Transforming Business Cultures to Empower Innovation

Traditional business structures often assume that people higher up the hierarchies know more and have better ideas. However, it is often the case that those closer to the customer know what the business needs. Invariably, the traditional business culture is different from the one needed to be a successful digital business. 

Learn more about transforming business structures from Jeanne Ross, Faculty Director in the Organizational Design for Digital Transformation online short course from the MIT Sloan School of Management.

Transcript

Many business leaders I talk with worry that their company has the wrong culture to become digital. It’s a good thing to focus on because invariably the culture that’s been established in a business that has been successful for some time is different from the culture you need to be a digital business. Let’s explore a little more of the hierarchy – it could slow down the innovation you need to be a successful digital company. But take a closer look: it’s not just that it’s slow, it’s about some of the assumptions that are embedded in our traditional structures and, specifically, in our hierarchy.

We, basically, assume that people know more and have better ideas as they work their way up the hierarchy. The people at the top of the organization are often the last to know what will really work. So, we need a lot more decision making much closer to the customer. 

Not long ago, I was doing a research project on designing organizations, and I was introduced to many business architects in companies. But what was interesting is how they described their role of designing processes and relationships in the company. And the last question in the interview was: “So what kind of impact are you having on the company?” And the shocking thing was most of them responded by saying, “Hmm, I don’t think I’m having any impact.” 

How many people in your company are coming to work every day and going home under the assumption they had no impact? How do we make sure we are using the creativity, the brainpower, the understanding of customers that exists across our entire organization? And I would argue that hierarchy is an ineffective way to do this. 

So we’re going to pick something that’s a much more empowered environment. How do we make sure that all these people doing smart things, meeting their customers, responding to their needs, in fact, do things that are valuable for the company? 

Now what I want to do first is explain how this empowerment is going to contribute to innovation. The reason that the more empowered environment will give us innovation is we really are going to ask people to solve problems and to find out where the real opportunities are or the real solutions to problems exist. And if we divide things up and have different people in the organization solving different problems, looking for different opportunities, we will simply have more ideas than senior-level leaders can come up with.

So, take a look at Spotify. This is a company that was born digital, and what it realized pretty quickly is there are a lot of things you need to tend to. There’s underlying technology because if this goes wrong, things aren’t going to be very reliable. There’s the whole recognition of how I’m going to present this to potential listeners: Spotify started as free radio, but it moved into paid radio. There’s the artwork. There’s the interface. There’s a lot of different things going on, and it turns out that although they are interdependent, they can be identified, and we can expect innovation on every one of those dimensions if we actually componentize.

And if we get our accountability framework right, we will have a lot of simultaneous innovation. When we put people in charge and tell them we want them to explore what’s possible, it is fine for them to say, “I’ve explored this and it’s a bad idea.” 

Then they will divert their attention to something else, but they will want to have an impact every day. They won’t keep pursuing ideas that look to them to be bad ideas, because they’d much rather pursue something that has some real potential.