Innovation. The Currency of the 21st Century

Shaping an Organisational Culture of Creativity and Innovation


Master's Thesis, 2013
170 Pages, Grade: 5.5 von 6 (Schweiz)

Excerpt

Table of Contents

1 INTRODUCTION
1.1 The importance of innovation
1.1.1 Innovation trends in world economics
1.1.2 Swiss innovation support
1.1.3 Innovation in corporations
1.2 Initial Situation
1.2.1 Innovation - the engine of change
1.2.2 The drivers of innovation
1.2.3 Organisational culture - a spiritual force
1.2.4 The value of organisational culture on creativity and innovation
1.3 Problem Definition
1.3.1 Innovation - a buzzword
1.3.2 Reasons for innovation failure
1.3.3 The challenge of fragmented literature
1.4 Objectives & Research Questions
1.5 Scope of the Study
1.6 Document Structure

2 METHODOLOGY
2.1 Empirical design
2.1.1 Research approach and methodology
2.1.2 Objectivity and transparency
2.1.3 Validity.
2.1.4 Reliability
2.1.5 Strengths of the Empirical Design
2.1.6 Generalisation and Limitations of the Empirical Design
2.2 Strategic sample
2.2.1 The interviewees
2.2.2 Limitations of the strategic sample
2.2.3 Pre-Test
2.3 Conduct of interviews
2.4 Interview outline
2.5 Interview Analysis Scheme
2.5.1 Categories for Themes
2.5.2 Results of the Pre-Test and Changes in the Method

3 DEFINITIONS
3.1 Creativity
3.2 INVENTION, INNOVATION & INNOVATIVENESS
3.2.1 Invention
3.2.2 Innovation
3.2.3 Innovativeness
3.3 Organisational & Innovation Culture

4 THEORETICAL BACKGROUND
4.1 Work of Schein
4.2 Model of organisational culture by T erblanche & Martins
4.3 Model of organisational culture by Martins & Martins
4.3.1 The Culture dimensions
4.3.2 The importance of organisational culture
4.3.3 Strategy
4.3.4 Purposefulness
4.3.5 Trust relationship
4.3.6 Behaviour that encourages innovation
4.3.7 Working Environment
4.3.8 Customer Orientation
4.3.9 Management Support
4.3.10 Application of model

5 RESULTS
5.1 Strategy
5.2 Purposefulness
5.2.1 The importance of purpose
5.2.2 Getting the vision, mission and objectives across
5.2.3 Involvement through co-creation
5.2.4 Involvement trough understanding employee’s needs
5.2.5 Involvement through employee’s organisational integration
5.2.6 Involvement through recruiting
5.2.7 Availability of standards
5.3 TRUST RELATIONSHIP
5.3.1 Trust motivates people
5.4 Behaviour that encourages innovation
5.4.1 Innovation drivers
5.5 Working environment
5.5.1 Conflict handling
5.5.2 Cooperative teams
5.6 CUSTOMER ORIENTATION
5.7 MANAGEMENT SUPPORT
5.7.1 Mistake handling
5.7.2 Welcome ideas
5.7.3 Resources
5.8 MISSING ITEMS IN THE MODEL BY MARTINS & MARTINS (2002)
5.8.1 Human aspects
5.8.2 Physical Working Environment
5.8.3 Innovation sources & techniques
5.8.4 Diversity
5.8.5 Collaboration
5.8.6 Symbolism
5.9 CRITICAL REVIEW OF THE MODEL
5.9.1 Design
5.9.2 Interdependencies
5.9.3 Removal of dimension
5.9.4 Terminology

6 DISCUSSION
6.1 SUMMARY OF INTERVIEWEES CRITICAL ANALYSIS OF THE MARTINS & MARTINS (2002)
6.1.1 Areas of improvement and limitations
6.1.2 Omissions
6.1.3 Introduction of the newly developed framework
6.2 Strategy & Purposefulness
6.2.1 Definition of visions, mission and core values
6.2.2 Purposefulness
6.2.3 Organisational-wide Alignment
6.2.4 Symbolism
6.3 Outward orientation
6.3.1 Understanding of customer needs
6.3.2 Collaboration
6.4 Management Support
6.4.1 Open communication
6.4.2 Embrace uncertainty
6.4.3 Tolerance of mistakes
6.4.4 Availability of resources
6.4.5 Reward system
6.4.6 Recruiting
6.5 Individuals
6.5.1 Em powerment
6.5.2 Trust
6.5.3 Involvement
6.6 Work environment - Human centric orientation
6.6.1 Appreciation towards new ideas
6.6.2 Meeting culture
6.6.3 Creative groups
6.7 Work environment - Physical and technological
6.7.1 Optimal layout
6.7.2 Different areas
6.8 Driving forces of creativity and innovation
6.8.1 Techniques
6.8.2 Celebrate success

7 CONCLUSION
7.1 Answers to the research questions
7.2 Limitation of the study
7.3 Recommendations for further research

8 BIBLIOGRAPHY

9 APPENDICES
9.1 Appendix A: Interview Transcripts
9.1.1 Interview Transcript: Thomas Däppen (Comvation)
9.1.2 Interview Transcript: Rosemary Lokhorst (Living PlanIT)
9.1.3 Interview Transcript: Kevyn Norton (Microsoft)
9.1.4 Interview Transcript: Christan Wipfli (Trisa)
9.1.5 Interview Transcript: Xavier Weibel-Garcia (Swisscom)
9.1.6 Interview Transcript on the pre-test: Prof. Dr. Jens Meissner (Hochschule Luzern - Wirtschaft)
9.2 Appendix B: Interview Analysis
9.2.1 Appendix: Strategy
9.2.2 Appendix: Purposefulness
9.2.3 Appendix: Trust Relationship
9.2.4 Appendix: Behaviour that encourages innovation
9.2.5 Appendix: Working Environment
9.2.6 Appendix: Customer Orientation
9.2.7 Appendix: Management Support
9.2.8 Appendix: Critical Review & Missing items

Management Summary “The gap between what can be imagined and what can be accomplished has never been smaller” (Hamel, 2002, pp. 10-11). Today, change is discontinuous, abrupt and seditious (Hamel, 2002, p. 5). Change, largely driven by new technology and globalisation, has creat­ed a competitive landscape with a substantial uncertainty (Bettis & Hitt, 1995; Ireland & Hitt, 1999 in Hitt, Ireland, Camp & Sexton, 2001, p. 479). The good news is that an ocean of op­portunities lies beneath this uncertainty. These opportunities must be the firm’s focus and therefore be identified and exploited (Shane & Venkataraman, 2000 in Hitt et al.,2001, p. 479). The pace of change is accelerating rapidly as new knowledge, idea generation and global diffusion increase (Chan & Mauborgne, 1999; Senge et al., 1999 in Martins & Ter- blanche, 2003, p. 64). Creativity and innovation play a significant role in this change-process for survival. “To fully realise the promise of our new age, we must become a dreamers, as well as a doers” (Hamel, 2002, p. 11). The importance of organisational culture in this con­text has been emphasised by many researchers. Organisational culture has an influence on the degree to which creativity and innovation are stimulated within an organisation (Martins & Terblanche, 2003, p. 64). Today’s businesses are increasingly challenged as “an innovation culture has proved very hard to articulate, harder to achieve, and even harder to sustain” (Angel, 2004, p. 4).

Drucker asks “how much of innovation is inspiration, and how much is hard work?” If mainly the former applies, management’s role is limited: “Hire the right people, and get out of their way.” If the latter is more dominant, management must play a more vigorous role (2002, p. 5). The aim of this research is to gain a deeper understanding of organisational cultures, where management support has been clearly identified as one of the most important compo­nents. However, organisational culture is highly complex. What personality is to people, cul­ture is to organisations - a unique identity that sets one apart from all others (Contiua, Gaborb & Stefanescuc, 2012, p. 5553). The value of strong cultures is that by virtue of deep­ly-rooted assumptions and beliefs, the organisation is able to facilitate behaviours in accord­ance to organisational principles. A company that has managed to create a strong culture has employees that believe in its products, its customers, and its inherent purpose (Ahmed, 1998, p. 33).

Based on qualitative research, leaders and managers of highly innovative companies were interviewed on the topic of organisational cultures that thrive towards achieving creativity and innovation. The interview outline was represented based on “The model of the influence of organisational culture on creativity and innovation” developed by Martins & Martins (2002). Seven determinants were identified by the researchers and are presented in the main body of the theoretical chapter. Through an extensive literature review coupled with invaluable interviewee insights, a new framework was developed. It firstly highlights the most important factors of a creativity- and innovation-driven culture. Secondly, it is presented in the form of a model that attempts to be visually intuitively, comprehendible and applicable to executives by means of concrete measures.

