Organisational Culture and its Influence on Innovation

Muhammad Simjee Graduate School of Technology Management, University of Pretoria Abstract An innovation supportive culture has been identified as a key driver of innovation output. This paper evaluates the innovation culture of a South African petrochemical firm in order to identify the elements of an innovation supportive culture and to gain insights into the innovation culture of a large organisation engaged in engineering related activities. The synthesis of prior research on innovation culture was utilised to develop a six factor model which highlights the key elements of an innovation supportive culture. The six elements indentified are: Intention to be Innovative, Support Infrastructure, Learning, Structure, Behaviour and Communication. A comprehensive survey was developed in order to evaluate the six factor model. The key findings of the research are that, support infrastructure and behaviour are the greatest barriers to an innovative supportive culture and that the majority of employees are enthusiastic about improving their skills in order to support the firms innovation aspirations. Further, employees were willing to accept organisational changes if they resulted in benefits to the organisation. Keywords: Innovation, Culture, Technology Management 1. Introduction

Innovation in a South African context has been defined as: "The process of transforming an idea, generally generated through R&D, into a new or improved product, process or approach, which relates to the real needs of society and which involves scientific, technological, organisational or commercial activities" (Oerlemans, 2003). Academics and researchers have cited innovation as being the life blood of a firm and a critical success factor of any organisation. Phrases such as "driving force of a nation's economic development" (Oerlemans, 2003), "engine of change" (Pervaiz, 1998) and "the differentiator that will lead to the next level of competitive advantage" (Amit and Schoemaker cited in Dobni, 2008) have been used to describe the importance of innovation. The firm which is used as a sample case for this dissertation is a global oil and gas company established during the 1950's by the South African government, in order to reduce dependence on crude oil, as the country had no reserves of its own. It utilises proprietary Fischer-Tropsch technology to produce liquid fuels from coal as well as natural gas. Further, the company exploits by-products of the Fischer-Tropsch process in order to produce a variety of chemical products. The Annual Report (2010), reported that the company had 33 339 employees with a market capitalisation of R 183 350 M. The firm is comprised of a number of business units segregated by functional and geographical boundaries. One of these business units is responsible for managing R&D, technology management and innovation, engineering services and project management portfolios. The "engineering services group" consists of approximately 600 engineers primarily responsible for delivering engineering solutions in a project environment. These engineers are the focus of this research.

The dynamic environment of the global market place demands that the firm increases its innovation capacity in order to remain competitive. In order to achieve this goal the firm must eliminate the barriers preventing innovation by implementing policies that foster a culture of innovation, create an environment in which innovation can flourish and provide formal mechanisms which facilitate the innovation process 1.1. Objectives The objective of the study was to identify the elements of organisational culture and evaluate each of the with the intention of identifying key factors required to increase innovation output. 2. Literature review 2.1. Innovation Innovation involves the introduction of beneficial changes to an organisation. These changes originate from ideas derived either by individuals or by groups which are implemented if a perceived value exists. A more comprehensive definition is 'the intentional introduction and application within a job, work team or organisation of ideas, processes, products or procedures which are new to that job, work team or organisation and which are designed to benefit the job, the work team or the organisation" (West & Farr, 1990). West (2002, p. 355) describes innovation as a distinct two-step process. The first step entails the development of ideas and is titled the creativity phase whilst the second stage titled implementation involves the introduction of new and improved products, services and ways of doing things at work. The above definitions highlight two important characteristics of innovation, the idea must be new and the resultant changes must result in benefits. The novelty of an innovation is dependent on the environment which it influences as well as the relativity of the point at which it is measured. The second characteristic of innovation, benefit, implies that the changes resulting from innovation result in increased value or as stated by Escalfoni et al. (2010, p.1149) "Innovation can be considered a process in which the results occur when the ideas find business opportunities". Thus, innovation is a result of a planned effort to derive value. The value derived from innovation efforts could be related to financial benefits but could also encompass a number of other factors expressed by West (2002, p. 357) such as personal growth, enhanced satisfaction, improved group cohesiveness, better organisational communication as well as productivity. 2.2. Importance of innovation The importance of innovation to the success of any firm is widely documented in innovation literature. Skerlavajn et al.( 2010, p. 6932) reference Mansury & Love (2008) who are of the opinion that innovative firms will grow faster, be more efficient and more profitable than non-innovators as well as Hurley & Hult (1998) who believe that innovation is among the most important factors impacting business performance. Further, the authors cite Banbury & Mitchell (1995) and Deshpande et al. (1993) who view innovation as essential to the survival and long term success of an organisation, since innovation provides firms flexibility and enables them to effectively respond to customer needs. Crossan & Apaydin (2010, p. 1154) quote management scholars Mone et al.(1998) who have observed that innovation is the most important determinant of firm performance.

