According to McKinsey, 80% of executives agree that innovation is a top priority for their companies. Another analysis shows that innovative companies grow faster and are more profitable than those who do not have an innovative corporate culture. About 50% of the S&P 500 are forecasted to be replaced in the next ten years.
These are staggering statistics, but what do they really mean? Let’s explain by example.
Blockbuster owned the video rental market in the late 1980s and early 1990s. Friday nights were blockbuster night as people flocked to the stores to rent movies for the weekend. What Blockbuster failed to realize was people wanted convenience. When its primary competitor Netflix, Inc., started mailing DVDs, saving people a trip to the store, Blockbuster was ill-prepared.
Blockbuster’s lack of innovative thinking was clear when it missed the opportunity to purchase Netflix not once, but multiple times for a 49% share of the company. The company never envisioned a world of streaming videos. When Blockbuster finally launched its own streaming service, it was two years too late.
Blockbuster’s corporate culture was not one of innovation. They weren’t looking years out and imagining what technology could deliver or the convenience of delivering DVDs to the customer’s home. If they had, Netflix might have never developed into what we know it to be today.
When you think of innovative companies, you think of Apple, Disney, or Google. Netflix may not immediately come to mind, but this mail-order video distribution company is also an Oscar-winning production company. That progression demonstrates exactly what an innovative culture can do. So how has Netflix managed to create and maintain an innovative corporate culture for 21 years?
People Before Process
Netflix knows that innovation comes from people. They offer a generous compensation package, including unlimited holidays and competitive salaries. They also know that their corporate culture isn’t for everyone. That’s why they are very straightforward about how the company works during the recruiting process. Not everyone is suited for Netflix.
Give Employees Autonomy
Netflix desires employees who have good judgment. It is at the top of their list of values because their employees enjoy a great deal of autonomy. Without autonomy, employees feel constricted, which can limit creativity. Employees work on teams at Netflix. It is team autonomy that creates a sense of ownership for ideas that turn into products.
Employees are encouraged to share ideas. Whether it is a new product, service, or internal process, employees need to know that their ideas are taken seriously. Find ways to bring ideas together and share them with the company. Employees who are new to a workplace are often more inclined to exit a company if they don’t perceive it as innovative.
Netflix also encourages candid feedback. Teams need to work through situations as they arise in an honest manner. If they don’t, it can drastically affect productivity. Netflix’s policy states: No one should say anything about an employee that they wouldn’t say to their face. Holding people accountable to that policy creates a more trusting environment.
Innovation comes from failure. That’s why it is vital to create a culture that encourages risk-taking. Telling employees that it is OK to take risks is fine as long as you demonstrate your willingness to accept failure. Use a failed attempt as a means to share information and knowledge that was learned by taking the risk.
Celebrate innovative successes. In a culture of inclusiveness and team focus, rewards are more like celebrations. It doesn’t mean innovation isn’t recognized. Whether rewarding individuals or teams, it is crucial that people know their efforts are appreciated.
Blockbuster or Netflix?
Most companies are working to establish a positive culture; many are working towards an innovative one. But without data, it is hard to know if your efforts are making a change. Why not survey new hires throughout the first year to see if the onboarding process sets the right tone?
Collect data from employees to determine what you’re doing well and where there’s room for improvement. Through our survey data analysis over the last 28 years, we found that a full 21% or almost one-quarter of all respondents report that one of the top three improvement priorities for their company is an enhancement in innovation. Talk to us about how to gain actionable insights that improve employee engagement and retention while moving your company towards becoming the next Netflix.