This thesis is aimed at providing value to small and medium-sized enterprises (SME). In Switzerland these enterprises constitute 99.6% of all Swiss companies and employ 66.6% of the working population (Swiss Federal Statistical Office, 2013, para. Business Indicators Size). These figures clearly demonstrate that SMEs are the backbone of the Swiss economy. Although the type of companies studied varied considerably in size, the concrete measures surfaced in the research that stimulate creativity and innovation are mostly size irrelevant. The belief that large corporations’ ability to apply costly measures, would outplay SMEs proved to not necessarily hold true. This can be explained by the fact that organisational culture is predominantly about human interaction. It is about the people as they are the ones armed with great ideas. This study further reveals that these creative thoughts and ideas are frequently developed in a friendly atmosphere where people from different divisions can come together and exchange ideas. Creative hunches often occur through informal ex­changes where work and social interactions are encouraged in everyday life. Therefore, not only places for “doing” need to be provided, but places for “being” are equally important. This human-centric orientation must be further supported by employee empowerment, trust and the freedom to take actions on behalf of the company. These values have a powerful impact on individuals and make them engage by means of intrinsic motivation. The synergy of these factors provides a lively melting pot where the communication culture promotes an honest exchange of opinions. This is considered as the most productive method in achieving great results. However, without the active role of management support, no such culture can be achieved. Impartially rewarding achievements, embracing uncertainty, allowing risk-taking and mistakes are prerequisites for innovation. Implementation of these factors may appear to be straightforward, however, it demands a high degree of letting go. These components must form an integral part of company strategies and are effective if they are not only clearly communicated throughout the entire workforce in a consistent manner, but also experienced and lived by employees in the daily operations and interactions. This clearly answers Druck- er’s question and shows the great degree of influence that is held by management support.

List of Figures

Figure 1: The three components of creativity (Amabile, 1998, p. 22)

Figure 2: Distinction between incremental and radical innovation (adapted from Kroy,

1995, p. 5)

Figure 3: Model of Innovation (Dobni, 2008, p. 541)

Figure 4: The Three Levels of Culture (adapted by Schein, 1985, p. 24)

Figure 5: Influence of organisational culture on creativity and innovation (preliminary

model based on literature; Martins, 2000, p. 171)

Figure 6: Model of the influence of organisational culture on creativity and innovation

(Martins & Martins, 2002, p. 62)

Figure 7: Framework elucidating the implementation of influencing components that shape a creative and innovative organisational cultre (adapted from Martins & Martins, 2002, p. 62)

List of Tables

Table 1: The interviewees

Table 2: Overview of interviewees (short version)

Table 3: Sample of a Culture Survey (adapted from Flamholtz & Randle, 2011, p. 39).

Table 4: Appendix: Strategy

Table 5: Appendix: Purposefulness

Table 6: Appendix: Trust Relationship

Table 7: Appendix: Behaviour that encourages innovation

Table 8: Appendix: Working Environment

Table 9: Appendix: Customer Orientation

Table 10: Apendix: Management Support

Table 11: Appendix: Critical Review & Missing Items

1 Introduction

The introductory chapter provides the reader with the necessary background for the study. It explores the factors and drivers that create an innovation-friendly company cul­ture. The introduction chapter sets the scene by highlighting the importance of innova­tion for both countries and corporations. Current global innovation trends are examined and Switzerland is illustrated as an example of innovation support mechanisms executed by governmental bodies.

The initial situation addresses one of the main challenges faced by corporations in to­day’s world: change. Innovating is increasingly becoming the centrepiece of value crea­tion and even considered as a survival tool for businesses in the current evermore- competitive business environment. Diverse factors that support companies to attain an innovative status are discussed, the most important being innovation culture.

The section problem definition underlines and examines why innovation is considered more of a buzzword than an actual practical tool by many organisations despite its em­pirical importance.

Based on these factors, this thesis sets out on developing a framework to support com­panies to incorporate creativity and innovation into their daily business, and therefore their firm culture - this being the objection of this study.

1.1 The importance of innovation

“The only constant is change” - even after 2’500 years Heracles’ insight appears to be more prevalent than ever in today’s global and corporate context as Prahalad and Krish- nan (2008) came to understand (Jeschke, Isenhardt, Hees, & Trantow, 2011, p. 1; Pra­halad & Krishnan, 2008, p. 2). The two management and innovation experts believe that the changing dynamics of markets driven by the omnipresent connectivity, industry con­vergence, technology and moreover, consumer involvement will create a need for con­tinuous change. They claim the new game is about more efficiency and more innovation (pp. 2-3).

Innovation and ideas are considered “the most precious currency” in today’s economy (Hargadon & Sutton, 2000, p. 157). For many companies, being first in bringing new concepts to the market is critical to ensure long-term survival. There is no business that would not want to be more creative in its thinking, products and processes (Kelley & Littman, 2001, p. l). Leaders around the world have realized that the capability to trans­form ideas into successful products or services is an essential competence (Krueger & Killham, 2007, para. 1). The ability to innovate is hence the key to developing a sus­tained competitive advantage (Trantwo, Hees & Schenke, 2001, p. 1). Therefore, many executives made promoting and managing innovation their top priority (Krueger & Kill- ham, 2007, para 1).

Innovation has not only changed the priority lists of executives, but also those of gov­ernmental leaders. Economic growth is fuelled by innovation and has contributed to­wards global development (Segerstrom, 1991, p. 808; Global Innovation Index (GII), 2012, p. 4). The ability to develop innovations and to successfully launch them in the market will be a crucial determinant towards the global competitiveness of nations in the coming decade (OECD, 2007, p. 3). Moreover, innovation is critical to help address global challenges, such as climate change and sustainable development (p. 5). Ways need to be explored so that innovation can not only foster and harness growth, but also solve everyday problems, decrease poverty, and become a supportive pillar in achieving sustainable growth for the next generations (GII, 2012, p. VII).

1.1.1 Innovation trends in world economics

Recent history suggests two important innovation trends in the world economy. Firstly, the role of innovation for growth is strengthened by progress in new technologies, and a greater focus on knowledge creation and its use (OECD, 2007, p. 6). Technological in­novations are becoming an ever more important contributor of economic well-being (Grossman & Helpman, 1997, p. XI). Secondly, countries participating in the global eco­nomic exchange are becoming increasingly open and interdependent. Certainly, the two are not unrelated. Fast and interconnected communication as well as close contacts among innovation leaders in different countries facilitate and accelerate the process of innovation and the spreading of new ideas. Rapid changes in technology intensify the motives for trade and the consequences of integration into the world trading system (Grossman & Helpman, 1997, p. XI). These findings coincide with the results of the GII that state that innovation is increasingly understood as an interactive learning process that embraces the integration of knowledge coming from external sources and has be­come more fragmented and open (GII, 2012, p. 97).

1.1.2 Swiss innovation support

The importance of innovation and boundaryless collaboration, enabling the exchange of ideas throughout companies internally and externally, has been acknowledged by the Commission for Technology and Innovation (CTI), an independent decision-making body within the Swiss Federal Administration (Chesbrough, 2003, p. 43; Steinlin, 2013, para. 4). The CTI seeks to optimise knowledge and technology transfer through the use of networks, platforms and other initiatives. Furthermore, it supports general conditions that favour innovation capacities and intervenes precisely at the point where state measures have the greatest impact on private sector initiatives: transforming research into eco­nomic value (para. 4).

1.1.3 Innovation in corporations

Most corporate leaders understand that there is only one way to create sustainable eco­nomic value in order to survive in a climate of fierce competition - and it is not through old-fashioned management practices like restructuring, cost-cutting measures or mer­gers and acquisitions (Skarzynski & Gibson, 2008, p. 12). Those tasks have more to do with running today’s business than with building tomorrow’s economy (Hamel & Pra­halad, 1994, p. 5). For the long-run, if leaders want to succeed in growing at a faster pace than their competitors or the overall economy, they have no alternative but to inno­vate their products, their business models, and their management systems (Skarzynski & Gibson, 2008, p. 12). In today’s ever-changing world, the task of managing innovation is crucial to sustain and advance companies’ current businesses and to grow new ones (Chesbrough, 2003, p. XVII). Companies are valued less for their existing offerings than for their capabilities to adjust, adapt and dream up something new for the future - or in other words, to innovate (Kelley & Littman, 2005, p. 4). Companies must adopt the fol­lowing recipe for success: make a conscious choice to move away from status quo and take action towards change (Vangundy, 2007, p. 4).

1.2 Initial Situation

1.2.1 Innovation - the engine of change

This is precisely what most companies now are choosing to do (Vangundy, 2007, p. 4). Innovation is the engine of change and in today’s fiercely competitive environment and not adapting to change can be detrimental. Companies cannot protect themselves from change regardless of their greatness or the vastness of their resource pool (Ahmed, 1998, p. 30). Thus, for most organisations change is inevitable (Martins & Martins, 2002, p. 58). Change, while it brings uncertainty and risk, it also creates opportunity (Ahmed, 1998, p. 31). When faced with change, openness and trust are two important inter­related influencing characteristics (Deal & Kennedy, 1982, p. 164). More predominantly though, creativity and innovation are the key drivers of an organisation’s ability to change (Ahmed, 1998, p. 30). Rapidly changing business environments cause problems that managers have not previously encountered. Tried and trusted methods of approach­ing problems may fail. Therefore, creativity in problem-solving is an essential ability in managerial skills for any organisation (Proctor, 2005, p. 223).

In sum, innovation is the precious currency of the new economy and creativity is the seed of all innovation (Hargadon & Sutton, 2000, p. 157; Amabile, Conti, Coon, Lazenby & Herron, 1996, p. 1155). Indeed, the topics of creativity and innovation are even a bit magical - it is very hard to be creative on the spot, but by having an open mind and cre­ating the right atmosphere, the magic can appear (Kelley & Littman, 2001 in Heye, 2006, p. 253).

