Nudging innovation across the firm – aligning culture with strategy

Abstract

Purpose The purpose of this paper is to determine how and to what extent firms are using “environmental choice architecture” to “nudge” innovation across the organization. The Cultural Alignment Model was designed based on the concept that individual and collective workforce behaviors are formed by an organization’s environment. Although existing since the 1950s, behavioral theory has seen a recent resurgence of popularity in shaping culture. Described in the book Nudge, compelling research demonstrates that individual and collective behavior can be influenced through what is termed “environmental choice architecture.” The Oxford Innovation Insights Project was established to test the Cultural Alignment Model, by answering the question – How and to what extent are firms using “environmental choice architecture” to “nudge” innovation across the organization? Design/methodology/approach Semi-structured interviews were conducted with 60 “C-Suite” executives, representing 15 different industries. Each executive was asked to respond to the same four items: to what extent do you agree or disagree with the statement – innovation is a strategic priority for our firm; on a scale of 1 (low innovation) to 10 (high innovation) please rate your firm’s organization-wide level of innovation; Which of the following processes does your firm use to encourage innovation across the organization? And for the processes that your firm uses, please provide examples of how each is designed to encourage innovation behaviors across your workforce. Findings Eighty-six percent of respondents identified innovation is a strategic priority for their firm, while just 8% of respondents rated their companies as having a “high” level of firm-wide innovation. The environmental choice architecture components most frequently used by firms to encourage innovation behaviors across the workforce are identified. A strong positive relationship was found between “high innovation” firms and the number of environmental choice architecture components they use to encourage innovation. Firms having a low level of innovation underperformed market peers, while firms rated as having a high level of firm-wide innovation outperformed the market benchmark. Research limitations/implications Repeat the current study to include more respondents and industries; rather than relying on self-ratings, determine a firm’s innovation rating through an external assessment, such as industry expert ratings of firms’ innovativeness; beyond frequency of utilization, assess the strength of innovation “nudge” each cultural lever provides; determine if a relationship exists between the market and financial performance of firms and the number of “cultural levers” they use to nudge innovation across the workforce; and compare the level of innovation between each industry by expanding the respondent pool to include more representatives from each industry. Practical implications Company culture is identified as one of the top obstacles for a firm’s innovation performance in a global survey of 1,500 executives. Moreover, the authors of the McKinsey Global Innovation Survey state, “The best companies [in the study] find ways to embed innovation into the fibers of their culture, from the core to the periphery”, but tellingly the authors do not identify how to go about creating that embeddedness. The Cultural Alignment Model presented provides management a pragmatic approach to embed innovation across their firm’s culture using elements of the organization’s choice architecture. Originality/value Behavioral theory has seen a recent resurgence of popularity in shaping culture. The Oxford Innovation Insights Project tests the Cultural Alignment Model, by answering the question – How and to what extent are firms using “environmental choice architecture” to “nudge” innovation across the organization?