Business innovation comes with failure

Read time: 8 minutes | Published in Hays Journal 16 

Where they may once have looked at rival organisations as their key competition, they are now just as much at risk from changes in technology and shifts in the marketplace, not to mention social and political challenges.

For example, in 2016, Ford’s then Chief Executive Mark Fields said that the company works on the assumption that its future rivals may not be Chrysler or GM. Instead, it is eyeing competition from Google and Apple. Meanwhile, Amazon continues to disrupt a whole range of industries with its ventures in everything from grocery delivery to healthcare.

If a business is to succeed in the current climate, leaders and staff alike must constantly ask themselves what they want their organisation to look like in the coming years and decades, while remaining open to changing their view.

“In today’s business world, success is inextricably linked to how quickly and how effectively leaders and managers can react to change,” says Richard Chiumento, CEO of business transformation specialists The Rialto Consultancy. “To remain relevant and competitive, organisations will find that they have to re-engineer processes, and even reinvent themselves, on a regular basis.”

Business innovation needs ideas from everywhere

One sector where there is a constant need to react to change is financial services. Polina Rasskazova, Head of Recruitment, Citi in Russia, Ukraine and Kazakhstan, says: “The sphere we work in changes very quickly, due to technological progress, evolving customer expectations and increased competition from non-financial services firms such as e-commerce and fintech companies.”

Employers need a varied and different set of skills to respond to such changes, she adds. “The ability to change and to learn new skills quickly is crucial for our organisation. At Citi we are building a culture of change that is based on several principles, including ethics, meritocracy and inclusiveness, collaboration, ideation and innovation and a digital mindset.”

For example, around 140 ideas on improving the bank’s client experience process have been submitted by employees through its Ideation page, an innovation platform. “Changes are driven not only from the top, but from all levels of Citibank,” says Rasskazova.

Derek Draper, CEO of CDP Leadership Consultants, agrees that generating new ideas and concepts and staying on top of trends is key – and it doesn’t matter who is involved. “Ideas should come from everywhere – and be listened to and acted upon,” he says. “You should be implementing new, exciting things on a regular basis. Ask yourself: what have we done that’s new this week, month, quarter or year?”

An inclusive approach

Phil Sproston, UK Country Manager at the Top Employers Institute, points out that when it comes to implementing change and innovation, diversity is a major contributing factor.

“It is far too easy for organisations to become trapped in a group-think mentality, with a variety of topics that aren’t banned, but that are just not discussed by common consent,” he notes. “It’s the ‘no, there’s no point. We tried that ten years ago and it didn’t work’ mentality.”

Opening up and recruiting a truly diverse and inclusive workforce brings a wealth of benefits, he adds: “Not only in terms of race, gender, sexuality and ability, but also of background and experience. Diversity brings an organisation a rich tapestry of ideas, thoughts, best practice and new mindsets.”

This is something that chimes with Citibank’s experience. “Maintaining a truly diverse environment has been proven to be a leading indicator of the quality of a risk culture, in addition to be an effective way of connecting to an equally diverse client base,” says Mike Corbat, CEO of Citigroup. As a result, diversity and building new skills are the cornerstones of the bank’s corporate culture. It tries to create an inclusive and collaborative work environment by advocating a combination of internal and external people who can bring a range of different skills and generate change.

“We aim to increase client value, productivity, innovation and employee engagement by hiring, promoting and retaining diverse groups, creating an inclusive work environment, leveraging our diversity of thought to drive value for clients, and embedding the value of diversity into business practices,” says Rasskasova. “We believe in talent development within the organisation but, on the other hand, in order to stay creative and competitive and get fresh ideas, we look for talent outside Citibank. On average, 50 per cent of open roles are filled with internal candidates,” she comments.

Fighting the fear

But for companies to be truly agile, there is something else they need to take on board. In order to respond to change, you need to create a corporate culture where failure and innovation are encouraged and celebrated. A culture where people feel free to innovate, explore ideas and make mistakes.

“The workforce is more digital, more global, diverse, automation-savvy and social media-proficient than ever before,” says Helen Norris, former HR director of Nationwide Building Society. “At the same time, business expectations, needs and demands are evolving faster than ever. If organisations truly want to drive growth and innovate, they must create a fit-for-purpose, positive, ‘safe to fail’ culture that enables leaders and their employees alike to feel comfortable being creative and innovating.”

Rasskazova agrees that building a culture where innovation can thrive is not possible without allowing room for failure. “Failures and setbacks are a big part of the test-and-learn approach and allow us to meet the needs of our customers more quickly,” she explains. “In Citibank we use a ‘fail fast’ rule and have found that the best breakthrough ideas in business are often a result of constantly experimenting and taking risks.”