But what does it take to create such a magical atmosphere? Of course, simply deciding that the organisation has to be more creative and innovative is insufficient. That decision must be backed by actions that create an environment in which people feel inspired and comfortable with innovation to the point where they can actually live it (Ahmed, 1998, p. 31).

1.2.2 The drivers of innovation

The key to innovation resides in the ability to define, instill and reinforce innovation sup­porting drivers within organisations. And it appears that innovation will only flourish un­der the right circumstances (Dobni, 2008, p. 543). Numerous innovation studies have been published on the topic of how to create circumstances that unleash the recumbent magic lingering within organisations.

Different authors emphasise different factors. In literature preconditions such as open communication and dialog, a focused innovation strategy, profound customer insight, great talent, promotion and remuneration for individual performance, working environ­ments that are armed with creativity enhancing features are considered key. Further views suggest that innovation is all about people creating value by implementing new ideas (Hattori & Wycoff, 2004, p. 10). Kelley and Littman (2005) agree by stating it is the people that make it happen through their imagination, willpower, and perseverance (p. 6).

All of these stated measures may have an impact on organisation’s ability to innovate. However, it is paramount to understand organisational culture, the key driver of innova­tion when shaping a competitive company (Ahmed, 1998, p. 42). These above- mentioned elements tie an organisational culture together and create a distinctiveness that makes innovative companies different from their competitors.

1.2.3 Organisational culture - a spiritual force

It is not surprising that such cultural issues are becoming increasingly important and provide a source of strategic competitive advantage (Martins & Martins, 2002, p. 58). The value of strong cultures is founded on deeply-rooted assumptions and beliefs that organisations are able to facilitate behaviours in accordance to their principles (Ahmed, 1998, p. 33). Companies aspiring towards innovative goals need to learn from the ex­amples of highly successful companies such as 3M or The Body Shop whose leaders are striving to build organisational cultures and climates which perpetually create innova­tion. Leaders should therefore invest their time designing and creating an environment that stimulates innovation for the future (p. 42). As Buckler (1997) suggests, innovation is an environment, a culture - almost a spiritual force - that exists in a company and drives value creation (in Ahmed, 1998, p. 30).

1.2.4 The value of organisational culture on creativity and innovation

Research indicates that organisational culture has a great influence on the degree to which creativity and innovation are stimulated within an organisation (Martins & Ter- blanche, 2003, p. 64). It has been widely agreed in theory and practice that organisa­tional culture is a contributing factor to the degree to which creative and innovative be­haviour is found amongst employees in an organisation (for example Johnson, 1996 and Tuskman & O’Reilly, 1997 in Martins & Martins, 2002, p. 58). A creative and innovative organisation requires an organisational culture that relentlessly guides their employees to strive for innovation and a climate that is conducive to creativity (Ahmed, 1998, p. 30). Organisations and leaders are thus trying to design an institutional framework in which creativity and innovation is accepted as basic cultural norms in the midst of technological and other modern-day changes (Martins & Terblanche, 2003, p. 64).

1.3 Problem Definition

Virtually all companies talk about innovation, and the importance of “doing” innovation. Many actually try to “do it” but only few succeed (Ahmed, 1998, pp. 30). As Murrin (2001) claims, nine out of ten people would agree with the statement “innovation and creativity are vital to growth”. Yet, when these people are asked if they know how to practice and inspire creativity in their day-to-day life, nine out of ten people would reply no (in von Stamm, 2003, p. XI).

1.3.1 Innovation - a buzzword

Indeed, when reading the “CEO’s letter to the stakeholders” in annual reports, the word innovation can be mostly found in the first few lines: “We thrive on innovation,” “We are committed to growth through innovation,” or “We have an unwavering commitment to innovation” (Skarzynski & Gibson, 2008, p. 11). Even though innovation is debated in senior level meetings as being the lifeblood of the company, and occasional resources and R&D funds are allocated to it, often the commitment ends there. In reality, innova­tion, for the most part, frightens organisations because it is inevitably is linked to risk. Many companies pay “lip service” only to the power and benefits of innovation. To a large extent, most remain averse to the investment and commitment that innovation en­tails (Ahmed, 1998, p. 30). A study conducted by Bain & Company, based on 2000 com­panies in the last ten years, found that 90% of global companies have not achieved growth in a sustainable and profitable manner - a discouraging finding. Especially when considering that profitable and innovative growth is the primary goal of most executives (Zook & Allen, 2001, p. 7). This gives rise to the underlying question: why do so many companies fail to be innovative?

1.3.2 Reasons for innovation failure

The aversion towards risk is one of many reasons why companies do not manage to become truly innovative. Further reasons, can be that leadership and hierarchies are coagulated, open dialog is an alien concept and networking only takes place in the smoker’s corner (Granig & Hartlieb, 2012, p. 86). Other companies may shy away from novel solutions as they believe that truly creative individuals are few and far between (Kelley & Littman, 2001, p. 13). Another hindering factor is that creativity gets killed much more often than it gets supported. Not because managers have a vendetta against it - on the contrary (Amabile, 1998, p. 77). Managers get caught up in daily operations and quarterly return mind-sets (Hattori & Wycoff, 2004, p.2). Creativity, oftentimes gets undermined unintentionally every day in work environments and is overshadowed by entirely good business imperative reasons such as efficiency, productivity and control. Managers can impossibly be expected to ignore those business obligations. However, in working towards them, they may be inadvertently designing organisations that systemat­ically crush creativity (Amabile, 1998, p. 77). Regrettably, in many companies innovation is still more of a buzzword than a core competence that is understood (Skarzynski, & Gibson, 2008, p. 12).

The fact is that the many forces, which deter and inhibit innovation, are systemic and deeply rooted within the company’s culture. They are embedded in the management principles and processes that organisations inherited from the industrial era. The chal­lenge, therefore, in making innovation a corporate-wide competence is to identify these fundamental inhibitors. They hinder new thinking and innovation, frustrate experimenta­tion, stop talent and capital from flowing to the most promising ideas. Once identified, these inhibitors need to be removed. It is the challenge to replace a company’s old man­agerial DNA with a new, innovation-friendly culture that enables and sustains new kinds of creative behaviours (Kelley, 2010, p. XV).

1.3.3 The challenge of fragmented literature

In seeking a better understanding in the role that culture plays in creativity and innova­tion, there is a further challenge (Wolf, Kaudela-Baum & Meissner, 2011, p. 2). There seems to be little agreement in the literature as to what type of organisational culture will truly promote creativity and innovation (Judge, Fryxell & Dooley, 1997, p. 73). Numerous researchers have examined the organisational characteristics that influence innovation within organisations (e.g., Kanter, 1988; Kimberley & Evanisko, 1981). However, most studies have examined only one subset of the relevant variables at a time. This makes it difficult to obtain a comprehensive picture of the ways in which organisations can facili­tate or inhibit innovation (Arad, Hanson & Schneider, 1997, p. 43). Particularly for SMEs, in regards to innovating culture, academic contributions are fragmented (Wolf, Kaudela- Baum & Meissner, 2011, p. 2). Studies designed at developing a holistic picture on the issue, focus mostly on large companies. Thus, researchers claim that there is a relative shortage of studies holistically exploring the role of culture in SME innovation (e.g. Hausman, 2005; Oke, Burke & Myers, 2007; Spicer & Sadler-Smith, 2006 in Wolf, Kaudela-Baum & Meissner, 2011, p. 2). This makes it difficult to draw conclusions con­cerning the nature of the various characteristics that have been individually studied. Thus, a comprehensive framework that organises and specifies the relationships among the important characteristics of organisations could aid in better understanding how cul­ture can influence creativity and innovation in organisations (Arad, Hanson & Schneider, 1997, p. 42).

1.4 Objectives & Research Questions

Organisational culture is a social force that is invisible yet ever so powerful (Schein, 1996, p. 239). Research shows that there is an essential need for businesses to under­stand how organisational culture can be effectively implemented in the daily running of corporations to promote both creativity and innovation (Martins & Martins, 2002, p. 58). It is the aim of this thesis to contribute towards a better understanding of how to foster a culture of innovation and how to release and embrace the creative potential of organisa­tions.

The goal of identifying the most significant influences of an innovation-friendly culture was also followed by Martins and Martins (2002). They developed a comprehensive or­ganisational cultural model describing the most important determinants: strategy, pur­posefulness, trust relationship, behaviour that encourage innovation, working environ­ment, customer orientation and management support. The model is more specifically aimed at determining what type of organisational culture would support creativity and innovation. An elaboration of the model can be found in the theoretical background (see ch. 4).

This research paper sets out to further build upon the Martins & Martins model by ex­tending it with concrete measures and actions that show how to best implement the identified determinants. By conducting interviews with executives and Innovation and Development Departmental leaders, insights will be gained on the adoption of the above-stated seven factors. The knowledge and personal experience of experts within innovation leading companies will be adapted into Martins and Martins culture model with a focus on how to create an innovation-friendly culture.

The model can be used as a tool to comprehend the factors that play an important role in organisational innovation culture. However, the model lacks concrete guidance in im­plementing and executing these factors to achieve valuable results in creativity and in­novation.

