Culture Eats Strategy – Innovation Psychology Explored

Peter Drucker: “Culture eats strategy for breakfast.”

Editor’s note: This begins the first in a series on innovation psychology and the behavioral sciences by our great friend, the innovator, researcher and globe-traveling photographer Pete Foley, who just capped a very amazing career at P&G.  Here in his own words is what this series will be about:

Thinking is a pretty important part of Innovation.  It’s how we make breakthrough new connections, make decisions, and how we interact with others.  We all do it, but most of us haven’t read the manual on how we do it, and we rarely delve deeply into the Psychology of the Innovative process..  This series of articles examines different aspects of innovation from the perspective of Psychology and the Behavioral Sciences.  By understanding what we do, we can do it more consistently, and we’ll also be more resilient, as knowledge enables some routine maintenance along the way.

Culture – The Secret Sauce of Innovation

The late, great Peter Drucker said “Culture Eats Strategy for Breakfast”.   Of his many insights, this might be the most important for Innovation.  However, just as a fish doesn’t see the water, culture is often invisible to those that operate inside of it, and can therefore be difficult to influence or even evaluate.  Unlike strategy, which can be mapped out in a memo, or innovation processes, which can be taught at an offsite, culture needs to be grown and nurtured over time. When it is, it can be both powerful and resilient, even if it isn’t always obvious.

In this article, I’m going to use the lens of Psychology and Behavioral Economics to explore why culture is both elusive and important, and suggest ideas for what it should probably look like.

Psychology teaches us that our lives are littered with useful little decision short cuts that operate largely below our awareness.  These enable us to get on with our everyday lives, without having to agonize over every little decision.  As a personal example, every morning I make a great number of decisions without thinking about them very much at all.  For example, how much toothpaste to squeeze onto my toothbrush, or where to look for my socks and underwear.  If I weighed every alternative for every mundane decision I make before breakfast, I’d never get out of the house.  Instead I’d be stuck at home, wading through a quagmire of procrastination and indecision until happy hour.  Thankfully however, we humans have evolved a way around this.  Rather than over-think most everyday decisions, we employ a mixture of habits, default behaviors and mental short-cuts to navigate them with only minimal interference from our conscious selves.  Sure, our consciousness drops in from time to time, especially if we need a break from a difficult decision in different mental space, but in general, these unconscious processes allow us to function very effectively, without deeply analyzing everything.

There has been much written about low engagement (sometimes called System 1) decision making, and of particular note, are excellent books by Daniel Kahneman (Thinking Fast and Slow), Dan Ariely (The Upside of Irrationality), and Art Markman (Smart Thinking).  So I’ll not go into more detail here, but the salient point for this discussion is that low engagement decision-making is pervasive, and is very important for Innovation.

One obvious reason is that it frees our minds up for important, interesting, and challenging tasks, like innovation itself.  However, it also handles a lot of largely invisible decisions that go on in and around the innovation process.  I don’t mean whether to select prototype A or B for launch, or whether or not to spend $200,000 on a particular piece of consumer research.  Instead I’m talking about softer day-to-day behaviors and decisions.   For example, what is our ‘gut’ reaction to a failed experiment or surprising result, do we automatically ask permission, or seek forgiveness, and whose opinion do we really listen to in a meeting, and who drives us to surreptitiously scan our e-mail while they are talking?

While we all carry our unique, individual set of mental short cuts around with us, the ones we unconsciously select at a given time are highly dependent upon context.  This is where innovation culture comes in.   It creates a context that influences our everyday decisions, often implicitly, and rather consistently.  Even if you are a little risk averse, you are more likely to take a risk, and ask forgiveness in a culture where risk taking is consistently rewarded, but much less so in one where it is punished.   This may seem obvious, but a lot of the time we don’t think deeply about our thinking, especially if we are time constrained (and who isn’t), and our actions and decisions are based more on what feels like the right thing to do at the time, rather than deep analysis. And this feeling is more often than not, ultimately driven by culture,

Strategy is more about what we do when we think about a decision.  Culture is more about what we do when we don’t. Nobody knows exactly what percentage of our daily decisions occur above and below awareness, but typical estimates suggest that upward of 90% of decisions occur mostly below our awareness. So coming back full circle to Drucker’s quote, this makes culture potentially a lot more important than strategy.

So what is a great Innovation culture, and where can I buy one?  There is no one size fits all, but there are some components that are almost universally important for Innovation.

1.  Autonomy and Purpose: There is a significant body of evidence that suggests for creative tasks, as long as people receive enough compensation to be comfortable, it is intrinsic, rather than extrinsic motivation that drives performance.   That is, autonomy, alignment with purpose, and respect are all more likely than money to have a team ordering pizza at 9pm because they cannot put a problem down.  If you want to dig deeper into this, Dan Ariely has done a lot of work in this area, and Dan Pink has an excellent video/TED talk where he discusses the power of  Autonomy, Mastery and Purpose in driving intrinsic motivation.

2.  Mastery and T-Shaped Innovators: Mastery is critical.  We need to be very lucky to create something innovative without knowing what’s gone before.  The more established the field, the more mastery is typically needed, and acquiring it should be a life long process that evolves with the field, something that a learning culture should encourage.  A culture that values mastery can also value a fresh perspective, but without mastery, nine times out of ten, this will simply reinvent the wheel.  Interestingly, mastery comes in at least two flavors.  Deep knowledge of a subject is of course crucial, but emergent innovation usually comes from the integration of ideas from different areas.  This is where T-shaped innovators, or expert generalists become crucial to the process.  A culture therefore needs to reward both experts in a single field, and these more diversified experts who know a lot about a lot of different stuff, and who can bridge between experts.

3.  Failure as learning and Respect.  It’s now quite fashionable to embrace fast failure, but in many cases there remains a knowing-doing gap.  It’s easy to thoughtfully build it into a strategy, but still freak out when bad data comes in just ahead of an important stage gate in the process!  Also related to this is the productive pause, and taking time out to define a problem.  It is easy for a culture to become action orientated, and reward energetic ‘doers’.  However, taking time out to really define a problem, and think before acting can be at least as important. Respect lies at the heart of these cultural concepts, as few people will willfully fail, or sit around doing nothing.  A culture of respect assumes this.

I don’t think there is a one size fits all blueprint for an innovation culture.  Failure as learning is probably a universal, but even then, were in a process you want to fail will vary enormously – later if you are creating apps, earlier if you are building aircraft!   Likewise, some level of autonomy is going to be critical for motivation, but will again vary depending upon the inherent constraints of the system.  An autonomous airline pilot operating outside of air traffic control guidelines is probably not good.  However, these are good places to start if you want to build a resilient Innovation culture.

Finally, building one is a marathon, not a sprint.  Culture is more than a statement of purpose, or a buzz-word.  It must be authentic, be grounded in a organizations core values, and be consistent.  You can change culture, but not via a memo or white paper.  However, in part because it operates mostly below our awareness, and grows slowly, like a tree with deep roots, when you get it right, it is highly resilient.

image credit: Claremont Graduate School

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A twenty-five year Procter & Gamble veteran, Pete has spent the last 8+ years applying insights from psychology and behavioral science to innovation, product design, and brand communication. He spent 17 years as a serial innovator, creating novel products, perfume delivery systems, cleaning technologies, devices and many other consumer-centric innovations, resulting in well over 100 granted or published patents. Find him at pete.mindmatters@gmail.com