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The Butterfly Effect of Innovation (How to Manage Innovation’s Affect on Culture)

"E pur si muove." - Galileo Galilei

In a simplified version of Chaos Theory, sensitivity to initial conditions better known as the Butterfly Effect from the work of the great mathematician and meteorologist Edward Lorenz - at a small change to current conditions - may yield significantly different future behavior and concatenated events.

Innovation has a butterfly effect on organizational culture. Controlling this effect is nearly impossible. The introduction of innovation, when not adequately integrated into the existing work and cultural conditions of the environment it applies to, might bring in unpredictable consequences, given the interconnectedness of the dynamical subsystems of an organization. So rather than seek to control innovation, companies should instead seek to simultaneously follow and influence it. Here's how.

The first step of successfully managing the impact of innovation on the innovating company is to realize that its impact cannot be controlled, but merely influenced. No C-Suite can control a priori how the company's culture will be changed post-innovation; for example, both customers and employees may react in negative ways (i.e. ways that impede a company's ability to create value through its innovation) due to the disruption that occurs to their jobs, their client accounts, and their way of thinking once an effective innovation has been released into the market. Similarly if the employees affected by the innovation weren't involved in the crafting of the innovation, then they are likely to be resentful of the innovation and its impacts on their jobs.

Hence, it is essential to set in place a foundation that will help everybody in the organization modify accordingly the culture impacts post-innovation and be aware that:

  • Innovation is an essential process to viability: if you don't innovate products, services, business models, organization design and process, accordingly to the markets needs of your ‘era', your company will be soon pushed out of the market by other competitors (and your employees will need to seek work elsewhere);
  • Innovation follows a specific curve of demand: in different periods of organizational life the need varies for continuous practices of experimenting, simulating and learning from errors;
  • Innovation is only as successful in the marketplace as the company culture is innovation elastic.

The second step of successfully managing the impact of innovation on the innovating company is to focus on what our work shows as the 3C's of employing the foundation of culture change post innovation.

The first ‘C' is Coordinate!

High performance companies excel at linking innovation to culture. Their secret? A deep respect for the alignment needed among the various functions of the company. The specialists working on security, databases, network, storage, finance, CRM, procurement, marketing, operations and sales depend on each other's expertise before they can work on sizing and design. Simply put, companies that outperform their peers respect the interconnectedness of their functions; a change that impacts how one function operates, due to the launch of an innovation, will need to be counter-adjusted for within all other corporate functions. Systemic risk issues are now endemic everywhere. More and more venture capital firms are more interested in investing in companies that demonstrate strong platforms for sustainable success as opposed to companies that can simply demonstrate existing and ongoing incremental profits.

The second ‘C' is Collaborate!

The most relevant operational strategies to mitigate the butterfly effect in management have repeatedly been redundancy strategies and responsive strategies. The former sacrifice cost efficiency to better manage risk; the latter become very important, instead, when earthquakes and floods and alike, as industry-wide events, are opposed to a single company having a single plant go down. When that happens, the responsive strategies imply the ability to identify alternative suppliers and/or the ability to influence the kind of products your customers are going to buy. You need infrastructure, skill, and close relationships with the customer to ‘shape demand' and to strike a balance, then, between preparedness and waste since there is no one-strategy-fits-all situation and, accordingly, involve the wisdom of crowds. Consider the disruptive success of open-sourcing code development in the IT field. Companies in industries ranging from retail to apparel to energy are using similar collaborative tactics to manage risk and overcome the roadblock of not owning the scale needed to effect large change. Collaboration has changed the game. In fact, one could successfully argue that leasing another company's to make available a disruptive solution is, in itself, more desirable than owning the assets required to create the disruptive solution.

The third ‘C' is Communicate!

New delivery models (e.g., digital vs paper, cloud) and exponential data growth in complex environments are changing the way we communicate -  an essential ingredient to effectively managing the impact of innovation on corporate culture. As rudimentary as this might seem, we've found in our collective work that helping companies see the difference between innovation and invention is a vital step in the communication portion of managing corporate culture post-innovation. As Luhmann wrote "moral ‘invention' in the constitution of meaning allows for ‘variations' when unexpected operations happen and ‘innovation' is processed by meaning-constituting systems." Nonetheless, innovation and invention are separate outcomes. Too often companies pursue invention (the creation of a new process/product/service) when they, actually, intended to pursue innovation (new value provided by the company that disrupts the status quo within a given market). Corporate culture should naturally be altered as the result of the company's pursuit of innovation; if the company pursues innovation but merely delivers invention, one should expect a natural reduction in morale among employees, especially those most directly involved. If, however, the company truly pursues and achieves innovation, then excitement and a renewed energy within the company should be the natural and expected result. So, for innovation to have a chance at succeeding, it must be designed and communicated to meet the multi-dimensional needs and interests of multi-dimensional employees and consumers and enable them to contribute in sustaining businesses over the long-term.

Innovation needs simultaneous culture change. One cannot occur without the other. Only the organizations recalling and employing the logic of the time-proven African proverb: "If you want to walk fast walk alone, if you want to walk far, walk together" will be most successful in handling potential disruptive ‘butterfly effects'.

Originially posted on LinkedIn

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