Perks Don't Make a Culture Innovative — Here's What Does

In one of my more cynical moods, I wondered whether it’s even possible to innovate in the enterprise. There’s certainly reason to believe otherwise — large organizations are struggling more than ever to maintain leading market positions. In 1958, the average tenure of S&P 500 firms was 61 years; today it is 18 years.

The fallen are the Blockbusters that resisted technological evolution, confident that sheer mass would carry them forward. They’re even the Kodaks, which had the billion-dollar idea in hand and then shelved it for fear of self-cannibalization.

Today’s enterprises must act like startups to survive. Scale, structure, and process rigidity kept incumbents ahead in yesterday’s production economy; in our information economy, innovation and agility matter more. By lowering barriers to production and consumption, digitization has given the edge to startups.

The Culture Problem

To be clear, enterprises have plenty of advantages. Large teams, established processes, deep pockets, and industry connections provide a generous head start. So why are today’s S&P 500 firms so young? Why are market leaders struggling to stay ahead?

For a company — enterprise, startup, or anywhere in between — to innovate purposefully and regularly, three foundational systems must be in place. The first is a technology platform to support rapid development and deployment. The second is a set of processes that support strategic alignment, quality, and agility.

The third system is people. This is culture, and it’s the hardest of the three to get right. Although it’s uncouth to say in certain circles, the fact is that corporate culture can be toxic to innovation.

The true heart of corporate culture is risk mitigation. Complex chains of approval discourage experimentation. Risky but novel thinking is squelched by a pervasive “failure is not an option” mindset. Such a culture protects the company in the short term, but it does so at the steep price of squashing new ideas.

The Answer Isn’t Perks

Unsure of how to create an innovative culture, enterprise leaders look around them. They see confident, failure-friendly startups with ping-pong tables, beer coolers, and plush lounges.

Sure, perks may make for a fun workplace. They may even be table stakes to compete with startups for talent. They’re irrelevant, though, to innovation. The psychological environment, not the physical, is the one that matters in terms of innovation.

My team and I recognize that bright ideas require just the right conditions to mature into full-blown innovations. That’s why we’ve created an environment for ourselves (and our clients, who we invite to work from our studio for the duration of a project) that fosters innovation. We’ve built it with the following four tenets:

1. Maintain regular customer contact.

Whatever we’re working on, we meet with users each week for their feedback. Our clients are experts in their fields, but we’ve found that their expertise often blinds them to the layperson’s (read: user’s) perspective.

When designing something, step into the user’s world. Without listening to users, there’s a very good chance you’ll come up with a product that’s technically brilliant — and ultimately useless to them.

We learned this lesson the hard way. Recently, we designed an app to help a client’s outside salespeople collect customer data. Although we worked diligently to understand the client’s customers, we forgot to talk to the app’s users: the client’s salespeople.

The first iteration was wildly underused. Our concept was strong, but it impeded interactions between the salespeople and their prospects. Had we consulted those salespeople the first time around, we wouldn’t have made the mistake.

To codify customer contact, hire a user researcher (or tap an existing team member) to do field work. Ethnographic exploration — whether by phone interviews, house calls, or online surveys — is key to creating accurate user personas. Keep them top of mind throughout the design process. If you get stuck in a creative rut, go visit the people you’re trying to reach.

2. Give makers a seat at the table.

For all of the hype around agile design and development, most companies still develop products linearly. Executives craft a strategy, vice presidents plan initiatives around it, managers organize it, and designers and engineers implement it.

In the industrial age, this worked; in the information age, it does not. Today’s world moves too quickly for yesterday’s linear methods.

Now, corporate strategy must be flexible and iterative, evolving as new information is uncovered. The reality is that much of that information is found on the factory floor. Yet without understanding the strategy behind what they’re making, makers can’t offer useful improvements.

Philosophie recently designed a crowd-pleasing game for the Mobile World Congress, but it almost didn’t happen. We had a lot of latitude in creating the concept, but when we presented the idea, the client worried that the booth experience would be too gamelike for telecom customers. We explained that user feedback led us to believe otherwise, and sure enough, the game was a hit with conventiongoers (and a data goldmine for the client). We’re working to bring the same game concept to several international retailers this fall.

Let makers lead your next low-stakes project. Define the problem, but don’t offer any solutions. Set ambitious deadlines, and be clear about how success will be measured. Then, meet frequently with the people who are actually doing the work, not just the project manager. You might be surprised by how they solve the problem.

3. Be flexible.

Corporate life is about minimizing risk. This isn’t a bad idea, per se, but innovation requires risk. Well-intentioned technical restrictions can shackle designers and engineers who may see other solutions.

Makers do their best work when given broad parameters, not arbitrary constraints. Innovation happens when they’re blissfully ignorant of compliance, financial, and scaling issues. Those things matter, of course, but software can be refactored or revised if an initial concept proves successful.

Amazon CEO Jeff Bezos calls this the “explorer mentality.” Rather than prescribe fixed goals and solutions, he lets his team members prospect for other answers. It’s open-ended, it’s risky, and it feels scary to managers who want control. But Bezos considers it fundamental to Amazon’s culture.

To balance risk and innovation, sometimes you have to get creative. Philosophie recently worked with a major accounting firm on an app for small business owners and freelancers. All things financial are highly regulated and require legal review, and we didn’t want to damage the company’s brand. It was hardly a recipe for flexibility.

To find flexibility, try letting engineers choose their tools. Or partner with a third-party firm (or even a startup) for your next pilot project to chop out sluggish processes. Avoid using your company’s brand, infrastructure, or existing customers.

4. Celebrate failure.

I saved the hardest part for last. Failure is the bread and butter of makers. But it’s anathema to shareholders, executives, and other stakeholders seeking short-term gains.

At Philosophie, we approach every project expecting our first ideas to fail. In fact, we regularly use a technique called “time-boxing” to push ourselves forward. We place aggressive time limits on meetings, decisions, and deliverables to fend off the fear of failure.

We don’t always get it right. But by time-boxing ourselves, we limit the fallout from failure. Innovating often means moving in the wrong direction to find the right route.

For instance, that app we made for the outside salespeople that flopped the first time? We learned more through failure about the app’s necessary workflow and the salespeople’s needs than if we’d simply asked our client, “What are your needs?” at the start. That initial “failure” was actually a small investment in the app’s long-term success.

Companies that punish employees when they fail impede breakthrough innovations. Instead, identify well-intentioned failures and reframe them as useful experiments. Share the makers’ lessons in an all-hands meeting or internal email. Use a “best failure” award to gin up healthy competition.

Change Is Hard, Not Impossible

It’s easy to get cynical like I did about enterprise innovation. What corporation would ever encourage failure or bring a lowly engineer to a corporate strategy meeting? If that’s what you’re thinking, I implore you not to lose hope.

A Philosophie client works at one of the world’s oldest and most conservative companies. For him, staying relevant in the digital age seemed impossible. The company had struggled to transform itself for years. After just a year of working with us, he’d turned a two-person innovation team into a 40-person organization that he ran out of our office.

Talented, creative entrepreneurs exist within every enterprise. All they need is the right environment to shine.