Innovators not only recognize the role that fear plays but also invest in building corporate cultures that focus on success with a thoughtful design of employees’ emotional journey. Worrying about failure and criticism holds many people back from embracing innovation. Today, you will learn the five fundamentals of innovation culture.
As reported by McKinsey & Company on June 3rd, 2022, by Laura Furstenthal, Alex Morris, and Erik Roth.
Fear factor: Overcoming human barriers to innovation
Five years ago, Alex Honnold scaled the sheer face of the 3,000-foot El Capitan escarpment alone and without ropes—the only person to have ever done so. Honnold has great skill and discipline, but he is also blessed with a special brain: an MRI scan has shown that his brain doesn’t register fear.
Innovation may not put you at risk of sudden death, but it is anxiety inducing nonetheless. It is more ambiguous than any other business activity, requiring bold bets in the face of uncertain outcomes and a willingness to persevere despite setbacks, criticism, and self-doubt. Which is why most teams, in moments of honest self-reflection, will agree that fear can paralyze innovation. In fact, 85 percent of executives we recently polled agree that fear holds back innovation efforts often or always in their organizations. Average or below-average innovators are three times more likely than innovation leaders to report this phenomenon. Yet nine out of ten organizations are doing nothing to allay these fears. In essence, they are counting on having Alex Honnolds among them to spearhead initiatives that others dare not attempt.
Given innovation’s critical importance to driving growth, that is a risky strategy. Leading innovators not only recognize the role that fear plays but also invest in building corporate cultures that pair the infrastructure necessary for success with a thoughtful design of employees’ emotional journey.
To understand what a successful innovation culture entails, we conducted a survey and in-depth interviews with executives around the world responsible for leading and executing innovation projects inside large organizations. We then looked for differences between how leading innovators (organizations ranked in the top quintile of innovation) and all others tackle the fears that can hobble innovation efforts.
We found that the culture and employee experience of innovation correlate highly with an organization’s overall success at innovating. At the same time, fear is a constant for almost all practitioners. However, there are big disparities in the nature and intensity of that fear, as well as in how companies temper its negative impact.
What are we afraid of?
Fear is a complex and personal topic—what intimidates or paralyzes some can motivate others to act boldly. In aggregate, however, our research shows that three fears hold back corporate innovation more than others: fear of criticism, fear of uncertainty, and fear of negative impact on one’s career. Individuals working at average or below-average innovators are two to four times more likely than those working at leading innovators to cite these fears as barriers to innovation.
We were intrigued to find that the fear of career impact emerged as the biggest differentiator between those who work at top innovation companies and others, being 3.6 times more prevalent. Such worries have predictable consequences. When we believe our decisions can put our advancement or compensation at risk, loss aversion takes the steering wheel and drives us to hedge our bets. This results in employees being reluctant to fully invest (or gamble) their careers on innovation, let alone on a single innovation project.
Leading innovators are much more successful at alleviating these career concerns by making innovation an explicit requirement of professional success. For example, these companies are 2.9 times more likely than average and lagging innovators to expect executives to demonstrate innovation initiative in order to advance.
The second-biggest human barrier to innovation is difficulty dealing with uncertainty and loss of control. Such fears trigger the ambiguity effect, a cognitive bias that leads us to avoid options with uncertain outcomes. Management executives seeking more control over outcomes often prioritize incremental innovations they perceive as less risky or push teams for assurances that their projects will pay off, producing the counterproductive result of less experimentation, less-ambitious ideas, and less creativity. To allay their fear of uncertainty, some leaders treat past market dynamics as predictors of future performance—a risky assumption, particularly in dynamic times.
This fear plagues average or below-average innovators almost three times as much as it does leading innovators. Employees of top innovators are 11 times more likely than those at other organizations to say that their organizations incentivize risk taking and five times more likely to report encouragement of experimentation. Leading innovators also have a more nuanced understanding of which experiments can be reversed (as most can) and which ones are commitments to scale.
Fear of criticism, the third big hurdle to innovation, is something we all feel to some degree. Group conformity and tribalism are basic survival instincts, but these tendencies can imperil companies’ innovation success. Industry norms shape employees’ sense of what is possible, discouraging them from bringing forward ideas that sharply break with convention. When ideas do materialize, people water them down to fit those norms. This conformity bias leads us to follow the crowd, even if it is to our organization’s detriment.
As with the other two fears, leading innovators are much better at easing these trepidations, with 1.5 times fewer executives reporting them than those at other organizations. Employees of successful innovators are also three times more likely to say that their organizations make it easy to critique ideas openly.
