The Seven Essential Characteristics of Innovative Companies

What makes for an innovative company? An innovation initiative is not enough. Having the word “innovation” in your company slogan or all over your web site is not enough. Indeed, I would argue that any kind of focus on innovation as an end is detrimental to innovation.

Innovation is nothing more than a tool that enables companies to achieve unique, strategic goals. Here are seven essential characteristics of innovative companies. How well does your organisation do?

1. Unique and Relevant Strategy

Arguably, the most defining characteristic of a truly innovative company is having a unique and relevant strategy. We all know what companies like Apple, Facebook and Google do. That’s because they make their strategies clear and relentless follow them. An innovative smaller player may not be recognised globally, but its leaders, employees, business partners and customers all will have a clear idea of the company’s strategy. If a business does not have definable, unique strategy, it will not be innovative. Bland strategies, such as “to be the best”, do not provide a path to innovation in the same way clearer strategies, such as “to be on the cutting edge of mobile communications technology”, “to build the world’s safest cars”or “to deliver anything anywhere” do. If your strategy is vague or fails to differentiate your company from the competition, you should change this situation as quickly as possible!

2. Innovation Is a Means to Achieve Strategic Goals

Highly innovative companies do not see innovation as an end, but rather as a means to achieving strategic goals. Just as a good camera is an essential tool that enables the photographer to take professional images and the saw is an essential tool for the carpenter, innovation is an essential tool for visionary companies intent on achieving their strategic goals. Indeed, if you look at the web sites of the world’s most innovative companies, they tend not to trumpet innovation, but rather corporate vision.

3. Innovators Are Leaders

The one thing innovation provides more than anything else is market leadership. When companies use innovation to achieve strategic goals, they inevitably take the lead in their markets. Unfortunately, this does not always translate to being the most successful or profitable. Amazon has been an innovator from the beginning, setting many of the standards for e-commerce. Nevertheless, it took some years for the company to become profitable. Cord was one of the world’s most innovative car companies, launching cutting edge innovations such as front wheel drive and pop-up headlights — in the 1920s and 30s. However the company was never very successful financially and went out of business in 1938. On the other hand, innovators like Apple and Google have been financially successful as a result of their innovation. In short, innovators are leaders, but not always profitable leaders!

4. Innovators Implement

Most businesses have a lot of creative employees with a lot of ideas. Some of those ideas are even relevant to companies’ needs. However, one thing that differentiates innovators from wannabe innovators is that innovators implement ideas. Less innovative companies talk more about ideas than implementing them!

5. Failure Is an Option

I would argue the the most critical element of business culture, for an innovative company, is giving employees freedom and encouragement to fail. If employees know that they can fail without endangering their careers, they are more willing to take on risky, innovative projects that offer huge potential rewards to their companies. On the other hand, if employees believe that being part of a failed project will have professional consequences, they will avoid risk — and hence innovation — like the plague. More importantly, if senior managers reward early failure, employees are far more likely to evaluate projects regularly and kill those projects that are failing — before that failure becomes too expensive. This frees up resources and budget for new innovative endeavours. However, in businesses where failure is not an option, employees will often stick with failing projects, investing ever more resources in hopes that the project will eventually succeed. When it does not, losses are greater and reputations are ruined. As a result, companies that reward failure often fail less than those that discourage it.

6. Environment of Trust

The Innovative company provides its employees with an environment of trust. There is a lot of risk involved in innovation. Highly creative ideas often initially sound stupid. If employees fear ridicule for sharing outrageous ideas, they will not share such ideas. Likewise, if employees fear reprimand for participating in unsuccessful projects, they will not participate (see item 5 above). If employees do not trust each other, they will be watching their backs all the time. If they fear managers will steal their ideas and claim them as their own, employees will not share ideas. On the other hand, if employees know they can take reasonable risks without fear, if they know outrageous ideas are welcome, if they know that their managers will champion their ideas and credit them for those ideas, these employees can be creative, implement ideas and drive the company’s innovation. In short, creativity and innovation thrive when people in an organisation trust each other and their organisation.

7. Autonomy

Along with trust, individual and team autonomy is a key component of innovation. If you give individuals and teams clear goals together with the freedom to find their own paths for achieving those goals, you create fertile ground for innovation. But, if managers watch over their subordinates’ shoulders, micro-managing their every move, you stifle the creativity and individual thought that is necessary for innovation. Of course giving employees autonomy means they may make mistakes. They may choose inefficient routes to achieving goals. But at worst, they will learn from their mistakes and inefficiencies. At best, they will discover new and better ways of accomplishing objectives. Most importantly, if you hire intelligent, capable, creative people and give them the freedom to solve problems, they will do so. And, in so doing, they well help innovation to thrive throughout the company.

What Do You Think?

There you have it, the seven essential characteristics of a creative company. What do you think? How well does your company fit? Have I missed an essential characteristic? I’d love to know your thoughts.

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Jeffrey Baumgartner is the author of the book, The Way of the Innovation Master; the author/editor of Report 103, a popular newsletter on creativity and innovation in business. He is currently developing and running workshops around the world on Anticonventional Thinking, a radical new approach to achieving goals through creativity — and an alternative to brainstorming.