Fostering an Innovation Culture

As a CTO, one of your primary responsibilities is to foster a culture of innovation within your engineering team. This is no easy task, but it’s crucial if you want to stay ahead of the competition and deliver the best possible products to your customers.

In this chapter, we will discuss some tactics that can be applied to spread this culture throughout the company.

Creating a Supportive Environment

If you were to ask what the opposite of innovation is for a company, the answer might be a “culture of fear.” In an environment where people are afraid of making mistakes, innovation is unlikely to be a priority. When individuals are unable to express their thoughts without being judged, criticized, or mocked, addressing this issue should be the first step.

Proposing an idea that differs from everyone else’s in a meeting and risking humiliation in front of managers is a daunting prospect. Not everyone can take such risks. Even if the ideas of those who take such risks seem absurd, it’s important to listen and investigate the points where they may be correct.

It’s important to establish a culture of openness about mistakes within the company. Discussion and learning from mistakes should be just as much of a priority as celebrating successes. This culture will take time to establish, but investment should begin without delay.

One example of a company that has created a supportive environment where people are encouraged to pursue their ambitions and talk freely about their failures is Google. The company’s “Moonshot Factory” is dedicated to developing radical, innovative ideas that could change the world. The team is encouraged to take risks and think outside the box, and failures are seen as opportunities to learn and improve. In fact, Google’s parent company, Alphabet, has even created a dedicated entity called “X” that focuses on “moonshot” projects like self-driving cars and internet-beaming balloons.

As a CTO, you can create an environment that fosters innovation by leading by example. If you’ve ever humiliated someone in a meeting just because they said something you deemed stupid, forget about innovation in your company for a long time. Similarly, you must ensure that other executives also act with the same discipline.

To create an environment where all titles and hierarchies are set aside and ideas are freely discussed, consider having weekly WOR (Weekly Operations Review) or quarterly Strategy Review meetings within the company.

Your engineers may sometimes make big mistakes and cause downtime. The attitude you display after such unpleasant situations will signal the innovation culture of the company. If you fire one or two people just to teach them a lesson, the same applies. It is impossible to talk about innovation in that company for a long time. These kinds of events are occasions that everyone in the company watches carefully. It’s a great opportunity for you to show off and set an example for people. Embrace the mistake, understand the reason behind it, learn from it, and think about how to develop the person who made the mistake. Make sure everyone sees this positive example and talk about it within the company.

Setting Aside Dedicated Time for Innovation and Experimentation

Contrary to common belief, innovation does not happen immediately. It is a process that requires occasional and continuous investment.

While it may be fun to listen to and tell anecdotes such as the apple falling on Newton’s head and him discovering gravity, or Archimedes running naked on the streets of Syracuse and shouting “Eureka!” right after he discovered the buoyancy of water in the bathtub, these stories are far from reality.

Real stories are often extremely boring, and no one enjoys telling or listening to them. Newton began developing his ideas on gravity and motion in the mid-1660s, and he published his groundbreaking work “Philosophiæ Naturalis Principia Mathematica” (often referred to as the “Principia”) in 1687, which contained his laws of motion and theory of gravity. Therefore, it is safe to say that Newton worked on these concepts for at least two decades before publishing his landmark work.

If you expect your team to come up with innovation, don’t wait for the moment an apple falls on their heads. That moment will never come. Self-driving cars are an excellent example of a proper modern-era innovation. After decades of work, the efforts of thousands of people, and billions of dollars in investment, this innovation has become a reality. Today, we can see these vehicles on the roads thanks to advances in AI, computer vision, and sensor technologies.

If you want your team to achieve similar success, you must give them dedicated time to invest in it. They can devote some of their time to this, or at least you can occasionally organize hack days, ShipIt Days, and hackathons (or whatever you call it) within the company to encourage everyone to think with this perspective, even if only for a while.

