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Leadership

5 Keys to Building an Innovative Culture: A Q&A With Protiviti’s Jim DeLoach


Market-changing organizations are built differently. Here are five elements boards and organizations should be looking at to ensure they don’t miss innovation opportunities.

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FEI Daily spoke with Jim DeLoach, MD at Protiviti, about how board of directors are ensuring that the organization it serves is not missing out on opportunities to innovate and, as a result, running the risk of getting swept aside by the forces of disruptive change. 

FEI Daily: What does an innovative culture mean to you?

Jim DeLoach: When I think of innovation culture, I'm thinking about an organization that innovates with speed, is able to make decisions at a relatively high velocity, an organization that is very engaged and focused on customers, an organization that embraces external trends. There are unmistakable mega-trends happening in the world today. And so, I'm thinking of an organization that embraces that, not resists that. 

The best way to sum up an innovation culture is that it is an organization that, through customer focus, through its embracing of external trends, through its decision making philosophy, and through its application of the tools of the digital age that are making possible today things that were unthinkable five, ten years ago -  that organization is moving forward with a tailwind rather than a headwind. It faces the future with confidence because it knows it's playing the right game. 

FEI Daily: And how can boards be sure they're not missing innovation opportunities? 

DeLoach: I think that there are several things. First of all, they need to first look at composition, whether in terms of who sits on the board or the external advisors advising the board, so that the board understands how digital disruption can affect the organization and provide the appropriate board oversight to management. If you get the composition right in a board room, there are four things that come to mind to address your question.

First of all, digital readiness. Has management really assessed the organization’s digital readiness? And does management understand the strengths and weaknesses across the business and the context of the digital vision, its mission, its strategy? And where is the organization on the digital maturity curve? 

Then there is innovation velocity. Do we have sufficient support for decision making within the organization to ensure that we're embracing new or emerging technologies and in doing so re-imagining key operating processes and critical functions. 

A third point is talent. In thinking about the talent question, it's really important to understand that innovative, market-changing organization are built differently. Not because they have a digital strategy, but because they think and behave digitally in setting and executing strategy. And so, when you think about talent that way, I know it's trite to say it, but the organization with the best talent, usually wins the game.

And the final point is dealing with barriers. Are there any barriers to innovation and digital transformation that exists with the organization that require the board's and executive management's attention from a change management standpoint? If barriers exist, certain steps can be taken to eliminate them. 

FEI Daily: Coming back to the barriers, what are some of the challenges that boards are facing when it comes to the promoting creativity and innovation at the company?

DeLoach: When you look at the digital maturity continuum, what you're looking for is addressing the question on whether or not your organization's a digital leader or a digital follower or somewhere in between. But, what you want to make sure of is that you don't have a digital skeptic in the organization, that management really doesn't buy in to the concept of digital, think it's all hype, that it won't affect them. I think that the point of view of the CEO is extremely important, of the executive management team is extremely important. Some people are further down the road than others and the whole question of understanding digital readiness and where we are on the continuum and in our focus on where we want to be, not many organizations have transparency with that question. 

The other thing is when you deal with the talent question, a tiger can't change is stripes. You just can't look at a group of people and say, ‘Okay, all of you grew up in the analog world, now I'm going to snap my fingers, and you are going to think digitally. Okay, go!’ It doesn't work that way. The organization has a plethora of talented people who have incredible institutional knowledge, but often times you need a hybrid. You need to bring in some new talent that have been there, done that to infuse objectivity, creativity into the process, infuse the organization with fresh ideas, fresh perspectives, so that institutional knowledge can be put to work. 

Finally, it's being hamstrung with legacy systems. One reason that the Cloud is so popular is that you can move beyond having to deal with the restrictions of your existing legacy systems and amazing fear that people had about, ‘If I tamper too much with this, I'm going to create a can of worms with that. I don't even know what can of worms I might create if I mess with this thing.’ So, that exposes an organization to new competitors that emerge and can scale very quickly because they were born digital. And so they are able to redefine the customer experience and move much quicker and scale quickly with less infusion of capital than ever before, so entry barriers have been reduced. So, that legacy system problem can be a big one for a large global corporation, and they are operating like a battleship, meanwhile a born digital company's attacking them and their market shares, operating like a speed boat. 

You could add to all that, the typical change management issues. You have to get buy-in at the top, you have to get buy-in in the middle, you have to get everybody on the same page. You have to articulate a crisp position. And if it's all just, ‘Okay, here's our digital strategy,’ that's nibbling around the edges, and you are not really transforming the organization at being digital at the core. You really don't have the digital organization you're going to need to be successful. 

FEI Daily: How can boards and company leaders create an innovative culture from top to bottom?

DeLoach: It's a great question. If you’ve read Jeff Bezos' letter to Amazon shareholders in the 2016 annual report, it was issued in April of 2017, I think it gets to the heart of your question. Even the CEO of Amazon is telling his shareholders, ‘I don't have all the answers.’ But he's also saying, ‘I know this: It's always got to be day one around here.’ 

And it's got to be day one because if it ever evolves to day two, what does that mean? It means, stasis. Which leads to inevitable decline, which leads to death of a thousand cuts, and ultimately, that the demise of the organization. That terrible downward spiral that you see in an organization when it’s beyond the point of no return and played out a strategy that has led it to a disaster and nobody can save it. They can cut costs, they could do all this stuff. But it's nibbling around the edges.

So, part of creating an innovative culture gets back to some of the things we were just talking about. We have to be passionate about focusing on the customer. We have to be very aggressive in terms of understanding, and more importantly, embracing external trends. The world is changing all around us. We have to understand that world if we want to play in that world.

And then Bezos talks about decision making velocity, and that is a fascinating conversation in and of itself. Most decisions can be made with 70 percent of the information that you need. If you wait for 90 percent, you're probably too slow. 

I'm fascinated with this concept of speed. Organizations that can get to the right answers quicker and to act decisively and with commitment quicker, are going to win the game. That's just the way it is. 

Innovative culture is one that fails fast. I've looked at companies that have an innovative culture who are very successful, and what I find is they are able to break tasks down to an easily definable, embraceable area and put a team on that task, and move forward, and if they find that they don't have the right answer, they learn from it and they continue to go forward. So, it's a willingness to fail and yet keep moving forward, but failing fast, not dragging it out--forever and a day. Those are some of the aspects of an innovative culture and it starts at the top, and it's driven with passion by an executive and a management team that's committed to that vision.