Every company, not just innovative ones, build their cultural foundation positioned between the operational and entrepreneurial systems.
The operational system is driven by budgets, strategic plans, and the formality of business disciplines with regulatory bodies, such as: FASB/IFRS for accounting & financial reporting, ISO 9001 for quality assurance, and PMBOK for project management. Similarly, the entrepreneurial system is buttressed by less formal disciplines, such as: creativity, flexibility, vision, and questioning. The difference is that innovative organizations embrace, encourage, and expect the friction between the two organizational systems.
The challenge for most organizations is allowing the two to co-exist without one dominating the other. An organization that is operational-system dominant tends to be more bureaucratic, mechanistic in nature, and lumbers in their market or industry. These are the organizations that are content to maintain the customer base and only take initiatives that have already been proven and tested in the market. Even then, their iteration substantially lags behind early adopters.
An entrepreneurial-system dominant organization is ultra creative but lacks the discipline and rigor to fully back concepts into commercially viable profit centers. These organizations have the ability to cultivate small followings behind their product or service but doesn’t have the framework to transition past the small set of early adopters.
Look at these examples of organization that have a small following but are not mainstream yet; MOD or MVMT
Lack of Employee Engagement
The most innovative companies engage their employees in a way that encourages them to flourish in the adaptive space.
There are two scenarios where an organization will struggle to be innovative:
The organization is overly entrepreneurial, despite the effects of the operational system; or
The organization is so bureaucratic that it has no entrepreneurial spirit.
If you are an employee or a business leader in an organization that is solely dominated by one of the systems mentioned above, ask yourself the following questions:
How would you feel if you were a member of the system that was getting dominated?
Do you feel a sense of belonging to something bigger than you? Would you feel like you were a part of a cause?
Do you trust the leaders of the organization if there was a lopsided balance of power?
How committed are you?
Do you feel empowered?
Ukil (2016) discussed the latter as the key to organization improvement and employee happiness. As a business leader, you set the tone for the organization and are integral to the development of cultural parameters. You can foster an environment that produces contexts that combine design thinking (entrepreneurial system) with tactical business (operating system). By managing the power distance between system leaders and the tension between the two systems, you can ultimately create a more innovative organization. (Wattanasupachoke, 2012).
See how we did this for one of our clients, take a look at our Case Studies section.
Lack of Customer Involvement
Many organizations take on an “Us vs. Them” persona when considering customer involvement relative to idea generation. Some organizations completely ignore their customers as a source of ideation. Who better knows the jobs they need to get done and how they would like to get those jobs done?
The opportunity is not developed and revealed through surface level awareness of your customers but through highly developed and tested personas or types of qualities that your typical customers embody. By taking an inbound perspective, we can get an even deeper understanding of where the customer is in their journey to getting their jobs done.
Learn more about how customers get their jobs done by the guru: Clayton Christensen
This level of understanding also fosters the depth of relationship that allows for the exchanges that produce insight on your customers needs. You may already know your customers’ needs but how do you convert that into innovative activity for your company?
The conversion occurs in the co-creation space. This is the space where providers and customers come together to explore the problems and solutions that have impact and relevance because there is power in radical relevance.
Learn how Facebook’s COO Sheryl Sandberg uses ‘ruthless’ prioritization.
Solution
You might ask, “Why would I want these two separate systems working in my organization? Doesn’t a house divided have no chance of succeeding?”
Whether you believe it or not, you probably already have these two systems in place in your organization, but it takes a particular type of leader to reveal the benefits of the adaptive system.
Arena and Uhl-Bien (2016) describes it as the Complexity Leadership theory where bureaucracy and organizational impediments conflict with organizational learning and growth to create a dynamic tension. This tension is called the adaptive space, and this is what business leaders must create, cultivate, and encourage.
Business leaders have to channel the overbearing need of the operational system to dominate and, ultimately, smother the inspired energy of the entrepreneurial system (Arena & Uhl-Bien, 2016). Leaders of adaptable businesses fend off the limiting effects of the operational system on the entrepreneurial system without letting the entrepreneurial system to extend beyond risk tolerances and budgetary expectations.
The ideal situation is for both systems to work in a synergistic fashion to generate unique and novel approaches to client’s needs. Essentially, it is the business leaders’ responsibility to create an innovative culture within the traditional framework of an organization that is formed to generate profits and be of value to their clients.
Formulating a plan of execution that will realize a transformative change in company innovation might feel daunting but there is no reason to go it alone. Lean on our knowledge and expertise garnered through years of experience. Contact us for a quick chat and a free consult on how your company can become innovative.
STRATASCENSION was founded on the notion that business is relational and growth is achieved through the deepening of all the micro-connections between people, processes, tools, & performance. We want to help small businesses enhance these connections and leverage them for transformation.
References
Arena, M. J., & Uhl-Bien, M. (2016). Complexity leadership theory: Shifting from human capital to social capital. People & Strategy, 39(2), 22-27. Retrieved from http://www.hrps.org/
UKIL, M. I. (2016). The impact of employee empowerment on employee satisfaction and service quality: Empirical evidence from financial enterprizes in bangladesh. Business: Theory & Practice, 17, 178-189. doi:10.3846/btp.2016.651
Wattanasupachoke, T. (2012). Design thinking, innovativeness and performance: An empirical examination. International Journal of Management and Innovation, 4, 1-16. Retrieved from http://www.worldscientific.com/worldscinet/ijim