could cost you in terms of short-term profits will be discouraged.

Worse yet are the companies where those who do experiment within certain constraints and fail are actually sanctioned.

5. They bake in a need for “new.”

One way to do this is through the strategic planning and annual business planning processes. Are all line and staff units required to come up with new ways to do things, new products and/or services to sell, and new ways to market them as a part of their formal management process?

I have found this very effective. Any company I was leading had a requirement for “new” in each unit’s business plan every year.

And we never published unit profitability nor rewarded that. The focus was on achieving certain qualitative goals as an organization in its entirety vs pitting silos against each other to get a bigger piece of the profit pie.

6. They actually reward creativity and innovation.

Those individuals who demonstrate these qualities are promoted and paid better than those who don't. Management “talks them up” both inside and outside of the organization. And those individuals who exhibit these qualities are also supported, i.e., they get more time, manpower, monetary and other resources so they can continue to be creative and innovative.

7. They function more like a small organization than a large one.

The fact is that firm size is a factor. Larger organizations tend to become less innovative over time. Flatter organization structures with fewer layers from top to bottom have fewer people to go through to effect change. Younger organizations have less sunk costs into legacy systems and are less set in their ways.

You can look at nearly any industry and see that much of the “new” comes from younger and smaller companies. That shouldn’t be the case, as the larger organizations have more resources and should theoretically be in a better position to spend more time and money on R&D and other efforts to create “new” than smaller ones. But too often it doesn’t work that way.

Just look at Tesla and how they have become the most valuable automaker in the world when they were only created in 2003 and entered an industry dominated by a few well-funded major players at that time.

One thing we can all agree on — creativity and innovation won’t happen if you do things the way you always have done them. It starts at the top and takes more than just talk.

There are some specific actions management can take to create a culture that encourages and supports it!