Left unchecked, these and other fears can compound into large cultural barriers, transforming initial enthusiasm for innovation into apathy. Indeed, executives at innovation outperformers describe work environments filled with positive energy and enthusiasm and identify creativity and excitement as the top feelings associated with innovation (see sidebar, “Five ways to move past fear”).
Five fundamentals of innovation culture
Organizations wishing to build a thriving culture of innovation need to be systematic and intentional. Our research and client experience have shown that all high-performing innovators embrace to various degrees five dimensions of innovation culture (exhibit). 
Believe and value: Our analysis of companies’ stated corporate values shows that the world’s 50 most innovative public companies hold innovation as a central value three times as often as the rest of the S&P 500. Leaders of these organizations then cascade those values into the on-the-ground employee experience. One industrial company has made innovation one of its four core values and has put it at the heart of achieving its purpose. It goes so far as to describe innovation as a “moral responsibility.”
Frame and champion: It is up to the CEO to build optimism and consistently encourage risk taking by framing innovation as fundamental to the organization’s success. Echoing Thomas Edison’s words, “I have not failed. I’ve just found 10,000 ways that won’t work,” the chief executive of one global technology company has the mantra “failure is the successful discovery of something that doesn’t work.” By evangelizing stories of past, present, and future innovations (both from within and outside the organization), leaders can also expand employees’ views of what is possible. An executive at a global consumer-packaged-goods company told us that the organization used to have a narrow definition of innovation: line and brand extensions. “We have since undergone an innovation culture transformation,” she reports, “and the stories we share about innovation are now much broader and focused on new business models, go-to-market models, and cross-functional ideas, especially around digital.”
Signal and symbolize: Leading innovators understand that symbols hold great power and that companies can leverage symbols to reinforce the primacy of innovation. Ten times as many practitioners at these companies as those working at less mature innovators report such practices. Symbols can be physical, verbal, or action oriented, such as the CEO frequently visiting sites where innovators work. “A lot of the fear goes away when the CEO is plugged into your agenda,” says an innovation executive in the transportation and logistics industry. Another potent symbol is status: Does the organization confer recognition and rewards on innovators? “The more you can ascribe currency to innovation, the better,” the head of strategy for a global video game developer told us.
Show and ritualize: To make innovation the norm rather than an occasional endeavor, companies should establish routines and rituals such as innovation days, hackathons, and meeting-free days that senior executives lead or at least participate in to signal innovation’s central role. One technology executive says that innovation rituals are pervasive at his company, including regular innovation days during which “colleagues and teams explore interests and uncover ideas that may not be road-mapped yet.” These sessions often yield unexpected discoveries that lead the organization to reprioritize its next wave of projects. The head of innovation at a 150-year-old insurance company, meanwhile, has instituted a rule designed to encourage brainstorming among his team. “Tearing down ideas is easy, sharing them is harder, so when a new idea is shared, the next five comments have to be supportive and build on it,” he says.
Shield and empower: The experience of innovation inside most organizations is emotionally fraught. Among average and lagging innovators, fear, anxiety, and frustration rank as the feelings employees most associate with innovation; joy, inspiration, and courage are among the least. Of course, fear can motivate. One executive at a global fintech company told us that every week, his team has to present a new product idea to the CEO, “and the CEO destroys you or praises you. The pressure is intense.” While the fintech’s fear-based culture seems to produce results, our research shows that only 11 percent of companies with high-fear cultures are leading innovators versus 58 percent of companies with low-fear cultures.
By building a sense of belonging and safety through a shared commitment to innovation, companies give employees the assurance that it’s OK to experiment, ask questions, and provide feedback. Leaders of top innovators destigmatize failure, sometimes putting in place mechanisms (such as Amazon’s Correction of Error memos) designed to capture lessons from missteps while rewarding learning. “There is always an opportunity to say, ‘I don’t think that is working’ and to try to make it better,” one executive reports. “You will get the resources you need to try it. There is an abundance mindset and a strong permissiveness around failure.” Another innovation leader shares, “There is a sense of safety and security present in the organization that creates the trust that lets people take risks—like loving parents and children. Security breeds trial and experimentation.”
By providing employees with psychological safety, an innovation-centric purpose, and explicit encouragement and rewards, management can help them find the courage to risk failure in pursuit of creative ambition. Only by addressing the fears that hold people back from experimenting can companies build a true innovation culture. Leading innovators understand that innovation will always entail risk and that—unlike fearless climber Alex Honnold—their employees do feel fear and do need the innovation equivalent of protective gear if they are to dare scale the rockface of uncertainty.
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