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Discussion paper for Department of Trade and Industry Innovation Review March 2003

DEVELOPING AN INNOVATION CULTURE: IMPLICATIONS FROM RESEARCH


INSTITUTE OF WORK PSYCHOLOGY/ ESRC CENTRE FOR ORGANISATION AND INNOVATION, UNIVERSITY OF SHEFFIELD Modern times have seen an iincreasing emphasis placed on innovation as a key contributor to organizational success. Innovation not only concernsvers the creation of ideas that are novel and useful to the workplace, but also includes the implementation of those ideasem to produce develop new products or, services (i.e., product innovation) or and new ways of working (e.gi.e., process innovation, for example though. changes in HRM practice or work design). The Institute of Work Psychology (IWP) has been conducting research in this area, for a number of years and it has become apparent that a holistic approach is needed to initiate and sustain innovation in organisations. What would an innovative organisational culture look like? It would be one in which employees are motivated and confident enough to continually try new things out. To this end, employees They would also be equipped with the right types of knowledge, skills and abilities to both effectively generate and implement new ideas. However, innovation will only flourish if the work environment is supportive of these efforts. This means employees must be given opportunities to explore, investigate and experiment, and management should provide support through active encouragement of these types of behaviours. At a broader level, the organisation itself should have structures and processes in place which that allow for smooth transitions from appearance of new ideas to actualised innovationstheir implementation. How can such a culture be developed? Research conducted by IWP and others have highlighted some of the overlapping means by which this culture can be grown: o o
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Selecting innovative employees Training for creativity and innovation Developing a general learning culture EEnabling empoweringment of employees Setting up idea capture schemes Developing managers to support the innovation of others Having Making creativity as a requirement of the job Improving employee participation in decision-making Having appropriate reward systems for innovation Allowing risk-taking as an acceptable mode of practice Encouraging investment in research and development functions Benchmarking on a regular basis

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Discussion paper for Department of Trade and Industry Innovation Review March 2003 Each of these approaches will beis elaborated upon evaluated in the following discussion. SELECTING INNOVATIVE EMPLOYEES Studies over the years haveResearch has uncovered a wide range of potential attributes of creative individuals. Some of these characteristics refer toare fairly stable personality traits but other aspects are more malleable knowledge, skill and motivational dimensions. Recently, psychometric measures have been developed by IWP staff for tapping into the general traits which identify consistently innovative individuals ( i.e. those good at both generating and implementing ideas). The Ffour key traits include are: an openness to frequent change;, active championing of change; , having unstructured approaches to work; and a preference to try doing things differently. This instrument provides a practical way forward for helping to select innovators into the organisation, measure and is now being used by a number of organisations for recruitment purposes. Such instruments will help identify strongly innovative individuals, but a mixture of personality types are needed in organisations. So there remains a and there is still a question of what would be the optimal balance. FurthermoreMoreover,, given that most organisations are not starting from scratch, they may have to settle for working with options to develop the capabilities of the existing workforce. Although relatively few people are able to innovate in a radical manner, everyone has the potential to be creative at some level or another. It is better therefore to use these selection instruments for key, identified positions where innovation is a major component of the job. Also, even if highly innovative individuals have been selected, they will be unlikely to innovate if the work environment is unsupportive (e.g. one with a lack of resources and time for creativity). Policy implications:
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Select for innovation in key roles Encouraging diversity in organisational populations?

TRAINING FOR CREATIVITY AND INNOVATION Another popular approach is to directly develop employees learning about innovationIt is widely assumed that, the underlying belief being that creativity is a skill that can be learned by anyone. For this reason many organisations send their employees This is typically done by sending individuals on creativity training courses, that which cover techniques such brainstorming, lateral thinking or problem-solving. Until recently, little evidence existed about the effectiveness of such initiatives. However, there has been very little formal published evaluation as to the effectiveness of these types of courses. A A study done completed in IWP on three different types of creativity course s found that they all improved the generation of ideas, but that idea implementation was much more strongly determined by organizational factors (e.g. management support). These findings combined with others provide some practical implications. In order for individuals to fully learn about the innovation process, creativity courses should cover opportunity finding, problem definition, idea generation, idea evaluation and idea implementation. The skills needed for each of these aspects can differ and it appears that the implementation side of things can often be ignored.

