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  • Writer's pictureYoram Solomon, PhD

What is the best time to build a culture of innovation?

You already know that “culture eats strategy for breakfast.” When do you start paying attention to your company’s culture and changing it?

My research made me realize that the reason people are more creative when they work in startups than when they work in mature companies is due to the difference in culture of those two types of companies.

I don’t need to convince you that this is the case, right?

The culture puzzle

The culture, for the most part, is made of five elements: autonomy, bureaucracy, constructive conflict, office politics, and the one that is the foundation for all of those, trust(or lack thereof). Trust interacts with the other four pieces of this puzzle.

Office politics and bureaucracy erode trust. The existence of trust, on the other hand, increases the ability to conduct constructive conflict and the autonomy that management gives employees, which is desperately needed for them to be creative and productive.

Startups have it right. They have the right culture, as a result — as my research showed — their employees are more creative, and their companies are more innovative. Something happens, as they reach maturity that kills that culture, and you must fix it if you want the amazing financial results that come with innovation.

An old Chinese proverb states that “the best time to plant a tree was 20 years ago. The second best time is now.” So when is the right time to change your organization’s culture?

Stages in the company’s life from startup to maturity

The following info-graphic shows the stages in a company’s culture life cycle.

At first, a startup has the “right” culture. Management gives employees the autonomy they need. Constructive conflict is the only way they conduct business. There is hardly any bureaucracy or office politics. Nobody has time or inclination for those.

  1. As the company reaches maturity (measured by time, number of employees, or revenue), it becomes overweight with bureaucracy (policies, regulations, processes, and formalization), almost to the point of not being able to move. At the team level, constructive conflict gives way to political correctness and office politics.

  2. As a result, creativity breaks down. And non-innovative companies have smaller market shares, less revenue, and less profit than their competitors.

  3. Unfortunately, the decline of those companies starts with revenue decline, and follows with cost cutting. While revenue declines are immediate, cost-cutting efforts typically take time. Letting people go typically involves a period of time and severance pay. That continues to burden expenses for a longer period of time, which causes the company to be in a constant state of loss all the way to crossing the viability level (in the wrong direction) and its demise.

  4. Some mature companies realize they have a culture problem, and start correcting it. Albeit not impossible, it requires a lot of hard work. Habits, behaviors, policies, and processes that became ingrained in the culture must be all but eradicated. Management’s actions are faced with skepticism and disbelief. Changing the culture at this point is hard. Very hard.

The right time?

However, the problem starts much earlier. As the company starts its growth (stage 5 in the info-graphic), past the viability line (in the right direction), its culture begins to decline. The employees you hire join the company for the salary, and less for the vision. You hire executives from large companies who bring bureaucracy with them.

At this early stage, all it takes is a little “nudge” (arrow 7) to keep the culture innovative. It is a lot easier to do it then before bad habits and behaviors develop.

Once the original founders-entrepreneurs of the company realize the nature of the company has changed, it’s time to make changes that will assure the startup culture is maintained, albeit at a much larger scale (the purple line).

(Note: this article was originally published at Innovation Excellence. You can find it here.)

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