Innovation is essential for building a healthy, competitive company. Yet many businesses seem to go out of their way to stifle transformative ideas. Here are some major culprits and how to turn things around.

Innovation is one of the most popular words in global business. Companies love innovation. They promise it, commit to it, and even embrace it. Yet when employees or business partners propose a truly innovative tech idea, the businesses often rush to crush it. Unintentionally, of course.

"Culture eats strategy for breakfast," observes Ganes Kesari, co-founder and head of analytics and innovation at Gramener, a data visualization and analytics services firm. Kesari believes that innovation tends to be the biggest casualty of an inhospitable culture. "As organizations scale up, a shift toward a rigid, process-driven culture, standardization, and inadvertent hierarchy slowly snubs out innovation," he says.

Contrary to accepted logic, it's often the successful enterprise that gradually becomes the least innovative. "When a company becomes successful or, even worse, tremendously successful, the priorities of the business can change," says Jon C. Wolfe, CEO of business loyalty program consulting firm House Advantage. Objectives grow more tactical and innovation takes a back seat. "It happens so gradually that you look up a couple of years later and your product hasn't had any lightning bolts in it in quite a while," he notes. "New features and customer requests are introduced, but that's hardly innovation."

Are innovation-killing practices holding back your company's ability to leverage digital disruption? Watch out for the following five warning signs.

Failing to cultivate an innovation-focused enterprise culture

Innovation is fueled by change agents. "These are employees who espouse the spirit of curiosity and experimentation," Kesari says. "Leaders should make room for these people to survive and thrive to keep the flame alive."

Innovation begins with a value system and hiring people who believe in it and can bring it to life. "When opportunities arise, you review them with that same team of people," Wolfe notes. "Innovation is like date night after you've been married for a while—you have to make time for innovation."

Wolfe urges business leaders to periodically rekindle their organization's innovation fires. "You can't wait for innovation to find you again," he says. "You have to recommit to the effort so that lasting results can be achieved."

Innovation is like date night after you've been married for a while—you have to make time for innovation. Jon C. WolfeCEO of business loyalty program, House Advantage

For many large tech-focused businesses, optimization and reliability are core capabilities, with services delivered efficiently and reliably, observes Kristian Simsarian, founder of Collective Creativity, a firm that helps businesses transform into innovative organizations. Innovation is, at best, a secondary consideration for such enterprises. "The quest for efficiency and optimization is often in tension with experimentation and can squash a promising avenue before it leaves the Post-it Note or laboratory," he says.

It takes a strong, confident leader to resist the urge to push innovation aside in exchange for short-term security. Consider Nokia: "Leadership in 2007 had the answers but prioritized the cash flow of the low- and mid-range cell phone market, making cell phones that were not connected to Internet services with a great UX," Simsarian says. The company began collapsing shortly thereafter, seeing its sales volume drop 47 percent from 2008 to 2012. Nokia sold its handset business to Microsoft in 2013 for $7.2 billion (a deal the software giant eventually wrote off as a loss).

Punishing innovators

Communication and sharing are acts of trust, and no one wants to feel rejected. "Leaders must learn how to foster communication to a point that even a new idea that's not accepted is respected so your staff will want to bring you more," advises Karolyn Hart, founder of InspireHub, a team communications platform developer. "If you long for true innovation, you must start with building a culture of respect."

Team members want to feel confident and comfortable with the knowledge that even if they fail, they will not be ostracized by their colleagues. Free thinking and new ideas should be applauded, says Kristina Podnar, digital policy consultant at NativeTrust Consulting, a digital governance advisory firm. Sometimes, the reward is nothing more than fun. "Throughout history, we see organizations succeeding when they encourage fun, and that fun breeds creativity," she observes. "It is the job of executives and leaders to set that tone, enabling the organization to establish boundaries and then encourage digital innovation."

Innovation, by its very nature, requires an environment where mistakes are seen as steps toward success. "We've discovered that having an understood process around mistakes that's taught to each employee is critical to fostering innovation," Hart says. "We teach staff when something goes wrong to blame the process first and then to do a review on where the process failed."

While employees who propose useful innovations are honored with bonuses and recognition, that's not what they really need, Wolfe notes. "Innovators should be rewarded with freedom, flexibility, room to work, room to make mistakes, and resources to expand their efforts," he says. "Those are the things that really matter to innovative personalities."

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Failing to develop and nurture innovation programs and teams

Innovation teams can be enormously productive when structured correctly. A successful innovation team performs three basic tasks: absorbs needs from all parts of the business, creates ideas that meet identified business goals, and catalyzes leadership and other stakeholders to execute plans, explains Sib Mahapatra, co-founder of tech office furniture start-up Bureau. "To do this well, the team must be empowered and encouraged to build relationships cross-functionally at every level of the organization," he says. "Unfortunately, many innovation teams answer only to the executive team, which does them no favors."

Hart points to Thomas Edison and his legendary Menlo Park research staff, developers of multiple disruptive technologies, such as the incandescent light bulb and gramophone, as an example of what a fully dedicated and supported R&D team can achieve. Unfortunately, smaller enterprises generally lack the financial resources to field a full-fledged idea team. "For most companies, this is not a reality, and it becomes less of a reality the smaller your organization," Hart notes. "In this case, the culture will spur innovation."

Fearing disruption

Digital disruption is largely uncontrollable, a fact that strikes fear into the hearts of many business leaders who are more than comfortable with the status quo. "The best thing a company can do is try to stay on top of emerging technologies and infuse them into its application and solution stack when they make sense and to try not to be blindsided by them," Wolfe notes.

To succeed during a period of rapid technological change, focus on resilience rather than disruption. "We're inundated with potentially disruptive technologies daily," Hart observes. "Historically, it was 'who could invent the quickest,' but today, it is really about who can adapt the quickest."

To innovate successfully in the face of ongoing digital disruption, teams must be able to fail fast and move on even faster. "The teams that will control the future of digital will be the ones who are the most open to the fact that what they're working on right now is outdated," Hart says. She advises businesses to invest in processes that allow staff members to assimilate change and learn so that when a disruption happens they will know how to quickly and resiliently bounce back through knowledge and innovative adaptation.

Not collaborating with business partners on innovative concepts

Third-party partnerships offer an excellent way to spark innovation at little or no direct cost. "If you're insistent on building everything in your own shop, you may have tighter control of your destiny, but time to market and more innovative solutions may be sacrificed as a result," Wolfe advises.

Wolfe says he makes it a habit to meet with his various partners from time to time to see what they're currently working on and if any of their ideas could help his own business. "They also meet with me regularly to see if I can offer the same," he says. "If you run a smaller company, this just may be the added value you need to compete with some of the bigger companies you are up against in the marketplace."

Encouraging innovation: Lessons for leaders

Large-scale enterprises that excel at innovation are very good at outlining a set of guardrails—digital policies—that keep the organization safe while encouraging innovation and freedom by employees.

Many businesses unrealistically expect the same people to deliver both optimization and experimentation, which most often is possible only for exceptional individuals.

The test for whether an organization is innovation-focused is how it perceives questions. Most businesses fail to foster an environment of questioning.

While complete integration and standardization can kill innovation, keeping innovation separate as a standalone unit creates yet another silo. Innovation programs have to be carefully guarded for freedom and judiciously integrated to blend in the results.

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