Discussion paper for Department of Trade and Industry Innovation Review March 2003 Training interventions can be used to enhance motivation and confidence to innovate, as well as to develop creative thinking skills. Research has shown that motivation is a core contributor to creative outputs. Within courses, these emotional aspects can be enhanced through clarifying personal and organisational benefits of creativity, goal-setting and providing sufficient feedback with practice. As well as formal training, organisations can consider other routes to stimulate learning about creativity. These include providing access to books, articles and web resources, setting up innovation discussion groups and encouraging coaching by line managers. Although these learning activities can be used to develop employees knowledge, skills and attitudes concerning innovation, there will be little long-term impact if the work environment they return to does not give them the support and freedom to express, develop and apply their ideas. Policy implications:
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Build in creativity and innovation training into MBAs or other courses (as the other innovation review panel also recommend)Encourage development and assessment of innovation traininginnovation training within organisations. Develop innovation training to emcompassencompass implementation as well as idea generation. Include innovation training within MBA and other professional development programmes.

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DEVELOPING A GENERAL LEARNING CULTURE Evidence is gathering linking the extent to which organisations actively encourage continuous learning and development in their employees with company innovativeness. By providing a wide variety of opportunities for learning, organisations are exposing their workforce to a greater variety of stimuli, developing the motivation of individuals to learn new things and developing their knowledge and skills to work with new innovations. These are all conducive to stimulating creativity Policy implications:
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Support a culture of training and learning lifelong learning initiatives in organisations. Education of children and students to encourage more creative and autonomous thinking and learning.

ENABLING EMPOWERINGMENT OF EMPLOYEES Empowerment involves devolving responsibility for organising and managing work to individuals or teams. For example, this can take the form of delegation, job enrichment initiatives or setting up of autonomousself-managing work groups. Research has shown that those with greater levels of control in their jobwho are empowered tend to develop better understanding of their work and arebe more innovative and open to new ideas. . In fact, there are indications that autonomy is a particularly strong influence on the implementation of ideas as opposed to the generation of ideas. Empowerment influences facilitates innovation by not only giving employees the motivation, knowledge and confidence to generate new ideas, but has especial value with respect to implementation, by
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Discussion paper for Department of Trade and Industry Innovation Review March 2003 providing the opportunity to put their ideas into practice. but it can also enhance their motivation, confidence and learning. When instigating empowerment initiatives, it is vital to involve employees in the design of new work practices from the start, and to have visible and active management support. Policy implications:
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Encourage empowerment within organisations (especially those facing most change). Involve employees in the development of empowerment practices.

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SETTING UP IDEA CAPTURE SCHEMES There are probably already many untapped ideas in the workforce, and idea capture schemes (ICSs) are ways of harnessing the suggestions of all employees. Thesey are most commonly thought of in terms of suggestion schemes, but can also refer to quality circles and production development groups. In essence, they provide an opportunity for employees to share their ideas so that their relevance and feasibility can be assessed. Savings from these schemes can be huge substantial, but there is very low participation in UK organisations compared to those abroad. A study ofurvey of 160 organisations idea capture schemes was conducted by IWP. on the design of ICSs and the success of employee suggestion making. More effective schemes: involved end-users in the development of the scheme and its rewards, recognition and feedback systems; gave timely, detailed and encouraging feedback to employees on their ideas; had rewards (not just monetary ones) that were perceived as being fairly distributed and valued by employees; engaged in sufficient marketing and continuous publicity to maintain the momentum of the scheme; were given visible support by senior management; and encouraged use of the schemes as part of daily work. Policy implications: o Dissemination of best practice in ICS schemes.
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IGovernment initiatives to support and rewardthe use of ICS schemes.

DEVELOPING MANAGERS TO SUPPORT THE INNOVATION OF OTHERS Many studies have demonstrated that greater line management support is linked to greater creativity of employees, especially with respect to the implementation of ideas. Further workWithin IWP research has within IWP has set out to ascertain exactly what managers supportive of innovation do. It has been found that managers they: help employees learn how to innovate by sharing their knowledge, skills and experience and role-modelling the desired behaviours; and; and they. They enhance employee motivation and confidence by giving supportive encouragement and feedback. The other key aspect is the extent to which the manager provides opportunities for innovation by giving freedom and resources to employees and being open to challenge and willing to change. Again these types of managers can be selected into post according to the above criteria or, more usefully, undergo training and development to develop the requisite capabilities. As mentioned by the Innovation Review Panel, management skills in the UK need to be enhanced and the management of innovation is a crucial aspect that should be addressed.

