In 2018, KPMG released a Benchmarking Innovation Impact report that contextualises the priorities and success stories of innovative companies all over the world. The findings suggest that one of the most powerful driving forces for modern businesses, transformational innovation, is gaining steam.
From what we have seen in innovation networks, this trend has only deepened in the last three years. So, for the remainder of 2021, how can you get the most from your innovation efforts?
In this report, we will look at transformational change and how you can integrate a powerful system for innovation with the combined influence of a strong and psychologically safe workplace environment.
Let’s dive right in to learn more about these concepts.
Historically, innovation has been categorised in three ways:
- Incremental innovation occurs when existing products and services are improved;
- Adjacent innovation occurs when a company expands its product catalogue or ventures into new markets; and,
- Transformational innovation occurs when a company launches entirely new products or radically alters its business model.
In the past, the conventional thinking was that the split between these categories of innovation should resemble 70 percent incremental, 20 percent adjacent, and 10 percent transformational.
However, as the 2018 KPMG report illustrates, that convention has shifted and more and more companies offer a ratio of 20-25 percent transformational innovation.
Innovation Value Pyramid
At Innovolo, we use a powerful methodology for transformational innovation that allows companies to boost their business resiliency and maturity by integrating innovation into all aspects of a company environment.
We call it the Innovation Value Pyramid, and it consists of four progressively more impactful levels of integrated innovation:
- Owner-driven value;
- People-driven value;
- Systems-driven value; and,
- Culture-driven value.
As you work toward higher levels of value, your innovations become more regularised. An important aspect of the pyramid methodology is the concept of psychological safety, which we will touch on next.
What is psychological safety?
Psychological safety is the group culture that reinforces the shared understanding between team members. In a safe environment, colleagues feel safe to take interpersonal and innovative risks and they have confidence that they will not be punished or embarrassed for speaking up with new ideas.
In a study conducted by Google to evaluate team performance, their findings suggested that psychological safety was vital to a team’s success. The importance of the work environment was deemed more critical than other conventional business parameters like strategy or reliability.
For the remainder of this report, we want to show you how you can unlock new innovation in your organisation with the power of transformational change. By coupling the Innovation Value Pyramid with elements of psychological safety, you can improve your innovation outcomes.
Level one: owner-driven
At the first stage of the Innovation Value Pyramid, the owner or manager runs the show. In many cases, there is simply too much to take on for a single person. As such, priorities fall off the agenda, and innovation efforts are lackluster. Most employees are too scared to put their hand up and offer new solutions since the owner is quick to pass judgment and is always rushed for time.
At the business-owner level of the Innovation Value Pyramid, how can you improve the innovation ecosystem at your organisation?
To progress up the pyramid model and achieve greater levels of psychological safety and innovation, the owner has to get the teams more involved. Here are two ways that owner-managers can promote psychologically safe work environments.
Be collaborative, not adversarial. The business world is competitive. In an effort to “get ahead” at the workplace, it’s not uncommon even for good-natured employees to view projects or business objectives as competitions. Naturally, employees want to “win” rather than “lose.” However, this kind of thinking can be harmful. Employees might criticise their own colleagues or disengage from the workplace as a result of the competitive environment.
Rather than standing by and watching a competition break out, a business manager should foster a collaborative environment. Ideally, employees will always seek a win-win outcome and base their efforts on mutually desirable results – both for the company and the employees.
Be curious, not accusatory. There really is no safe way to accuse someone without escalating a situation. Pointing the finger is one of the simplest and therefore most destructive forces that impede innovation and psychological safety.
While trying to build a collaborative safe space, it is always better to be curious rather than accusatory. That means you need to reframe your thinking. Rather than letting your emotions steer your reactions to problems, state the scenario in neutral and factual language. Then, explore what factors led to the problems in the first place.
Finally, be curious about new solutions – what kind of collaborative efforts can be shared with team members to resolve the problems?
If business owners use this approach with their direct reports and encourage the business teams to be curious about problem resolution, then they can create a psychologically safe workplace.