2.3. Organisational culture The term culture is not easy to define and is used to describe a variety of situations. Kerlavaj et al (2010, p. 6391) provides a detailed analysis of literature to highlight the complexities associated with defining the term culture and highlights this complexity by citing Rollinson & Broadfield (2002) who state that there is no universally accepted definition, as well as Ott (1989) who identified over 70 different words or phrases used to define organisational culture. Weiner (1988, P. 534) found that most researchers of organisational culture agree that shared values are a key element in the definition of culture". Charles et al. (2001) defines organisational culture as "The specific collection of values and norms that are shared by people and groups in an organisation that controls the way they interact with each other and with stakeholders outside the organisation." This definition is comprehensive as it encompasses values as well as interpersonal interaction. However, the most understandable definition which best illustrates the concept of organisational culture is provided by Deal & Kennedy (1982, p. 90) who define organisational culture as the way things get done around here". 2.4. Innovation supportive culture According to Dombrowski, et al. (2007, p. 190) organisational culture has been found to be one of the most important characteristics of sustained organisational innovativeness. Whilst creativity can be considered an individual process, innovation cannot as it involves several people. From the definitions of organisational culture described in section 2.3, organisations have values, principles, norms and unwritten rules which impact collaboration and behaviours which consequently impact the innovation process (Escalfoni, Braganholo, & Borges, 2010, p. 1149). Khazanchi, et al. (2007, p.873) remarks that "Increasingly, studies stress organisational culture as a key to managing innovation". Claver, et al. (1998) observe that innovation is strongly dependent on the "disposition of individuals and their organisational behaviour". The authors refer to Hunter (1992, p.251) according to whom innovation in corporations is linked to the aims of the organisation and is a means through which "the corporation and individuals may express their ideology". Further, research conducted by Dombrowski, et al. (2007, p. 200) found that organisations which had a weakness with regard to their innovation cultures had poor innovation projects and were unable to effectively execute their innovation strategies. 2.5. Innovation culture models Researchers have developed a number of models in order to describe the factors which drive an innovation supportive culture. Table 2-1 provides a summary of the models developed by Dobni, Martins & Terblanche, Dombrowski, et al., Claver et al. and Malik & Wilson.
Table 2-1: Summary of Innovation Culture Models Citation Factor Intention to be Innovative (Dobni, 2008) Support Infrastructure Environment Supporting Implementation Knowledge (Martins & Strategy Description The intention of senior management to drive innovation within the organization The infrastructure to support innovation thrusts An environment or context to support implementation influence, or the knowledge and orientation of employees to support thoughts and actions necessary for innovation Vision, Mission, Purposefulness

Terblanche, 2003)

Support Structure Behaviour encouraging innovation Communication Innovative mission and vision statements Leadership Safe spaces Boundary spanning Incentives Flexibility Democratic communication Collaboration Experimentation

Reward (recognition), Available Resources (time, IT, creative people) Flexibility, Freedom (Autonomy, Empowerment, Decision Making), Cooperative teams (group Interactions) Mistake handling, Idea Generation, continuous learning culture, risk taking, competitiveness, support for change, conflict handling Open Communication between members of the organization Single organizational goal Successful innovations need champions who can manage innovation from ideas to successful commercialization Teams or units with resources and facilitation Collaboration across various organizational boundaries No spot bonuses, every employee has innovative responsibility Open-mindedness and questioning of protocol and procedures Participation by all employees Communication and joint problem-solving The corporation has a compromise with experimentation Failures are viewed as part of the innovation process Organization accepts the risks associated with the innovation process Appropriate procedures are available to help them deal with task-related problems Participation in Decision Making

(Dombrowski, et al., 2007)

(Claver, et al. , 1998)

Accept Failure Tolerance for Risk

(Malik & Wilson, 1995)

Formalization Centralization/Participation

3. Proposed model The process of extracting the factors of an innovation supportive culture and grouping them into themes results in the model graphically illustrated Figure 3-1. A more detailed explanation of each of these factors is presented in Table 3-1.

Figure 3-1 Graphical model Illustrating the factors impacting an innovation supportive culture Table 3-1 Defining of Factors

Factor
Intention to be innovative Support Infrastructure Learning Structure Behaviour Communication

Interpretation
An organisational wide initiative by all levels of management to drive innovation resulting in all levels of employees understanding the firms innovation strategy. Formalised procedures and tools coupled with appropriately skilled resources to incubate ideas and implement changes resulting from innovation initiatives. Development of internal knowledge capacity. Organisational structures which empower individuals and enable them to make independent decisions. Organisational acceptance that there are risks associated with the innovation process and that failures will occur. Willingness to rapidly prototype new ideas in order to validate potential benefits. Established organisational wide communication channels where employees are free to share opinions and ideas.

