This is the seventh of several Innovation Perspectives articles we will publish this week from multiple authors to get different perspectives on How should firms develop the organizational structure, culture, and incentives (e.g., for teams) to encourage successful innovation?. Here is the next perspective in the series: by Willings Botha and Andreas Constantinides
Innovation is one of the most important pillars on which successful companies rely on. Employees are the vital component in the innovation equation. Therefore, it is of utmost importance for a firm to have the right organizational structure, culture and incentives in place in order to allow its employees to be innovative and perform to their maximum ability. Organisational structures can be classified as either mechanistic or organic. Mechanistic structures have high degrees of formalization and standardization and information flow tends to be unidirectional top-down. Furthermore, employees in mechanistic structures are constrained to conform to their job descriptions and there is tight control through sophisticated control systems. On the other hand, organic structures tend to be more free-flowing and have low degrees of formalization and standardization. Employees with expertise and knowledge are influential, irrespective of their hierarchical position.
The communication channels in organic structures are open and allow free information flow and exchange of ideas. Practice has shown that organic structures are more conducive in promoting and recognizing the potential for innovations. Organisational culture is also a very important characteristic of innovative firms. The general firm culture should be inspiring to employees, encourage risk-taking and experimentation and tolerate failure. Employees should learn from failures in order to improve chances of success in the future. The firm should also put great emphasis in training and education of employees in order to improve their technical skills and creativity techniques. Managers should be concerned with how to improve the skills of individuals and teams and how to enable their participation and commitment to innovation. They should realize that innovation is not innate or instinctive, but a skill, like carpentry or accounting, and as such it needs to be learned. Set rules or principles should support innovation and idea management. The culture should also allow teams to look for innovative ideas and concepts outside the firms boundaries. These can be either done by establishing synergies with other firms or by posting their research problems on electronic marketplaces for ideas, such as InnoCentive. Finally, innovative culture leverages on diversity, cross-pollination of ideas and cross-functionalism.
Apart from the organisational structure and culture, motivation and incentives also play a big role in promoting and enhancing innovation. Basically, there are two types of motivation extrinsic and intrinsic. Extrinsic motivation comes from the outside; it can be a promise of a reward or a threat of punishment that drives employees or teams to do something in order to get something desirable or avoid something painful. Intrinsic motivation, on the other hand, is built on a passion, an interest and an internal desire to do something that no one has been able to do before. Alternatively, intrinsic motivation can be thought of as a drive to do something primarily by interest, satisfaction and mere challenge of doing it and not by external push. Intrinsic motivation is what is essential for innovation. At a firm level, this can be achieved by continuously seeking to make innovators feel good about their achievements; recognition can take the form of a special mention or a technology award. Furthermore, innovators may be placed as leaders of teams responsible for taking their innovation to market. Firms should try everything possible to keep money out of the innovation equation because practice has shown that monetary incentives do not necessarily promote innovation.