Here is a brief excerpt from an article co-authored by Jay Rao and Joseph Weintraub for The MIT Sloan Management Review. To read the complete article, check out others, obtain subscription information, and sign up for email alerts, please click here.

Image courtesy of Flickr user reway2007.

* * *

Today’s executives want their companies to be more innovative. They consume stacks of books and articles and attend conventions and courses on innovation, hoping to discover the elixir of success. They are impressed by the ability of comparatively young companies such as Google and Facebook to create and market breakthrough products and services. And they marvel at how some older companies — Apple, IBM, Procter & Gamble, 3M and General Electric, to name a few — reinvent themselves again and again. And they wonder, “How do these great companies do it?”

After studying innovation among 759 companies based in 17 major markets, researchers Gerard J. Tellis, Jaideep C. Prabhu and Rajesh K. Chandy found that corporate culture was a much more important driver of radical innovation than labor, capital, government or national culture. [Note: 1. G.J. Tellis, J.C. Prabhu and R.K. Chandy, “Radical Innovation Across Nations: The Preeminence of Corporate Culture,” Journal of Marketing 73, no. 1 (January 2009): 3-23.] But for executives, that conclusion raises two more questions: First, what is an innovative corporate culture? And second, if you don’t have an innovative culture, is there any way you can build one? This article addresses both questions by offering a simple model of the key elements of an innovative culture, as well as a practical 360-degree assessment tool that managers can use to assess how conducive their organization’s culture is to innovation — and to see specific areas where their culture might be more encouraging to it.

Six Building Blocks of an Innovative Culture

An innovative culture rests on a foundation of six building blocks: resources, processes, values, behavior, climate and success. These building blocks are dynamically linked. For example, the values of the enterprise have an impact on people’s behaviors, on the climate of the workplace and on how success is defined and measured. Our culture of innovation model builds upon dozens of studies by numerous authors.

When it comes to fostering innovation, enterprises have generally given substantial attention to resources, processes and the measurement of success — the more easily measured, tools-oriented innovation building blocks. But companies have often given much less attention to the harder-to-measure, people-oriented determinants of innovative culture — values, behaviors and climate. Not surprisingly, most companies have also done a better job of managing resources, processes and measurement of innovation success than they have the more people-oriented innovation building blocks. As many managers have discovered, anything that involves peoples’ values and behaviors and the climate of the workplace is more intangible and difficult to handle. As one CEO put it, “The soft stuff is the hard stuff.” Yet these difficult “people issues” have the greatest power to shape the culture of innovation and create a sustained competitive advantage.

[Here’s the first of the six that Rao and Weintraub discuss.]

Values

Values drive priorities and decisions, which are reflected in how a company spends its time and money. Truly innovative enterprises spend generously on being entrepreneurial, promoting creativity and encouraging continuous learning. The values of a company are less what the leaders say or what they write in the annual reports than what they do and invest in. Values manifest themselves in how people behave and spend, more than in how they speak.

* * *

To read the complete article, please click here.

Jay Rao is Professor, Strategy & Innovation, at Babson College. He earned a B.Engg. degree at Indian Institute of Technology( Chennai, India), an M.S. at the University of Kentucky, and a Ph.D. at University of California, Los Angeles. Joseph Weintraub is the Founder and Faculty Director of the Babson Coaching for Leadership and Teamwork Program. He earned a B.S. at the University of Pittsburgh and M.A. and Ph.D. degrees at Bowling Green State University