Accordingly, the research questions of this thesis are:

- What are the key components that foster creativity and innovation in organi­sational cultures?
- How can they best be implemented in order to achieve a creativity- and inno­vation-driven culture that is lived by its employees?
- How can they be elucidated by a concrete framework focusing on the imple­mentation of the identified components?”

The answers to these research questions will come in the form of a framework that is based on the model by Martins and Martins (2002).

1.5 Scope of the Study

Organisational culture is a complex and subjective topic with contrasting geographic and cultural values where widespread assumptions and generalisations are difficult to identify. To make this study more specific and focussed, the scope is limited to Swiss SMEs.

1.6 Document Structure

Following the introduction of the subject matter, objectives and research questions, the thesis continues with the methodological procedure hereafter. The rest of the thesis is structured in the following matter.

Chapter 2 discusses the applied procedure for realizing the study. The validity and relia­bility are touched upon as well as the extent to which the results agree with those of oth­er researchers and the extent to which the results are applicable in other fields. Moreo­ver, the chapter reveals the criteria for selecting the strategic sample. It also elucidates the development of the interview outline and the outcome of the pre-test.

Chapter 3 presents the definitions, which include creativity, invention, innovation, innova­tiveness and organisational & innovation culture. A clear understanding of these terms supports the reader of this paper and avoids potential misinterpretations.

Chapter 4 addresses the concepts and models used in order to highlight the most im­portant determinants of organisational culture in regards to creativity and innovation. The model of Martins & Martins (2002) is discussed in detail.

Chapter 5 reveals the results of the empirical research based on the interviews. They are categorised according to the structure of the model by Martins & Martins (2002).

Chapter 6 refers to the existing cultural model which is extended with the primary re­search collected from the interviewees. The self-developed framework will be presented.

Chapter 7 concludes the most important findings that are summarised and discussed. A new model and its relevant application to this field of study is presented. These results, coupled with the concepts and theories studied, provide a sound pool of knowledge that is applied in answering the research questions. In conclusion, concrete recommenda­tions are made on how to create and stimulate an innovation-friendly culture.

2 Methodology

This chapter explains elaborately how the study was conducted to reach the aim of de­veloping a framework illustrating the most important components of organisational cul­tures.

2.1 Empirical design

2.1.1 Research approach and methodology

The objectives of this master thesis can be achieved best by the combination of both deductive and inductive thinking. Deductive reasoning works from a general theory to more specific observations, seen as a top-down approach. Generally, it enables a con­firmation or falsification of a hypothesis based on observations. The opposite applies for the inductive reasoning, which aims at moving from specific observations to broader generalizations or theories. To meet the objectives of this research, these two ap­proaches were used in parallel, cycling from a theory to observations and back up again to a theory (Trochim, 2006, Deduction & Induction section, para. 3). Through studying and combining the experiences of highly positioned people from different innovation­driven companies, a new model was developed that depicts the most important determi­nants of an innovation-friendly culture.

Concepts, theories and models covering the importance as well as the challenge of cre­ating an innovation-driven culture exist plentifully; yet, there seems little agreement in the literature as to what type of organisational culture will promote creativity and innova­tion best. Therefore, once the main model by Martins & Martins (2002) was analysed sufficiently and properly embedded, a qualitative analysis was conducted to gather ob­servations, opinions and empirical knowledge from professionals that have worked in highly innovative companies and who therefore, have experienced ideal circumstances. The goal was to have them share best practice examples as well as specific measures upon which the author will develop a framework that incorporates the relevant profes­sional know-how, skills and abilities with regard to the subject matter.

Theories are there to provide the theoretical fundamentals and should fulfil two main functions. Firstly, the explanation of facts and circumstances within the object range. Secondly, the possibility of predictions (Klaus & Buhr, 1972, p. 1083 in Dahinden, Sturzenegger & Neuroni, 2006, 68). The concept of Schein (1985) who identified three distinct levels of organisational culture as well as the model of the influence of organisa­tional culture on creativity and innovation by Martins and Martins (2002) constituted the theoretical framework for the dissertation. The model was furthermore enriched with views from other scholars in the field in order to give a more comprehensive understand­ing of the specific determinants. Following deductive reasoning, the model was analysed by conducting in-depth interviews with industry professionals and experts. The results contributed to the development of an application model, that focuses not only on the identification of the different determinants but more on the concrete implementation of the influencing factors. This was precisely the intention and purpose of this research paper. Thus, an explorative approach was best suited to answering the research ques­tion and encompassing the greater complexity of organisational cultures fostering crea­tivity and innovation.

The qualitative approach allowed the systematic setting up of a choice of interview part­ners and the generation of interesting questions that aimed for discussion and interac­tion with the specific interviewees (Trochim, 2006, Qualitative Methods section, para. 1). In order to learn about innovation-driven cultures interviewees were selected based on their employer and their experience. These choices are further argued in the chapter on the strategic sample. During face-to-face interviews, the author aimed to gather in-depth information and different perceptions on how to best create an organisation culture that leads to innovation.

2.1.2 Objectivity and transparency

Objectivity is understood as intersubjectivity, meaning that each statement and the way it has evolved must be comprehensible to a third person (Pürer, 2003, p. 551). The reader must be able to follow the process by which the data was collected and analysed (Rubin, & Rubin, 2005, p. 76). Fulfilling this requirement demands a clear representation of the topic, the methodology and its accrued results (Dahinen, Sturzenegger & Neurone, 2006, p. 140).

The study examined the perspectives of how to create an innovation-friendly culture based on literature as well as interviewees that have all been highly exposed to the building of an organisational culture aimed at coming up with new ideas. However, by using the qualitative inquiry as the single method, the work disclosed to a major extent the subjective view of the interviewees. This restricts the objectivity of the assumptions generated through the research (Marshall & Rossman, 2006, p. 102).

In terms of transparency, the attempt was to gain an honest, personal and open picture of the interviewees. It is important to note that the physical space in which an interview is situated can have a strong influence its outcome. Comfort, privacy and quiet are the three aspects of the physical environment that can be seen as the most crucial (King & Horrocks, 2010, p. 42). Whenever possible, interviews were conducted in the offices and complexes of the interviewee to encourage a feeling of security and comfort. To ensure the transparency of the results, and that personal interpretation of the content was miti­gated, notes and recordings were taken. Relevant answers and statements were then, analogously and grammatically corrected transcribed. These transcriptions can be found in the appendices A.

2.1.3 Validity

Validity is understood as the entitlement of a research technique to measure what should be measured (Dahinden et al., 2006, p. 140). One potential threat to validity is the researcher bias. Qualitative research tends to be exploratory and open-ended rather than structured. Furthermore, it can result from selective observation and recording of information (Johnson & Christensen, 2010, p. 264). However, the researcher at all times was aware of those threats that could potentially distort results and therefore has made sure to ask questions in a neutral and impartial manner. What furthermore helped the results not being influenced by the researcher was the fact that all interviewees have actively in one way or another gathered significant experience and know-how on how innovation cultures are built. Hence, all interviewees can be seen as experts in the field, having a clear opinion on the effects and impacts that certain determinants can have on culture. Therefore, the interviewees would not support any statements the researcher may advocate which is not aligned with their own views and opinions. The choices of interviewees represent the entire range of company sizes, i.e. from a start-up company to a large international corporation. The aim was to gather valuable insights from all pos­sible company sizes and to then adopt the suggested measures relevant to small and medium sized firms. By specifically soliciting interviewees to describe concrete actions for SMEs, the author contributed towards a generalisation of findings.

2.1.4 Reliability

In research, reliability means that results are repeatable on different subjects, provided that the same usage of methods, equipment and experiments is made (Greetham, 2009, p. 132). A measure is considered as reliable if the same results would be achieved over time. In other words, if the same people would be repeatedly asked the identical ques­tions, the answers would not deviate. Nevertheless, as with any source, judgements have to be made about the reliability. With the rather open nature of qualitative research, the interviews might have taken a somewhat different direction if repeatedly conducted. The interviewee’s answers would probably have varied slightly each time. Yet, the over­all outcome would still remain consistent as the answers were based on the opinions and experiences of the interview partners, thus ensuring reliability.

2.1.5 Strengths of the Empirical Design

Qualitative data is extremely varied in its nature and includes virtually any information that can be captured that is non-numerical (Trochim, 2006, Qualitative Data secion, pa­ra. 1). Expressed in words describing attitudes, feelings, opinions, ideas, customs and beliefs, it does not allow any extraction of averages, maximum and minimum values, or percentages. However, it is rich in subtle insights into human behaviour that is essential to understanding individuals, societies and cultures (Greetham, 2009, p. 180). The quali­tative approach with a balanced and suitable strategic sample influenced the research outcome in terms of validity, reliability, and objectivity. The quality of answering the re­search question ultimately rests in the hands of the experts. For enhanced credibility of the research, interviewees were chosen who are knowledgeable, whose combined views presented a balanced perspective and who helped testing the emerging guiding princi­ples (Rubin, & Rubin, 2005, p. 63). The semi-structured interview type, was chosen by the author. Having the interviewee elaborate on a series of given determinants whereby leaving the choice for him or her to decide what aspects the emphasis was placed on, gave the interviewer the possibility to have unanticipated responses. Furthermore, that led the discussion into other areas that were not covered by the model and therefore new to the researcher and all the more valuable to the thesis (Greetham, 2009, p. 214). The model as well as the research article by Martins and Martins (2002) were sent out to the interviewees beforehand to encourage preparation. The aim was to get detailed feedback and opinion on the model, more specifically, what aspects were considered to be of highest importance, the implementation of the factors within the respective compa­nies and areas with potential for improvement. The author aimed to receive on the one hand insights on how the given determinants can best be implemented in companies and on the other hand, ways on how the comprehensibility of the model could be im­proved. Overall, this methodology allowed for personal opinions and impressions, and enabled human interaction.