The six factor model described above has been developed based on the findings of five authors namely Dobni (2008), Martins & Terblanche (2003), Dombrowski, et al. (2007), Claver, et al. (1998) as well as Malik & Wilson (1995). The conceptual model developed in this research incorporates all elements derived by Martins & Terblanche (2003) in their five factor model. Crucially, the model developed by Martins & Terblanche (2003) has been derived in the South African context which further supports the use of this conceptual model as this is the country where the sample population shall be evaluated. This model has been utilised to evaluate the sample population in order to determine the extent of an innovation supportive culture.

4. Research methodology Existing literature has been utilised to define innovation and culture as well as to highlight the importance of innovation to an organisation. The existing literature has also been used to identify the linkages between culture and innovation and identify the elements of an innovation supportive culture. The framework indicated in Figure 3-1 has been developed with the intent of evaluating the innovation culture of an organisation. In order to assess the framework a measurement instrument was developed. Existing, validated measurement instruments were utilised as a basis for the research instrument. The modification to existing research instruments was limited to the changing of terminology in order to ensure relevance to the sample population. The data obtained from the survey was evaluated and interpreted in order to identify which elements of innovation culture needed to be improved. 5. Results 5.1. Analysis of results The survey evaluated of each of the six factors, the results of which are presented in the following paragraphs. The perception of employees towards the organisation's "Intention to be Innovative" was evaluated through 5 statements. Only one statement was not met with a positive response i.e. "I am sufficiently engaged in the strategic planning process". This response provides a clear path to improve this area of culture. Of particular interest is the statement "Innovation is a core value in this organisation". The firm does not have a specific value titled innovation however, one of its 6 values is "Continuous Improvement" which is directly related to innovation. Further, the company's vision and mission statements makes particular reference to innovation. Given, these efforts by the management of the firm to drive innovation the 31% of respondents who did not show a positive response to the statement is alarming and highlights a disconnect between management initiative and ordinary employees. The overwhelmingly positive response to the statement "I want to be more innovative" highlights the desire of 91% of responding employees to be more innovative and support innovation thrusts. The second factor evaluated was that of support infrastructure. This factor received a generally poor response from employees highlighting that this factor was one in need of significant improvement. In particular, the majority of employees pointed out that the organisation lacked a method to effectively measure innovation initiatives. Further, the existence of suitable information systems, resources and policies in support of innovation all received responses which indicate that the majority of employees are not satisfied with the current state of these facilities. Whilst the response to the statement "My supervisor helps break down barriers that stand in the way of implementing innovation" did receive a positive response when compared to the other statements in this category only 49% of respondents agreed with the statement. Thus, in contrast to the response related to intention, the organisation's implementation efforts are not viewed as positively by its employees. The factor titled Learning received the most positive response of all the six factors evaluated. Clearly, this is an area which the organisation has managed successfully and requires little improvement. With regard to individual willingness to learn in support of the organisation's innovation initiatives, 89% of respondents were in support of this argument, emphasising that a strong learning culture exists within the organisation.

The positive nature of the average response relating to the organisatons structure was driven by the response to the question "I feel that I am trusted to act in the organisation's best interests with minimal supervision". 74% of responding employees agreed with the statement which suggests that employees currently work in scenarios with little supervision. However, positive responses to the other two questions were less than 55%. Thus, whilst employees are provided independence in their work environments they are exposed to a degree of inflexibility and bureaucracy. The reduction of "red tape" is a means by which this factor can be improved. Further, 95% of employees were in support of empowerment and decision making responsibilities, thus creating an environment suitable for reducing bureaucracy. The portion of the survey dedicated to evaluating the behaviour of individuals with regard to innovation received a poor response. Roughly one third of employees were of the opinion that innovation is perceived as too risky and is avoided. There was a similar sentiment towards the statement that individuals are unfairly penalised for new ideas that do not work. The results for the communication theme, indicated a significant variation in the response to the statements posed. The poorest response related to collaboration within and between departments with 32% of employees stating that current efforts were ineffective. Only 50 % of employees felt comfortable to challenge decisions and actions indicating a perceived fear towards management. The survey also highlighted that employees are neither consistently involved in decision making activities nor involved in evaluating the performance of the organisation. Alarmingly, 21% of employees felt that they are never involved in decisions on adoption of new rules, policies and procedures and 18% of employees stated that they never participate in evaluations of the organisation's effectiveness. On the positive side more than two-thirds of employees found that their supervisors enabled them to participate in the decision making process. Further, the majority of employees were of the opinion that communications are open and honest and that there exists trust and respect between management and employees. 5.2. Findings related to research questions The analysis of responses as per the research questions are presented below: "Are employees resistant to change?" The question could be directly answered from survey results based on the responses to the statement "I desire changes if they bring benefits to the organisation." Ninety-five percent of employees provided a positive response indicating a nearly unanimous willingness of employees to change. "Are firm innovation values demonstrated by employees?" The firm under analysis has 6 well publicised values; one of these is related to innovation. The analysis of the results of the theme related to behaviour, indicates that employees are not satisfied with the present situation, resulting in this factor receiving the second lowest score. Thus, having innovation as a core firm value does not guarantee that employee behaviour will shift to one supportive of innovation. An interesting nuance is that when posed the question "Innovation is a core value in this organisation" only 68% of respondents provided a positive response. "What is the greatest barrier to an innovation supportive culture?" Of the 6 factors evaluated support infrastructure which is defined as "Formalised procedures and tools coupled with appropriately skilled resources to incubate