In the course of experimentation, she continues, it is inevitable for individual leaders or companies to make mistakes or fail, and the company has tried to incorporate that into its culture and processes.

“This culture also requires employees to stay persistent in the face of failures,” she says, citing the importance of determination, which “helps us to see and use failures as learnings to improve and keep up the momentum. Determined people are also able to maintain optimism and see future possibilities where others can’t.”

And Chiumento emphasises the role of leaders in setting this ‘safe to fail’ culture. “They need to take a hard look at their organisational culture and assess whether it truly supports transformation and innovation,” he says. “They also need to examine their own behaviours and actions and be prepared for people to challenge them. A leader’s strategy may be to prioritise innovation but, in effect, their everyday actions and attitude stifle it.”

Meet in the middle

Creating an environment that both encourages innovation and celebrates failure requires a high level of transparency, to build trust in managers and the company as a whole.

“Employees want to know what drives the company they are working for, what its long-term goals are and how they will be involved in achieving these objectives,” Norris points out. “Communication and transparency across all levels of management are what foster this trust and determine the degree of discretionary effort that comes with a high level
of engagement.”

Citi also places a high value on transparency. In order to ‘fail-safe’, says Rasskazova, it has to be able to make quick decisions to drive change, and support this with an open and transparent culture where it accepts and appreciates that not all ideas will work.

“In order to be innovative and to truly meet and exceed our customers’ expectations, we must be willing to step outside the box, try something new and take smart risks,” she explains. “This transparency is supported by our ethical principles and leadership standards.”

But how can employers foster and promote this transparency, especially in organisations that have an archetypal hierarchical management structure?

One of the first steps is to stop using the hierarchy as the main source of communication, Norris advises. “Remind teams of what the end goal is, what the key principles you base your decisions on are and how they can be a part of bringing the company closer to this vision,” she says.

Then you can try to involve them in the decision-making process and make them part of it: “Bring them on board and encourage them to voice their opinions; it will gain their trust and instil a sense of responsibility.”

Middle management must also be open about what is going on in the organisation and willing to communicate this to their teams.

“If middle management do not understand their role in a future organisation’s structure or feel threatened by change, they can block the team’s ability to be successful,” Norris notes.

“They must adapt their role and learn to step back from functional leadership and act more as a servant leader who trusts their teams and helps them remove roadblocks. They must also learn how to establish the concept of ‘accountable freedom’, where teams can make their own decisions and commit to their own work,” she adds.

Alan Price, Chief Operating Officer and HR Director at law firm Peninsula, agrees that, in order for change to happen, you have to get middle managers fully on board.

“An organisational change often demands contributions from many within the business,” he says, “so help each employee and manager to understand how their contributions will fit into the overall architecture of your organisation’s change.

“An honest and respectful boss, who is willing to share information with her or his teams and
help employees to understand their role in the business’s progression, has more chance of earning employee trust.”

Tone from the top

As with most things in business, innovation and change have to come from the top and be actively embraced by everyone within the organisation. Business leaders need to look at their own behaviour and actions and the impact they have on company culture, says Chiumento. “While such self-examination may not deliver the desired answer, time is running out for those leaders and organisations whose own actions may be impeding transformation rather than promoting it.”

In order to gauge whether a culture is working and evolving with the changing landscape, an organisation may need to use a range of different measures. “These should include a mix of the formal, such as decision-making accountability, and the informal, such as the tone set by senior leaders,” says Norris.

The indicators need to be tied back to the business objectives with a balanced set of measures, she explains: “For example, the achievement of specific milestones, the change of behaviours and the development of business performance.” They should ultimately result in a shift in the way people think, believe and feel.

She adds that people need to understand and agree what they can count on each other for. “This practice then becomes about principles and not personalities – holding people to account around agreed outcomes and helping and supporting each other to achieve them,” she notes.

“Our teams [at Nationwide] required capability development in managing difficult conversations and negotiating and resolving performance breakdowns. A measurable outcome was the number of new ideas being suggested and the overall performance of the team.”

Ultimately, progressive employers should be implementing, rather than inhibiting, innovation by taking a more gung-ho, less risk-averse approach to new ideas and projects.

“A true culture of innovation demands that leaders be more risk-taking, experimental and collaborative.

“But above all, they must recognise the crucial part innovation plays in their organisation’s future rather than merely paying lip service to it,” Chiumento concludes.

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