Level two: people
In the second phase of the Innovation Value Pyramid methodology, trust and expertise are fostered between the people within an organisation. Collaboration happens more naturally, delegation is fair and employees volunteer their time to work on new projects more willingly.
At this stage of the change management journey, staff are encouraged to take part in innovation activities rather than relying exclusively on the owner or manager. In addition, staff are strongly encouraged to learn new things. Staff avail themselves of webinars and networking events to expand their skills and expertise.
With a people-driven workplace, employees understand that skills are improvable, not set in stone forever. All in all, the human elements that contribute to innovation are better utilised.
To foster a psychologically safe workplace that empowers its people, team-building and interpersonal pathfinding are key. Jake Herway, a thought leader at Gallup.com, uses three powerful questions to encourage thoughtful collaboration in teams:
- What can we count on each other for?
- What is our team’s purpose?
- What is the reputation we aspire to have?
Answering these questions can help ground a team in the complex world that it exists within. It can bind team members together by giving them a common purpose. It also lets employees have in-depth conversations that tear down the walls that hold them back from truly getting to know one another: both in a team and as individuals.
Level three: systems
To determine whether psychological safety is already integrated into your workplace, you need to monitor it in some sort of statistical way. If you can do that, you satisfy the condition of using systems as part of your daily business operations, an integral part of the Innovation Value Pyramid Methodology.
So it’s time to have some delicate, but important, conversations with your teams. You should ask yourselves how conducive your environment is to teamwork and safety. And, you should track the morale of your teams and monitor their perceived psychological safety over time.
You can do this with a series of questions designed to tease out their perceptions of your teams to the following factors:
- Interpersonal risk-taking;
- Ability to put forward new ideas;
- Perceived risk of punishment;
- Feedback outcomes; and,
- Learning opportunities.
If you lead by example and place emphasis on the importance of psychological safety, your teams will buy into the concept and help contribute to the wellbeing of the organisation.
To identify your team’s safety perception, you can ask some of the following questions:
- In this team, is it completely safe to take a risk?
- In this team, is it difficult to ask other members for help?
- In this team, do people talk about mistakes and ways to prevent and learn from them?
- In this team, is everyone informed about what the team plans to accomplish?
For a complete list of questions that you can ask your teams, check out this seminal resource in the field of workplace psychological safety. Once an initial assessment is determined, you can check back over time to see how your safety scores are doing over time.
Level Four: culture
Finally, we reach the highest stage of innovation value. At this point, the organisation is ready to adapt to the business world of tomorrow. Powered through a transformation in company culture, colleagues around the organisation embrace innovation and feel safe to offer up new ideas.
When innovation is powered through culture, the environment always has a “buzz” in the air. New ideas flow more naturally and staff feel safe to take risks and challenge the norms.
How can you make it to the top while encouraging psychological safety along the way? Sometimes you have to face the hard truths about your workplace.
The innovative culture is often romanticised as being free-flowing and nearly anarchist. In a typical Hollywood movie scene, the analysts at a Silicon Valley tech company ride scooters around the office and have special brainstorming rooms with toys, sports, and video games to distract them. However, when we talk about innovative culture, this is not what we mean.
In reality, tough conversations need to happen to have an innovative culture. If management teams are willing to promote new ideas and accept more risk, there has to be an equivalent level of trust and commitment by everyone involved. The workplace culture must accept failure but not accept incompetence. If patterns of failure start to happen, the most psychologically safe environments are capable of sitting staff members down and having crucial conversations about the problems.
Likewise, staff need to speak openly and candidly with each other about how they feel about new ideas and projects. If employees can’t speak their minds, then the environment is not psychologically safe, and the top of the Innovation Value Pyramid has not been achieved.
By fostering psychological safety in everything that you do, your team members can offer consistent innovations to improve your business outputs.
We would love to speak with you directly about how the Innovation Value Pyramid can functionally create more innovation activity at your workplace. We offer a free consultation call with one of our innovation experts to get things started, so check us out!