ideas and implement changes resulting from innovation initiatives", received the poorest response. "Do employees who want to be more innovative desire greater freedom in their working environment?" The response to this question was developed by analysing the correlation of the responses to the following survey statements: "I prefer working in an environment where I am empowered to make decisions as I am willing to take on the additional responsibilities and "I want to be more innovative". The correlation coefficient was calculated as 0.38 which indicates that a weak correlation does exist. "Do employees want to improve their skills?" The question can be directly answered from survey results based on the responses to the statement "I want to learn and in the process gain more knowledge in order to support our organisation's innovation initiatives". Analysis of the response indicates that indicates that 90% of respondents demonstrated a willingness to learn. "Do employees who want to improve skills, know what to learn in order to support innovation outcomes?" The response to this question was developed by analysing the correlation of the responses to the following survey statements: I know what training/learning I need to engage myself in, to support innovation" and I want to learn and in the process gain more knowledge in order to support our organisation's innovation initiatives". The correlation coefficient was calculated as 0.17 which indicates that virtually no correlation exists. Thus, employees who desire to improve their skills do not know how to do so in a manner which supports innovation. "Do employees who want to be more innovative also want to gain more skills?" The response to this question was developed by analysing the correlation of the responses to the following survey statements: "I want to be more innovative" and "I want to learn and in the process gain more knowledge in order to support our organisation's innovation initiatives". The correlation coefficient was calculated as 0.28 which indicates that a weak correlation does exist. Thus, this research question cannot be confidently answered. 6. Conclusions and recommendations This research study was aimed at assessing the influence of organisational culture on innovation at the engineering division of a South African petrochemical company with the outcome being a framework to evaluate the innovation culture and identification of key focus areas within the firm. The synthesis of prior research into innovative supportive cultures revealed 6 dominant themes: Intention to be innovative: An organisational wide initiative by all levels of management to drive innovation resulting in all levels of employees understanding the firms innovation strategy Support Infrastructure: An organisational wide initiative by all levels of management to drive innovation resulting in all levels of employees understanding the firms innovation strategy

Learning: Formalised procedures and tools coupled with appropriately skilled resources to incubate ideas and implement changes resulting from innovation initiatives Structure: Organisational structures which empower individuals and enable them to make independent decisions Behaviour: Organisational acceptance that there are risks associated with the innovation process and that failures will occur. Willingness to rapidly prototype new ideas in order to validate potential benefits Communication: Established organisational wide communication channels where employees are free to share opinions and ideas

Research questions posed were answered through the analysis of data gathered by way of a survey of approximately 600 employees of the firms engineering division which yielded 97 useable responses. The outcome of the analysis provided the following main conclusions: Of the six factors evaluated, support infrastructure and behaviour were identified as the greatest barriers to an innovative supportive culture whilst, learning and intention to be innovative received the most positive response The majority of employees were enthusiastic about improving their skills in order to support the firms innovation aspirations. Further, employees were willing to accept organisational changes if they resulted in benefits to the organisation. A weak correlation i.e. correlation coefficient of 0.38 and 0.28 was identified between employees who had the desire to be more innovative and those who desired increased freedom in their working environment as well as those who wanted to gain more skills. Virtually no correlation existed (correlation coefficient of 0.17) between employees who had the desire to improve their skill set and those who knew which skills were important to supporting the firms innovation objectives.

This research has identified two primary focus areas for the firm to improve its innovation output namely, support infrastructure and behaviour. Whilst the theme related to learning did receive an overwhelmingly positive response from employees, they were unsure what skills would benefit the organisations innovation objectives. Thus, the learning outcomes of the organisation must be modified in order to highlight the required skills to employees. In addition the research inadvertently identified other interesting insights: Cross functional collaboration was highlighted as major deficiency within the organisation. Given the vast wealth of talent within the organisation, improving internal communication mechanism is essential in ensuring the maximum usage of the firms human capital Approximately one-third of employees did not identify with the firms innovation values even though it is publicised as one of its core values. This highlights a rift between the publicised image of the firm and the values which employees actually associate with.

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