When it comes to hosting hackathons, it’s important to avoid the trap of doing so just for the sake of appearing innovative. Many companies have made this mistake, putting a lot of effort and resources into organizing a hackathon only to have the winning projects end up being forgotten or never implemented. This not only undermines the culture of innovation within the company but also wastes time, money, and effort.

To ensure that hackathons are productive and worthwhile, it’s essential to have a clear purpose and plan for the event. The focus should be on solving specific problems or addressing challenges that the company is facing, and participants should be selected based on their relevant skills and expertise. Additionally, there should be a clear process for evaluating and implementing the winning projects, with resources allocated for continued development and refinement.

Encourage Cross Functional Collaboration

In Greek, there’s a saying that goes “αποφασίσεις από τη μία πλευρά μόνο του καπετάνιου το πλοίο το βυθίζουν” which can be translated to “one-sided decisions sink the captain’s ship.” This saying holds true not only in the world of sea travel but also in technological advancements.

The iPhone, which has become an iconic symbol of modern-day pop culture, was brought to life by a team of masterminds. Steve Jobs, Apple’s co-founder and former CEO, and Jonathan Ive, Apple’s former chief design officer, were the visionaries behind the iPhone’s concept and design. Scott Forstall, who oversaw the creation of the iPhone’s operating system, iOS, was the leader of the software team.

The engineering of the iPhone was the result of a collaborative effort between Apple’s internal hardware and software teams, as well as various external partners and suppliers. Among the key contributors to the engineering of the iPhone were Tony Fadell, the “father of the iPod,” who played a central role in the design and development of the iPhone’s hardware, and Bob Borchers, who was responsible for product marketing.

The success of the iPhone is a testament to the power of teamwork and collaboration. Without the coordination of these individuals and teams, the iPhone would not have been the groundbreaking success that it was.

But was the iPhone the first smartphone to hit the market? Definitely not. Prior to the iPhone, there were other smartphones of extremely good quality but with terrible UI and OS.

For instance, the Nokia N-Gage, released in 2003, was a gaming-focused smartphone with a unique design that allowed users to hold the phone like a game controller. However, it was criticized for its confusing UI and difficult-to-use keypad. The Palm Treo 700p, released in 2006, was praised for its powerful hardware and long battery life but received criticism for its cluttered and difficult-to-navigate UI. The BlackBerry 8700 series, which dominated the smartphone market in the early 2000s, was praised for its robust email and messaging capabilities but criticized for its clunky and difficult-to-navigate OS and lack of multimedia features.

The lesson here is clear - no matter how talented an individual may be, it takes a team effort to bring about successful innovation. One missing column can weaken the foundation of the building and lead to its eventual collapse.

Celebrate and Reward Innovation

In a high-pressure corporate hackathon, I once heard someone say to their manager in a moment of frustration, “If I had a billion-dollar idea, why would I tell you?” While the comment may have been made in anger, it reveals an essential truth about the nature of innovation and company culture.

Companies are established to generate profits for entrepreneurs and investors, which are realized through the hard work and expertise of employees who offer their time and skills in exchange for compensation. In this context, employees are compensated fairly for their time, but expecting them to freely share their most valuable and potentially transformative ideas might be an unrealistic expectation.

To foster a culture of innovation and encourage employees to contribute their best ideas, companies need to create a win-win scenario where employees also benefit from the company’s success. A prime example is 3M, known for its culture of innovation. The company’s “15% free time” policy has led to numerous groundbreaking innovations, such as the invention of Post-it notes by Spencer Silver and the development of Scotchgard fabric protector by Patsy Sherman. These inventors were compensated for their contributions, which fostered a sense of loyalty and partnership within the company. Spencer Silver worked at 3M for 30 years until he retired. It is unknown if he ever considered resigning and starting his own company, but we do know that he did not carry this out for sure.

In contrast, consider the case of Gary Kildall, who developed the CP/M operating system while working as a consultant for Intel. Kildall developed the system in his own free time and sold it independently through “his own company”, Digital Research, Inc. (DRI). Eventually Intel missed the opportunity to secure the rights to CP/M, which became the dominant operating system for early microcomputers.