Discussion paper for Department of Trade and Industry Innovation Review March 2003 Policy implications: o Ensuring that management of innovation is covered on MBAs and other types of educational courses. o Management of innovation as an NVQ element MAKHAVING ING CREATIVITYINNOVATION AS A REQUIREMENT OF THE JOB Studies within IWP have indicated that, in many jobs, creativity is not seen as a requirement. At the same time, the extent to which creativity is a formal requirement of the jobthe job is strongly associated with the degree of innovation shown. Other research has shown that if innovation is not overtly attended to currently, there is a danger that it can ly required by the job influences an employees level of innovation. be seen as less and less important over time. Policy implications: o Ensuring that innovation is a job requirement. o Include innovation in career development and performance appraisals. Practically, making innovation an explicit part of the job description should motivate and focus creative efforts. IMPROVING EMPLOYEE PARTICIPATION IN DECISION-MAKING The fact that employee participation is a key ingredient to innovation success is apparent across the issues discussed above. A survey by IWP of 500 UK organisations showed that those that conducted extensive internal and external discussion and negotiation prior to idea implementation, were more likely to produce successful innovations. By broadening participation in decision-making, the organisation is encouraging a wider range of viewpoints and ideas from which to choose., which is beneficial to creativity. It should alsoThis also helps motivate recipients of innovationemployees by giving them a sense of ownership over changes at work, as opposed to them resisting imposed changesalterations. Other benefits of an increased sense of control have been outlined previously. Furthermore, research has shown that employees participation in innovation is influenced by the degree to which they trust the organisation will take their ideas seriously, indicating the importance of a climate of openness and honesty. Participation can extend beyond employees to other stakeholders such as customers. Findings from research show thatsuggest that seeking the views of customers, or providing an opportunity for them to comment, can supply an organisation with invaluable feedback/information on, for instance, the quality, usefulness, or price of products or services. Feedback from customers intuitively represents a major source of knowledge from which ideas to improve existing products or services, or to develop new products and services, can spring. Importantly, ideas and innovations originating from such feedback help to ensure that customer demands are met, thereby contributing to organisational competitiveness and growth. Policy implications:
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Encourage aging organisational usage of systematic employee participation initiativesve.s


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Discussion paper for Department of Trade and Industry Innovation Review March 2003 o Involve customers or client in the participation process. HAVING APPROPRIATE REWARD SYSTEMS FOR INNOVATION The idea ofP providing employees with rewards for their innovation activities is an important issue. At some level employees need to be acknowledged for their efforts and rewards can take many forms apart from the financial. For example, informal recognition by from immediate managers, public recognition in company newsletters or certificates of achievement can also be valued by employees. Furthermore, it is felt by researchersEspecially significant is the finding that employees that people will perform more creatively if motivated by the work itself, rather than by rewards or punishments. This type of intrinsic motivation can be developed by encouraging employees to explore ideas they find personally exciting, reinforcing feelings of personal competence and creating an environment where people can freely exchange ideas and explore areas of mutual interest. Policy implications:
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Encourage recognition for innovation within organisations (not necessarily financially). o Tax breaks for innovation?

ALLOWING RISK-TAKING AS AN ACCEPTABLE MODE OF PRACTICE It is an established fact that a number of ideas must be produced in order to produce one successful one, and that implementation is generally not right first time. An innovation culture should reflect this by showing a tolerance for errors and and rewarding effort as well outcomes. However, Tthere also needs to be an element of learning from any mistakes that are made, by instigating regular reviews and reflective practices. It is apparent that the UK culture is currently more risk-averse than others abroad. Policy implications: o Promote reflection and learning from practice. Policy-wise: Risk assessment as a tool to be learned in courses
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Reflection and learning from practice, again a key component of management learningUse risk assessment techniques alongside idea generation and implementation.

ENCOURAGING INVESTMENT IN RESEARCH AND DEVELOPMENT IWP studies have confirmed that gGreater levels of investment in R&D are associated with greater reported levels of innovation in organisations (though not more so than the kinds of softer initiatives decribeddescribed above). Traditionally, R&D has been regarded as a discrete function of the organisation devoted to the design of new products or services, but the creation or adoption of new work processes can also come under this aegis. Activities in this area can range from fundamental blue sky research, where the intention is primarily to develop scientific knowledge without having a predefined practical application, to tailoring of specific products or processes to meet a particular need. R&D therefore represents a conscious and planned effort by the organisation to innovate but it does need to be strategically integrated with other functions such as production and marketing to be optimally
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Discussion paper for Department of Trade and Industry Innovation Review March 2003 effective. Collaboration between organisations and the research community can enhance such R&D, by bringing a broader perspective (see also benchmarking, below). Policy implications:
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Encourage R&D into process as well as product innovation. Tax breaks for Research and Development (already done?).