2.1.6 Generalisation and Limitations of the Empirical Design

Asking questions and getting replies is a more challenging task than it may initially sug­gest. The spoken or written word always has a residue of ambiguity, no matter how care­fully the answers are reported or coded. Yet, interviewing is one of the most common and powerful methods that lends itself to understand fellow human beings (Denzin, & Lincoln, 2005, p. 645). The research for the dissertation at hand was based on six inter­views with cultural experts, five of them working in innovation-driven companies and one of them being a lecturer and researcher in the field. This sample helped to validate the results and to come up with an application model. The recommendations made are based on the expert opinions and backed by literature. Nevertheless, generalisation of the findings would be considered inappropriate, since a limited amount of data was col­lected and analysed.

2.2 Strategic sample

Sampling is the process of selecting units that refer to people or organisations from a specific population of interest. The study of the sample may fairly generalize the results back to the population from which they were chosen (Trochim, 2006, Section sampling). Thus, the selected interviewees should be as representative of the total population as possible (Kothari, 2011, p. 5). For this thesis this would mean that service-oriented com­panies should be selected, as the model by Martins & Martins (2002) was revised based on an empirical study with a service-oriented organisation. This was done as four out of the five chosen companies mainly operate in the Information and Communication Tech­nology (ICT) industry, where service is the predominant means of creating economic value. The fifth company is present in the fast-moving consumer goods market. Yet, through its stringent and well-known innovation-driven orientation, the researcher felt that valuable insights could be drawn from this company. Despite the ability to general­ise, it was seen positive to have different types of companies represented in the sample. On the one hand, the sample includes a traditional Swiss family business. On the other hand, a start-up company that still breeds off the energy of young entrepreneurship. Both very innovative in contrasting manners form part of sample criterion. Companies were chosen that are considered innovation leaders in their field with strong organisa­tional cultures. The sample was chosen with great elaboration and thought, as the main body of the study was based on the answers of the selected interview partners. The field, location and size was of secondary relevance. This thesis is mainly aimed at Swiss SMEs. However, as this represents a broad category ranging up to 250 employees, the author believed that it would be best to conduct interviews with companies of different sizes. The selected companies range from a start-up with 15 employees to companies where the head count amounts to 500 people working in Switzerland. In terms of finan­cial resources, SMEs usually have lower budgets than large corporations, nonetheless, the researcher believes that they can learn from the best and are be able to adopt cer­tain measures with a significant lower budget.

2.2.1 The interviewees

The interviewees, including their employer and the specific relevance to this thesis are listed Table 1 below. The interviewee’s initials are included in the table as all statements in the result chapter 5 are referred to by initials, indicating who expressed what.

Table 1: The interviewees

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2.2.2 Limitations of the strategic sample

The intention of the researcher was to gain insights on distinctive innovation pro­cesses and cultures of best practice examples. By having achieved that on the one hand, on the other hand the ability to generalise is not possible. Had the aspect of generalisation been stronger aimed at, companies of more similar sizes and indus­tries should have been selected. Drawn generalisations from this thesis therefore do not hold. The matter of generalization however, is an aspect that could further be researched on in order to evaluate if the developed framework is able to contribute to an enhanced organisational culture in terms of creativity and innovation enhanced for SMEs.

2.2.3 Pre-Test

The first interview was conducted with Prof. Dr. Jens Meissner, the co-coach of this thesis. He was chosen since he is an expert in the field of innovation and has exten­sive experience and knowledge. A few of his publications that were of great value for this thesis were mentioned about in the description above. The results of the pre-test can be found in chapter 2.2.3.

2.3 Conduct of interviews

All interviews were conducted in a semi-structured question format and were based on the Martins and Martins model (2002) presented in the theoretical background. The decision to use open questions was a deliberate choice made by the researcher. It is felt that too much structure would detract the interviewee from freely expressing valuable ideas and opinions. The intention is to encourage the creation of a bounda­ryless information flow. In consideration with this intention, all interviewees were asked open questions related to the research topic requiring more than a simple yes or no response as this has the effect of opening up the dialogue in a natural manner.

2.4 Interview outline

Basic information about the participants and their experience with the process of in­novation, creativity and organisational culture was addressed at an early stage. This allowed the conversation to naturally flow towards the focal point of the interview, the Martins & Martins (2002) model. The researcher intentionally kept her responses to a minimum, occasionally paraphrasing or reflecting back to the informant. Every effort was made to create a friendly environment of trust and confidence where respond­ents felt at ease, especially when talking about their own personal experiences (Ko- thari, 2011, p. 99). This was supported by a general warm-up question, being "What does organisational culture mean to you personally?”, aimed at making both parties feel comfortable and ready to engage in a story telling model. All interviews were conducted in the interviewee’s mother tongue, being English or German to ensure highest quality in the stated.

To maximise the quality of the results, a copy of the model was sent to the respond­ents in advance. The author believes this approach encouraged a more in-depth and prepared interview outcome. By doing so, they were already familiar with the seven determinants of creativity and innovation within the organisational culture. After shar­ing their opinion on the model, interviewees were asked to rank the seven character­istics in order of importance. They were also questioned on how these seven pillars are prevalent and significant in their own experience within their respective compa­nies. Furthermore, they were thoroughly questioned on the strengths and limitations of the model before being asked how to make the model more intuitive to understand and apply in the corporate world.

The researcher ended the interview with a brief summary of the most important points raised to allow the informant to further develop on any points that may have been too briefly discussed. All interviews were conducted in a sensitive and courte­ous manner respecting the time limitations agreed by both parties. Five out of six interviews were conducted face-to-face. Through face-to-face interviews the re­searcher got the chance to get a feel and insight on the visible company cultural. However, one interviewee was currently working abroad and the interview therefore took place over Skype.

2.5 Interview Analysis Scheme

2.5.1 Categories for Themes

This chapter provides the scheme with which the six interviews were analysed. The objective of the analysis plan was to structure the interview transcripts to finally help with comparing individual statements about the same topic.

In order to evaluate the answers accurately, they were first allocated according to the seven determinants of the model, being strategy, purposefulness, trust relationship, behaviour that encourages innovation, working environment, customer orientation and management support. Background on these determinants can be found in the theoretical chapter (ch. 4.3). A further category was the feedback and critical review of the model by Martins & Martins (2002). This additional category was included since the interviewees were asked about aspects that were not a part of the model but yet, important to take into account. The tables with the statement taken directly from the transcripts can be found in the appendices. That is why certain parts are in German. The translation took place during the transformation of the tables to the writ­ten form in chapter results.

2.5.2 Results of the Pre-Test and Changes in the Method

Conducting the pre-test with Prof. Dr. Jens Meissner was invaluable for this thesis. The interviewee was open and honest enough with the researcher to make her real­ise that the outline and thereby the entire thesis required a sharper focus. The previ­ous aim of the thesis was to extensively identify factors that enable creativity and innovation in organisations, greatly exceeding the scope of a research at hand. By having a more targeted focus, the thesis provides a greater value as the author was able to dive deeper into the topic at hand. The author would like to take the oppor­tunity to thank Prof. Dr. Jens Meissner for providing clarity and guidance to the study, hence enhancing the quality of final outcome.

After reviewing the existing literature, the author decided to focus on the topic of cre­ativity and innovation within organisational culture. This meant not only creating a revised theoretical background but also an entirely new interview outline. For this reason the majority of Prof. Dr. Meissner’s highly qualified answers that were given could not be included in this thesis. The new interview outline was based on the model by Martins & Martins (2002) provided the author with a structure. The inter­viewees discussed the model as a whole as well as the separate determinants within the model and gave valuable opinions and views.

3 Definitions

This chapter provides the reader with clarity in regards to the terminology used in this thesis. This is especially necessary since the terms creativity and innovation are cur­rently being used with increasing frequency in both business and strategy formula­tions. The term innovation, in particular needs to be clarified in detail as a degree of confusion exists with the words invention, innovation and innovativeness.

Finally, the terms organisational and innovation culture will be defined in order to ascertain terminological clarity when diving into the subject matter with greater depth.

3.1 Creativity

Creativity and innovation are often used interchangeably, but rather than being syno­nyms, creativity is a building block for innovation (Yusuf, 2009, p. 2). Looking at the process of innovation, creativity is the starting point, or in other words, the first is a necessary but insufficient condition for the second. From this perspective, creativity comes first and provides the impetus and content for the many forms of innovation (Amabile, 1996, p. 1155 in Andriopoulos & Dawson, 2009, p. 30). For this reason, this thesis will first concentrate on the term creativity and will then continue by defin­ing innovation.

