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What does an innovation culture look like?

Last updated

15 January 2024


Dovetail Editorial Team

Reviewed by

Shawnna Johnson

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In the fast-paced business world, every company must find ways to cope with the ever-increasing level of competition and changing customer demands.

One of the best ways to cope with competition is by fostering an innovation culture. This encourages employees and other stakeholders to share creative ideas and solutions to boost customer and employee satisfaction, improve branding, and gain a competitive advantage, among other benefits.

Establishing an innovation culture may seem easy—but it’s not. You’ll need to carefully consider various aspects and make constant evaluations to achieve the desired results.

This article provides more insight into the culture of innovation, including what it looks like in practice, its importance, and how to build it.

What is an innovation culture?

An innovation culture is an organizational culture that encourages the sharing of creative ideas and solutions. It also ensures these ideas are implemented.

The Harvard Business Review summarizes organizational culture as consistent, observable behavior patterns. Meanwhile, McKinsey & Company defines innovation as the ability to conceive, develop, deliver, and scale new products, processes, business models, and services for customers.

If you combine these two definitions, you can think of a culture of innovation as the sum of all the practices, processes, values, structures, personnel, and incentives a business sets forth to encourage innovative ideas and ensure they are implemented.

Why is a culture of innovation so important?

The benefits of establishing an innovation culture are real and tangible. They can make a huge difference to your company by giving it a competitive advantage and opportunities to discover new markets.

Here’s a breakdown of why you should foster an innovation culture in your organization or business:

Helps you maintain a competitive advantage

An innovation culture can help your business stay current and get through potential market threats and disruptions, whether you have created a new product, developed a different business model, or overseen a commercial innovation.

A good example is how Microsoft rolled out MS-DOS in 1981. This revolutionary programming interface changed everything about software licensing and made coding and development more accessible for customers. This move kept Microsoft ahead of its competitors Sun Microsystem and IBM. It’s one of the reasons they have remained dominant for years.

Improves employee engagement and retention

Innovation involves lateral thinking, creativity, applied logic, and problem-solving, so there’s nothing better than a culture of innovation when it comes to motivating and engaging your employees.

Studies have shown that employees are usually happier and more productive when pushed to innovate. This also explains why businesses with an established innovation culture have constantly attracted and retained talented staff.

Google is a good example. Besides its commitment to innovation, its goal is “to create the happiest, most productive workplace in the world.” This is one of the reasons why Google was named the best workplace in 2014 by Fortune 100.

Helps you discover and define new markets

An innovation culture can help companies gain an edge over their competitors. It also enables them to discover new and uncontested markets and define them for years.

For instance, Canon’s decision to move from selling commercial copiers to focusing on domestic products meant it became a dominant force in the market for years.

The three dimensions of innovation culture

An innovation culture is built by establishing an environment that promotes, recognizes, and nurtures innovation, fosters employees’ willingness to innovate, and provides an opportunity for them to do so.

Here’s a closer look at these three dimensions:

Recognizing and nurturing the ability to innovate

A company that intends to create an innovation culture should develop an environment that supports and promotes its employees’ creative potential. These four considerations can help achieve this goal:

  • Ensuring innovation culture remains a top priority and establishing a top-down policy throughout the company

  • Training employees in modern tools and methods to brainstorm, evaluate, and realize their ideas (this can be done through crash courses, workshops, and innovation management)

  • Establishing internal knowledge transfer

  • Using external know-how and an open innovation approach by cooperating with universities, external consultants, research institutions, internet research, and expert reviews

Fostering employees’ willingness to innovate

An innovation culture is intrinsically motivated—not ordered from the top. Your employees should be willing to put in the extra effort and time to innovate.

So, how do you foster a willingness to innovate? Here are some ideas:

  • Establishing innovation as part of the company’s culture and values

  • Raising awareness of the importance of innovation through regular training and establishing an annual innovation day

  • Encouraging idea-sharing by gathering employees’ opinions and setting up regular idea evaluation meetings

  • Establishing an environment where employees can make mistakes and learn from them, which allows them to express and try out their innovative ideas without fear of reprimand

  • Motivating your employees to innovate through incentives and appreciation for their contribution. This can be through bonuses, gifts, praise, recognition, and pitching contests.

  • Reviewing and changing superiors’ roles within the framework of creativity and innovation.

Creating opportunities for innovation

Creating an opportunity for innovation at work is vital if your employees are to act on their innovation. You need to establish framework conditions that provide the opportunity to think and act innovatively. Here are some of the ways you can achieve this:

  • Providing the necessary resources and time for employees to brainstorm and implement their innovative ideas

  • Providing financial resources

  • Establishing clear goals and processes that guide your employees in developing and implementing creative ideas

  • Ensuring fast and efficient communication across different levels of your organization’s hierarchy

  • Providing free space to hold informal meetings to brainstorm innovative ideas

What does a culture of innovation look like?

Organizations achieve a strong innovation culture through an intentional, systematic, and coordinated commitment. This entails various practical processes, including the following:

Ensuring that everyone understands what innovation means

The term “innovation” may seem obvious, but your employees may not know what it means and how it applies to your organization. Try using real-life examples to define what innovation means.

Leading by example

As a leader, you can only show your team what’s crucial in an innovation culture through what you emphasize, measure, and reward. This ranges from how you react to a failed idea to rewarding successful innovation and ideas that you didn’t end up implementing.