Encouraging research into process as well as product innovation.Promote research community and user collaboration in R&D.

BENCHMARKING Many organisations actively undertake systematic approaches to locate and assess good practice elsewhere in attempts to improve their own performance. Again, research has shown that organisations that benchmark their operations more frequently tend to be classed as more innovative. Benchmarking comparisons can be made both externally, with direct competitors or those in other industries, and internally, examining similar operations within different parts of the organisation. Typical methods of gathering this type of knowledge include observational visits, using surveys, attending conferences and workshops, conducting literature reviews and analysing performance or operational data. Since these benchmarking techniques are a means of introducing or generating ideas which that are new to an organisation, this can greatly help an organisation to become more innovative. In particular, organisations should benchmark themselves in terms of their innovation processes and outcomes in order to highlight areas for improvement. IWP research within Small and Medium Enterprises has led to the development of an innovation audit tool which can be used for this purpose. Policy implications:
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Support for benchmarking groups or initiatives Support usage of innovation audit tools

o National databases and studies to highlight the most effective organisational practices
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Notes compiled by: Kamal Birdi and Toby Wall Institute of Work Psychology (IWP) and ESRC Centre for Organisation and Innovation (COI) University of Sheffield 3rd March 2003 SELECTED REFERENCES FROM IWP RESEARCH Axtell, C., Holman, D., Unsworth, K., Wall, T., Waterson, P., & Harrington, E. (2000). Shopfloor innovation: Facilitating the suggestion and implementation of ideas. Journal of Occupational and Organizational Psychology, 73: 265-285.

Discussion paper for Department of Trade and Industry Innovation Review March 2003

Birdi, K. (2003). Evaluating the effects of creativity training on employee innovation. Paper presented at the Academy of Management Conference, August, Seattle, USA. Clegg, C., Unsworth, K., Epitropaki, O. & ParkerThis document has outlined some of the issues to be considered when developing an innovation culture. The list is not exhaustive but does provide evidence-based recommendations that should go a long way to enhancing and sustaining innovation in UK organisations , G. (2002). Implicating trust in the innovation process. Journal of Occupational and Organizational Psychology, 75, 409-422. Clegg et al., (2002). An international study of the use and effectiveness of modern manufacturing practices. Human Factors and Ergonomics in Manufacturing, 12, 171-191. Leach, D., Totterdell, P., Birdi, K., Clegg, C., Wood, S. & Wall, T. (2001). Innovation at work: Findings form a survey of innovation in UK organisations. Sheffield: University of Sheffield. Leach, D.J., Unsworth, K.L. & Wall, T.D. (2002). What is an idea capture scheme? What is..? series on IWP website at www.shef.ac.uk/~iwp. Leach, D.J., Jackson, P.R. & Wall, T.D. (2001). Realising the potential of empowerment: The impact of a feedback intervention on the performance of a complex system. Ergonomics, 44, 870-886. Patterson, F. (2000). The Innovation Potential Indicator: Test Manual and Users Guide. Oxford: Oxford Psychologists Press. Patterson, M.G., West, M.A., Lawthom, R. & Nickell, S. (1997). Impact of People Management Practices on Business Performance. London: Institute of Personnel and Development. Port, R., Patterson, F., Warr, P. & Hegarty, P. (2002). The management of innovation. Paper presented at the BPS Occupational Psychology Conference, January, Blackpool. Unsworth, K. & Wall, T.D. (2002). Creative requirement: A neglected construct in the study of employee creativity. Paper presented at the Academy of Management Conference, August, Denver, USA. Wall, T.D. (2001). A digest of evidence from studies of innovation and performance. Contribution to The UK Productivity Challenge: CBI and TUC submission to the Productivity Initiative. Report submitted by the CBI and TUC to the Chancellor of the Exchequer, October 2001. See pp 52-58 and body of text. Wall, T.D. & Parker, S.K. (2001). Job design. In N.J. Smelser and P.B. Baltes (Eds) International Encyclopaedia of Social and Behavioural Sciences (vol 12), Oxford: Elsevier Sciences.

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