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Figure 1: The three components of creativity (Amabile, 1998, p. 22)

"Creativity is inventing, experimenting, growing, taking risks, breaking rules, making mistakes, and having fun”, playfully defined by Mary Lou Cook (in Casto, 2004, p. 31). According to Amabile et al. (1996 ) "all innovation begins with creative ideas” (p. 1154). Creativity is the key to fuel the innovation pipeline (McLean, 2005, p. 240). It is a process of developing and expressing novel ideas for solving problems or satisfy­ing needs (Luecke, 2003, p. 82). It is either the production of new ideas or combining old ideas in new ways (Heye, 2006, p. 253). Gustavsson and Laestadius (2006) un­derstand the ability of being creative as going outside the already known, thinking beyond - and breaking - the conventional routines and practices and continue by saying that creativity "is the ability to find new ways of applying knowledge from dif­ferent areas - knowledge new to the world or already known and used for other pur­poses” (p. 623). According to Boden (2004) creativity is the ability to come up with ideas or artifacts that are not only new, but also surprising and valuable (p. 1). In the business context originality is not enough. For an idea to be considered creative, it must also be appropriate, useful and actionable. It must in one way or the other, in­fluence the way business gets done. This can be by improving a product, or by open­ing up a novel way to approach a process (Amabile, 1998, p. 78). Creativity is not a state of mind, a form of personal "wiring”, nor is it so much a talent as it is a goal- oriented procedure for producing innovations (Luecke, 2003, p. 82)

Nevertheless, individuals are the source for the development of new ideas and there­fore, they are the essence of creativity (Edmond, Mumford, & Teach, 1993 in Tesluk, Farr & Klein, 1997, p. 27). Heye (2006) believes that most people that would not de­scribe themselves as very creative, can develop creative skills or facilitate sessions where creativity is needed (p. 254).

Breaking the term creativity down into a more individual sense, Amabile (1998) states that creativity has three components: expertise, creative-thinking skills, and motiva­tion, which are depicted Figure 1 and will briefly be touched upon. Expertise encom­passes everything that a person knows and can do in the broad domain of his or her work, whereby the source of that knowledge is not of relevance. This knowledge can be seen as the intellectual space that can be used to explore and solve problems (pp. 78 - 79). In order to be creative and permanently innovative, knowledge is par­amount. "Innovation is the work of knowing rather than doing” (Drucker, 1985, p. 5). Janzsen (2000) sees the management of knowledge as one of the key constitutes of the innovation management process. Whoever has the greatest insight in innovation and better skills in applying this insight will be most successful (p. 4). In a team, the diversity of the participants’ knowledge is a valuable and important aspect of learning opportunities, collective problem-solving and a large potential for creativity and inno­vation (Ramstad, 2011 in Jeschke, et al., 2011, p. 49).

Creative thinking, the second factor, refers to how people approach problems and solutions. It is about the capacity to put existing ideas together in new combinations.

The skill itself depends on the personality as well as on a person’s thinking and work­ing manner (Amabile, 1998, p. 79). Robinson & Stern (1997) believe that in the pro­cess of studying a problem from every angle, of getting stymied and blocked by it, of relentlessly thinking about it, can enhance a person’s sensitivity of a particular prob­lem to the point where that person finds significance in events that others do not even notice (p. 186). Management can emphasize on how to be creative by consist­ently encouraging employees to challenge basic assumptions regarding their work, the products and services they produce, and the processes used to produce them, and encourage to address problems from different approaches (Amabile & Gryskie- wicz, 1987; Couger, Higgins. & Mclntyre, 1993; Nonaka, 1991; Redmond Mumford, & Teach, 1993 in Tesluk, Farr & Klein, 1997, p. 35). Expertise and creative thinking are both individual’s raw materials or in other words natural resources (Amabile, 1998, p. 79).

The third factor - motivation - determines what people will actually do. If motivation is not present in the workplace, expertise and creative thinking will either go un­tapped or be applied to something else. Motivation comes in different forms with dif­ferent levels of impact. There are mainly two types of motivation - extrinsic and in­trinsic, the latter being far more essential for creativity. Extrinsic motivation often is at the root of creativity problems in business. It is induced from the outside through means such as bonuses and promotions. Financial incentives do not necessarily stop people from being creative but in many situations, they do not help either, especially when it leads people to feel that they are being bribed or controlled. The essence is that money by itself does not result in employees’ passion for a job. This can be achieved by intrinsic motivational factors such as stimulating interest and a person’s desire to do something. The work itself becomes motivating and people engage in their work for the challenge and enjoyment of it (Amabile, 1998, p. 79).

Given those three components of creativity, expertise, creative-thinking skills and motivation, everyone has the potential to be creative (Griffin & Morrison, 2010, p. 6).

In the context of this thesis, creativity is defined as the act of creating new ideas in the corporate context, which are intended to be rendered as innovations.

However, in order for an organisation to remain relevant and to compete in pursuit of its mission, management of organisations must pay attention to not only one end of the process, namely generating creative ideas but also the other; utilising its innova­tion process to realize its full potential value (McLean, 2005, p. 240).

3.2 Invention, innovation & innovativeness

The terms innovation, invention and innovativeness are a common source of confu­sion and misinterpretation. For the purpose of this study, all three words have been clearly defined and are hereby presented.

3.2.1 Invention

The conception of new ideas is the starting point for any innovation. It is merely a concept or a thought or collection of thoughts. The process of converting intellectual thoughts into a tangible new artefact, usually being a product or process, is an inven­tion. This is where science and technology mostly play an essential role. Inventions at this point need to be combined with hard work to convert them into products that will improve company performance. These later activities represent the notion of ex­ploitation (Trott, 2012, p. 15). It has been agreed upon that the distinction between innovation and invention is concerned with the commercial and practical application of ideas or inventions and thereby extracting value from the ideas (p. 15; Rogers, 1995, p. 5). It is therefore necessary for an invention to pass through production and marketing tasks and be successfully introduced into the marketplace in order to be­come an innovation (Garcia & Calacone, 2011, p. 112). A discovery that goes no further than the laboratory remains an invention. A discovery that moves from the lab into production, adding economic value to the firm is considered an innovation (Gar­cia & Calacone, 2011, p. 112). In other words, an invention is the conception of the idea, whereas innovation is the subsequent translation of the invention into the econ­omy (Trott, 2012, p. 15).

3.2.2 Innovation

The term innovation has been defined by the great Austrian economist Joseph Schumpeter as the commercialization of all new combinations based upon the appli­cation of: (1) new materials and components; (2) the introduction of new processes; (3) the opening of new markets; (4) the introduction of new organisational forms. According to this definition, innovations are the composite of two worlds - namely, the technical world and the business world. When only a change in technology is involved, Schumpeter defines it as an invention. As soon as the business world gets involved, it becomes an innovation. Innovation can be seen as an event, the introduc­tion of something new to the business world, as well as a process - and the great thing is that one innovation causes another (Janszen, 2000, p. 3).

In the context of innovation it is important to clarify the use of the term "new”, too. For Rogers and Shoemaker (1971) it matters little, as far as human behaviour is con­cerned, whether or not an idea is “objectively” new as measured by the lapse of time since its first use or discovery. If the idea seems new and different to the individual, however, it is an innovation (in Trott, 2012, p. 15).

Innovation itself is a broad concept that can be understood in a variety of ways. May­ers and Marquis (1969 in Trott, 2012, p. 15) give a comprehensive definition: “Innovation is not a single action but a total process of interrelated sub processes. It is not just the concept of a new idea, nor the invention of a new device, nor the develop­ment of a new market. The process is all these things acting in an integrated fashion”. Accordingly, innovation can be illustrated as process-based equation showing the relationship between the two terms:

Innovation = theoretical conception + technical invention + commercial exploitation

It is a process with a number of distinctive features that have to be managed, that represents innovation. Sergey Brin, Co-founder of Google, confirms that innovation needs to be seen as a process: “The fact is coming up with an idea is the least im­portant part of creating something great. The execution and delivery are what’s key” (Trott, 2012, p. 15).

However, innovations may come in different forms and sizes (Janszen, 2000, p. 4). They can lie along a continuum from small incremental, modular and architectural, to large-scale, radical and breakthrough innovations (Andriopoulous & Dawson, 2009, p. 30 in Janszen, 2000, p. 4). Generally two different types of innovation can be dis­cerned: incremental and radical or discontinuous. Incremental innovation is generally understood to exploit existing forms or technologies. It either improves upon some­thing that already exists or reconfigures an existing form or technology to serve some other purpose (Luecke, 2003, p. 2). According to Hipp and Grupp (2005) incremental innovations are conceived as new to the firm but not new to the market (p. 526). Con­trastingly, a radical innovation is something new to the world, and a departure from existing technology or methods (Luecke, 2003, p.2).