Building relationships that foster trust

A good leader should base their innovation culture on empathy, respect, and care. They and their colleagues should be able to ask questions, including those that generate critical conversations and challenge the status quo. This involves recognizing and directing critical questions to team members specialized in an area of contention without feeling self-deprecating.

The leader should also be brave and transparent enough to explain why a certain idea cannot be implemented.

Setting aside enough funds for innovation

Setting aside money for innovation is vital for the success of a workplace innovation culture. This helps motivate your team members to develop new ideas as they know there are funds available to actualize them.

The 70–20–10 budgeting rule is one effective approach that can help establish funds for innovation. In this model, 70% of funds are set aside for running the business, 20% for automation, and 10% for innovation.

What does a workplace look like without a culture of innovation?

Now you understand the benefits of having an innovation culture and how to establish it—but would you be able to tell if your company was lacking this culture?

Here are some of the tell-tale signs that an organization doesn’t have an innovation culture:

Reduced productivity

Employees working in an organization that doesn’t foster innovation easily become bored and unmotivated. They take more time to complete tasks and use more resources, ultimately reducing profitability.

Low customer satisfaction

Organizations and businesses without an innovation culture struggle to keep up with their customers’ expectations. This translates to lower satisfaction from customers who expect something new and exciting.

Poor brand perception

A business that doesn’t innovate falls into obscurity. It loses visibility among customers and investors, leading to fewer sales opportunities, loss of market share, and low profitability.

How to create a culture of innovation

Here are some of the practical steps that can help you develop a culture of innovation in your company:

Take stock of the company’s current innovative capacity

Try to understand what you’re dealing with before attempting to create an innovation culture. This means taking an innovation stocktake by evaluating current innovation levels, examining recent innovation performances, and identifying areas requiring urgent improvement.

Encourage diverse interactions

Any top-tier organization has an environment that encourages diverse alliances where everyone can collaborate freely.

The best way to promote diversity is by having a cross-functional team with representatives from various departments. It also involves removing bureaucracies and maintaining an “open door policy” where everyone can share their ideas with others.

Encourage an innovation culture from the top

An innovation culture should start from the top to be successful. Your company’s leadership team should set the right tone to celebrate successful innovation, establish clear communication, discover ways to improve things, and demonstrate how they value creativity.

Few companies realize they have a lot of inconveniences that hinder their employees’ innovation. To ease these barriers, start by talking to relevant people and understanding where the roadblocks are. Once you have understood these pain points, you can set up the framework and tools needed to foster innovation. These include the following:

  • Training to upskill your team in specific areas, like refinement

  • Using relevant technology that guides creative processes

  • Finding new collaboration opportunities like hackathons, workshops, and research

Examples of innovative company cultures

Some of the best-known and successful companies in the world have a strong innovation culture. Take a look at the three companies below to get an idea of what a culture of innovation looks like in practice:


Pixar is the world’s most successful animation company thanks to its strong collaborative and mission-driven culture. This was highlighted in its founder Ed Catmull’s book Creativity, Inc.

Despite Pixar’s rapid growth, it has remained true to this culture, helping the company scale without compromising quality. Pixar has an environment where everyone can celebrate experiments, take risks, and cultivate positive feedback.


There was a period when Microsoft fell into corporate inertia due to its bureaucratization and culture of individualism. This kept Microsoft rigid and stagnant, jeopardizing its reputation and profit.

Fortunately, Microsoft shifted from a stationary culture to an innovative, goal-oriented, humble, and empathetic environment that fostered a creative culture when Satya Nadella took over as its CEO.

The success of this culture is visible in various factors like financial results, brand image, and employee satisfaction.


Tesla’s ability to keep innovating and pushing boundaries is rooted in its culture of innovation. One key aspect that has played a big role is its organizational structure.

Elon Musk prioritizes an open communication policy where everyone can speak to each other. In an email to Tesla employees, he encouraged everyone to email their colleagues and express their opinions on the fastest way to solve a problem and benefit the company. This attitude arguably led to Tesla’s continuous innovation.


How do you lead a culture of innovation?

Here are some of the considerations that can help you lead a culture of innovation in your organization:

  • Use a multi-faceted approach that starts from the bottom.

  • Empower your employees by listening, mentoring, and empowering them.

  • Encourage quick action on innovative ideas by providing the right resources and support to actualize them.

  • Treat failure as an opportunity for learning.

  • Learn from the past and use this to look to the future.

What are the seven elements of innovation?

Successful innovation is structured in seven key areas. Let’s take a closer look at them.

  • Context: keep track of external trends and other factors like technological developments and customer preferences to identify opportunities and challenges that trigger innovation.

  • Leadership: leaders should demonstrate their commitment and leadership by establishing direction for innovation, providing necessary resources, and guiding team members to actualize their ideas.

  • Planning: this includes creating innovation objectives and strategies at different organizational levels based on the directions of management and the opportunities and challenges identified.

  • Support: consider all the support needed to execute the , including finding the right people, setting up finances and resources, establishing clear communication, and creating innovation awareness.

  • Operations: this involves forming one or more portfolios to manage, measure, and follow- up on established innovation strategies.

  • Evaluation: this involves constantly assessing the innovation strategy’s progress, strengths, and weaknesses.

  • Improvement: based on the evaluation results, all stakeholders should address the most critical gaps concerning each of the other seven elements and make necessary improvements.

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