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Figure 2: Distinction between incremental and radical innovation (adapted from Kroy, 1995, p. 5)

Radical innovations typically occur at the early stages of diffusion and adoptions while incremental innovations evolve at advanced stages of a product’s life cycle (Garcia & Calatone, 2002, p. 112). Both types of innovation strongly differ in most aspects such as objective, marketing and technological requirements (Yoon & Lilien, 1985 in Panne, Beers & Kleinknecht, 2003, p. 329). Incremental innovations will in­volve modest technological changes and the existing products in the market will re­main competitive. Radical innovations will instead involve large technological ad­vancements, rendering the existing products uncompetitive and eventually obsolete (Trott, 2012, p. 213). Radical innovations usually command a higher economical de­gree of risk than incremental innovations do. Their chances of market acceptance are bigger along with the needs and technological induction coinciding with one other (Pleschak & Sabisch 1996, p. 3). A possible attempt to distinguish between incre­mental and radical innovations in respect of engaged technology and the market type is depicted in Figure 2. The term disruptive technology is used for describing a tech­nical innovation that has the potential to upset the organisation’s or the industry’s existing business model. Disruptive technologies displace the established technology and precipitate the decline of companies whose business models are based on. Of­ten, disruptive technologies create new markets, which in most cases are initially small but can grow large (Luecke, 2003, p. 3).

For this thesis innovation is seen as the management of all the activities involved in the process of idea generation, technology development, manufacturing and market­ing of a new or improved product of manufacturing process or equipment (Trott, 2012, p. 15).

Definitions on creativity and innovation may be summed up and better understood in the following conclusive manner: Creativity is the process of generating ideas whilst innovation is the sifting, refining and more critically - the implementation of those ideas. Creativity is about divergent thinking. Innovation is about convergent thinking. Creativity is about the generation of ideas and innovation is about putting them into action (Gurteen, 1998, p. 2). Or in the words of the Senior Vice-President for Re­search and Developments at 3M: “Creativity: the thinking of novel and appropriate ideas. Innovation: the successful implementation of those ideas within an organisa­tion” (in Trott, 2012, p. 16).

3.2.3 Innovativeness

Upon focussing on organisational culture to enhance creativity, it becomes apparent that the term innovativeness is used frequently in academic literature and should therefore be defined. From a multi-dimensional standpoint innovativeness may be derived from several inter-related activities held together by a common thread - that being culture (Dobni, 2008, p. 543). According to Subramanian and Nilakanta (1996), innovativeness is an enduring characteristic in organisations that is manifested over time. Scholars have focused on innovativeness as a dependent variable, presuming it to be important and have linked it to organisational performance, suggesting that firms need to be innovative in order to survive, grow and particularly to gain a com­petitive edge (Grunhaug & Kaufmann, 1988 in Deshpandé, Farley & Webster, 1993, p. 28).

For the interest of comprehensiveness, it has to be mentioned here, that the term innovativeness also refers to individuals. Rogers and Shoemaker (1971) define inno­vativeness as "the degree to which an individual is relatively earlier in adopting an innovation than other members of his system” (p. 27). Midgley and Dowling (1978), after a thorough literature review, expressed the notion of innovativeness being "the degree to which an individual is receptive to new ideas and makes innovation deci­sions independently of the communicated experience of others" (p. 236).

For the purpose of this thesis, the focus is directed at organisations. However, the second definition regarding individuals is also relevant as ultimately, companies are formed by a group of individuals. With this mind-set, the author aims to provide the reader with a more profound and generic understanding.

3.3 Organisational & Innovation Culture

Perhaps the most simple definition of organisational culture is "the way we do things around here'' (Lundy & Cowling, 1996 in Martins & Terblanche, 2003, p. 65).

However, in order to grasp a somewhat deeper understanding of organisational cul­ture, one must first dig further into the concept of culture (Vogelsang, Townsend, Minahan, Jamieson, Vogel, Viets, Royal & Valek, 2013, p. 253). An organisation’s culture is defined by its norms and values. Values reflect beliefs about what is truly important. Norms are the widely shared and strongly held social expectations about appropriate attitudes and behaviour to such a degree that compliance with the norm is perceived as right and appropriate and noncompliance may even be punished (Tushman and O’Reilly, 1997, p. 92). However, there are views that do not consider culture as a static property. Rather than shared customs, beliefs, norms, values, and tacit assumption some think of culture as a dynamic human process of constructing shared meaning (Frost, Moore, Louis, Lundberg & Martin, 1985 in Vogelsang et al., 2013, p. 253). Creating a culture is one of the unique characteristics of humans. It is based on the capacity to self-consciously see one’s self and one another from re­spective points of view. It is this reflexive capacity of humans that enable the creation of such a culture. At the same time, it is the human need for finding meaning that creates the motivation for culture stabilisation. Developing shared meanings on how to perceive, categorise, and think about what goes on in the surrounding environment is necessary to avoid the catastrophic anxiety that would result from reacting to eve­rything as if it were something new (Vogelsang et al., 2013, p. 253). Therefore, once these patterns have been learned they not only function to reduce anxiety but also to provide moment-to-moment meaning and predictability to daily events. According to Trice and Beyer (1993), "human cultures emerge from people’s struggles to manage uncertainties and create some degree of order in social life” (in Schein, 1990, p. 255).

As a result, culture can directly affect behaviour and can help a company prosper (Ahmed, 1998, p. 33). Such influential cultural forces can facilitate senior manage­ment in implementing innovation strategies and plans. Having an established innova­tion culture enables overcoming what formal systems, procedures or authority cannot achieve (Ahmed, 1998, p. 33).

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: Model of Innovation (Dobni, 2008, p. 541)

The requirements for creating an innovation culture have been defined by Dobni (2008) in four points, which are depicted in Figure 3: 1. The intention to be innova­tive. 2. The infrastructure to support innovation. 3 The operational level behaviours necessary to influence a market and value orientation. 4. The environment to imple­ment innovation (p. 540). Schein (1984) and Weick (1985) both point to culture as the linchpin to innovation in organisations (in Dobni, 2008, p. 544). Although, there is no guarantee that an innovation culture will inevitably lead to innovation, it is considered a central strategic requirement for companies today (Angel, 2006, p. 3).

4 Theoretical Background

Essential for a company’s success is the incorporation of an organisational culture that promotes creativity (Jeschke et al., 2011, pp. 458 - 459). Before addressing cre­ativity and innovation in organisational culture, a comprehensive understanding of organisational culture alone will be provided hereafter by Edgar Schein (1984), who has made a notable mark on the field of organisational development in many areas. Various models have been developed to describe the relationships between phe­nomena and variables of organisational culture. One example is the model of organi­sational culture as part of organisation reality developed by Sathe (1985). It focuses on the influence of leadership, organisational systems and personnel on expected and actual behaviour patterns. However, the model was criticised for neglecting the influence of external factors on the organisational culture (Martins & Terblanche, 2003, p. 66).

For the foundation of this thesis the model developed by Martins & Martins (2002) was chosen for its broad comprehension. The model is based on the open systems theory as well as on the work of Schein (1984) and holistically looks at dimensions measured to describe organisational culture as well as determinants that influence creativity and innovation.

4.1 Work of Schein

Most research on organisational culture relies on the work of Schein (1984), who understands culture as consisting of different layers (Wolf, Kaudela-Baum & Meiss­ner, 2011, p. 3). He intended to show that culture can be analysed at several different levels. Levels meaning the degree to which the cultural phenomenon is visible to the observer. According to him, some of the confusion surrounding the definition of what culture really is, stems from not differentiating the levels at which it manifests itself. The levels range from the very tangible over manifestations that can be seen and felt, to the deeply embedded, unconscious, basic assumptions that were defined by Schein as the essence of culture (Schein, 1990, p. 255). Basic assumptions emerge from processes of learning how to cope with certain problems and define the accu­rate way to relate to them in the respective culture (Wolf, Kaudela-Baum, & Meissner, 2011, p. 5). Between these layers are various espoused beliefs, values, norms, and rules of behaviour that members of the culture use as a way of depicting the culture
to themselves and others. Schein’s work suggests that innovation management in firms is affected by underlying cultural aspects, which can be categorised into three major levels of cultural analysis shown in Figure 4.

Abbildung in dieser Leseprobe nicht enthalten

Figure 4: The Three Levels of Culture (adapted by Schein, 1985, p. 24).

1. The artifacts manifest the visibility, audibility and tangibility of the underlying as­sumptions.
2. The shared values are the espoused reasons for why things should be as they are.
3. The basic underlying assumptions are the invisible but surfaceable reasons why group members perceive, think and feel the way they do about external survival and internal integration issues (Schein in Vogelsang, Townsend, Minahan, Jamieson, Vogel, Viets, Royal & Valek, 2013, p. 255)

This model is useful in two ways. Firstly, it helps a novice observer of organisational culture to differentiate the superficial manifestations and espoused values that most organisations display from the cultural substrate or essence, the tacit, shared as­sumptions that drive the day to day behaviour that can be observed. Secondly, the differentiation of levels is a necessary conceptual tool in helping an organisation to decipher its own culture, which can be a timely process (Schein, 1990, p. 255).

Schein explains the process of a culture formation as follows. It starts with one or more entrepreneurs who found a company based on personal beliefs and values. As they employ others to work with them they will either choose them based on their compatibility or will socialize newcomers to the beliefs and values that they regard as core to running the new business. The founder’s beliefs and values will cause the
organisation to make decisions in its environment and, if those are successful, the newcomers will begin to entertain collectively the stand that the founder’s beliefs and values must be "correct”. As the environment continues to reinforce the behaviour of the organisation, what were initially the founder’s personal beliefs and values gradu­ally come to be shared and imposed on new members as the organisation grows. As this success cycle continues, these shared beliefs and values gradually come to be taken for granted, drop out of awareness, and can, therefore, be thought of as "taken for granted assumptions” that become increasingly non-negotiable (Schein, 1990, pp. 255-256). In other words, organisational culture is manifested in the typical character­istics of an organisation. It refers to as set of basic assumptions that worked so well in the past that over time they got accepted as valid assumptions. These assump­tions are maintained in the continuous process of human interaction, which again manifests itself in attitudes and behaviour. Therefore, they can be understood as the right way in which things are done or problems should be understood (Martins & Ter- blanche, 2003, p. 65).

According to Hatch (1993) Schein’s model of organisational culture as assumptions, values, and artifacts neglected the appreciation of organisational culture as symbols and processes (p. 687). Furthermore, the active role of assumptions and beliefs in forming and changing organisational culture was not addressed (Hatch, 1993, p. 661). Hatch developed a model that filled those gaps and has made place for sym­bols alongside assumptions, values, and artifacts. That was done by articulating ar­rows linking assumptions, values, artifacts and symbols and by defining these links as processes having proactive and retrospective temporal modes of operation (p. 687).

Over the years, many scholars have developed models to depict the cultural influ­ence on organisation. Bertalanffy (1950) for instance sees organisational culture against the background of the systems theory. The approach offers a holistic stance and at the same time emphasises on the interdependence between the different sub­systems and elements in an organisation, in which case it is considered an open sys­tem (French & Bell, 1995 in Martins & Terblanche, 2003, p. 66). The organisation system model explains the interaction between the organisational sub-systems which are among others goals, structure, management, technology and psycho-sociology. These interactions can be seen as the primary determinant of behaviour in the work­place due to its complexity and presence on different levels. More specifically, these interactions can take place between individuals and groups within the organisation, as well as with other organisations and the external environment. The patterns of

interaction between people, roles, technology and the external environment repre­sent a complex surrounding that has a great influence on the behaviour in organisa­tions (Martins & Terblanche, 2003, p. 66).

4.2 Model of organisational culture by Terblanche & Martins

Against the background of open systems and the work of Schein (1985), Martins (1987) developed an organisational culture model. The model aims at describing organisational culture based on an ideal organisation while taking the importance of leadership into account (Martins, 1987 in Martins & Terblanche, 2003, p. 66) and was futher elaborated on by Martins & Terblanche in 2003. Cultural values and norms that influence creativity and innovation, as found in the literature, were synthesised and formed the following integrated interactive model shown in Figure 5 (Martins & Ter­blanche, 2003, p. 69).

The model is based on the interaction between the organisational sub-systems, which are goals and values, structural, managerial, technological and psycho- sociological. The model is further founded on two central functions, namely the ex­ternal environment, which include social, industrial and corporate culture and the internal systems containing artifacts, values and basic assumptions, and finally on the dimensions of culture (p. 66).

Abbildung in dieser Leseprobe nicht enthalten

Figure 5: Influence of organisational culture on creativity and innovation (preliminary model based on literature; Martins, 2000, p. 171)

The model encompasses all aspects of a business upon which organisational culture can have an influence, and vice versa (p. 66). Martins and Martins (2002) have fur­thermore acknowledged the great importance of creativity and innovation in today’s world, making that the focus to which culture should evidently lead to. For that reason this model is all the more valuable for this thesis. They state that compelling new ideas help people think and act in new ways. In this respect there is a strong need to understand how organisational culture should be dealt with in order to promote crea­tivity and innovation (p. 58). A plethora of authors (for example Johnson, 1996 or Tuskman & O’Reilly, 1997) believe that organisational culture is a contributing factor to the degree to which creative and innovative behaviour is found among employees in an organisation (in Martins & Martins, 2002, p. 58). Accordingly, the aim of the model was to identify specific determinants of organisational culture that have an influence on the degree to which creativity and innovation are encouraged and stimu­lated within the workplace (Martins & Terblanche, 2002, p. 64). In other words, what type of organisational culture will enhance creativity and innovation in an organisation (Martins & Martins, 2002, p. 58).

Since the inception of the theoretical model above, Martins and Martins (2002) have further developed it by conducting a quantitative study. Creativity and innovation play an important role in the change process and the degree to which change occurs in organisations is influenced by the organisational culture. It was therefore decided to conduct the study in a service-orientated organisation that was going through a trans­formation and change process. The purpose was to identify, operationally, measure and describe their determinants of organisational culture that may influence creativity and innovation (Martins & Martins, 2002, p. 58). It was further decided to do the study in one organisation only, since the organisational culture varies from one organisa­tion to another (Hellregiel, Slocum & Woodman, 1998, p. 546; Shaughnessy, 1988, p. 7 in Martins & Martins, 2002, p. 59).

The results of the empirical study indicated that a new model could be developed to explain the influence of organisational culture on creativity and innovation yet better (p. 61). By comparing the theoretical with the revised model similarities, differences and new perspectives emerged (Martins & Martins, 2002, p. 58). This thesis will spare an elaboration of the literature-based model and will hereafter focus on the empirically revised model.

4.3 Model of organisational culture by Martins & Martins

The revised model by Martins and Martins (2002) is depicted in Figure 6. It is this model that lays the foundation for the further developed framework designed by the author. The dimensions measured to describe organisational culture as well as the relationship of creativity and innovation within organisational culture remained un­changed. These two unaltered components of the model will firstly be elaborated on. The focus will then shift to the determinants of organisational culture.

Dimensions measured to describe organisation culture

Strategic vision and mission Customer focus (External environment) Means to achieve objectives Management processes Employee needs and objectives Interpersonal relationships Leadership

Abbildung in dieser Leseprobe nicht enthalten

Figure 6: Model of the influence of organisational culture on creativity and innovation (Martins & Martins, 2002, p. 62)

4.3.1 The Culture dimensions

The model depicts that the dimensions that describe organisational culture have an influence on the degree to which creativity and innovation take place in the organisa­tion (Martins & Terblanche, 2003, p. 69).

The dimensions of culture encompass the following:

- Mission and vision determine the employee’s understanding of the firm’s values and intentions, and can motivate the employees to realize a prosperous and in­spiring common vision of the future. In order to make personnel truly understand the mission and vision, they can be transformed and broken down into measura­ble individual and team goals and objectives (Martins & Terblanche, 2003, p. 66).

- External environment determines the degree of focus on external and internal cus­tomers as well as the employees' perception of the effectiveness of community in­volvement. It also focuses on the image of the organisation to the outside world and whether it is a sought-after employer (p. 66).

- Means to achieve objectives determines how organisational structure and support mechanisms contribute to the effectiveness of the organisation (p. 66).
- Management processes focuses on the way in which they take place in the organ­isation. Such processes can be decision-making, formulating goals, innovation processes, control processes and communication (p. 66).
- Employee needs and objectives determine the degree of alignment between em­ployees' needs and objectives with those of the organisation as perceived by em­ployees (p. 66).
- Interpersonal relationships focuses on the relationship between managers and personnel as well as on the conflict management in place (p. 66).
- Leadership focuses on specific areas that strengthen leadership, as perceived by personnel (p. 66).

In studying the influence of organisational culture on creativity and innovation, it be­came clear that these dimensions have a direct bearing on the influence of organisa­tional culture on creativity and innovation (Martins & Terblanche, 2003, p. 69). This is what makes the model comprehensive and can therefore serve as a background to conclude which determinants of organisational culture influence the degree of crea­tivity and innovation in organisations (Martins & Terblanche, 2003, p. 67).

4.3.2 The importance of organisational culture

This leads to the relationship of creativity and innovation within organisational culture. The latter seems to be a critical factor in the success of any organisation. The ca­pacity to absorb innovation into the organisational culture and management process­es is what makes organisations successful (Martins & Terblanche, 2003, p. 67). Tushman and O’Reilly (1997) state that the effective management of culture lies at the heart of organisational innovation (p. 111). The basic elements of organisational culture such as shared values, beliefs and behaviour expected of members of an organisation influence creativity and innovation in two ways.

Firstly, individuals come to understand the values, expected behaviours, and social knowledge through various forms of socialization, such as direct interactions with co­workers and supervisors (Chatman, 1991; Louis, 1980 in Tesluk et al., 1997, p. 29). Culture can also be formed indirectly through vicarious observations of the types of behaviours and actions that are sanctioned and rewarded by management (Thomp­son & Luthans, 1990 in Tesluk et al., 1997, p. 29).

[...]

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Details

Title
Innovation. The Currency of the 21st Century
Subtitle
Shaping an Organisational Culture of Creativity and Innovation
College
Lucerne University of Applied Sciences and Arts  (Betriebs- und Regionalökonomie IBR)
Grade
5.5 von 6 (Schweiz)
Author
Year
2013
Pages
170
Catalog Number
V416065
ISBN (eBook)
9783668669772
File size
1451 KB
Language
English
Tags
Innovation, Creativity Kreativität Kultur Culture
Quote paper
Amber Dubinsky (Author), 2013, Innovation. The Currency of the 21st Century, Munich, GRIN Verlag, https://www.grin.com/document/416065

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