Creating an innovation culture in your company and ensuring the success of your creative employees is crucial. Failure to do so may result in the loss of valuable employees, such as Gary Kildall. Please don’t misunderstand me; I’m not blaming Gary Kildall. It’s clear that he did what was best for him at the time. However, if Intel had made Gary feel like a partner and compensated him appropriately for the value he created, perhaps he wouldn’t have considered selling CP/M through his own company. Who knows? Maybe Intel would be one of the world’s most important operating system manufacturers today, instead of just a microchip producer. We will never know.

To create an environment where employees feel comfortable sharing their best ideas, companies should consider implementing policies that reward innovation and align employee interests with those of the company. This could include offering stock options, profit-sharing programs, or other incentives that demonstrate the company’s commitment to fostering an innovation culture and ensuring the success of its creative employees. By doing so, companies can avoid the risk of losing valuable talent and ideas to competitors, and instead, unlock the full potential of their workforce to drive growth and long-term success.

Give Them Some Space and Avoid Micromanaging

Valve Corporation, the renowned American video game developer and digital distribution company, exemplifies an environment that nurtures innovation and creativity. Founded in 1996 by former Microsoft employees Gabe Newell and Mike Harrington, Valve’s flat organizational structure has been instrumental in fostering a culture of innovation.

With no traditional management roles or fixed job titles, Valve employees are free to choose the projects they work on and often form self-organizing, multidisciplinary teams. This lack of top-down management fosters collaboration, communication, and flexibility. Valve’s groundbreaking games, including Half-Life, Portal, Team Fortress, and Dota 2, as well as the digital distribution platform Steam, are all products of this innovative environment.

While Valve’s unique structure has faced criticism, its success in producing industry-leading games and technologies demonstrates the potential of giving employees the freedom to explore new ideas and take risks without bureaucratic constraints.

Valve’s situation is exceptional. While it may seem like an oxymoron to encourage the elimination of all titles, as this book is read by CTOs and aspiring CTOs, I believe that Valve provides an excellent example of the kind of success that can be achieved when a company fosters an environment and culture that aims for the seemingly impossible.

Another company that embraces a similar approach is Atlassian, the Australian software company behind products like Jira and Confluence. Atlassian hosts quarterly “ShipIt Days,” during which employees work on any project of their choosing for 24 hours, unrelated to their usual tasks. These events encourage creativity and innovation by allowing engineers to pursue new ideas without the pressure of deadlines or management oversight.

Several successful features and products have originated from Atlassian’s ShipIt Days, such as Jira’s “Bonfire” browser extension, Confluence’s “Questions” feature, and Bamboo’s “Deployment Projects” feature. Each of these innovations has improved user experience and efficiency, contributing to the company’s success.

In conclusion, micromanaging employees and dictating their tasks is an outdated approach in today’s world. Instead, hire talented individuals who excel in their fields and provide them with an environment where they can express themselves freely. By doing so, you can unlock their potential for innovation and drive your company’s success.

Start Small and Avoid Overextending Your Efforts

One common mistake when attempting to create an innovative culture is trying to implement all possible scenarios at once. Cultural changes don’t occur overnight. Like perfectly brewed Chinese tea, they require time and patience.

To establish an ideal innovation environment, begin by setting small, achievable goals. Make sure to celebrate and showcase successes, gradually raising the bar for what constitutes a successful outcome.

As mentioned earlier in this chapter, great innovations and discoveries are the results of processes that span many years. Don’t expect miraculous achievements to happen overnight; they rarely do. Instead, take one step forward every day, consistently progressing in the right direction.

The Japanese philosophy of “kaizen” (改善), which focuses on continuous and steady improvement, offers a helpful framework for fostering innovation. Kaizen, a combination of the Japanese words “kai” (change) and “zen” (good), conveys the idea that continuous, incremental improvements are more successful and sustainable than large, sudden changes.

The kaizen philosophy has been widely adopted in the Japanese business world, with Toyota’s production systems serving as a prime example. In the kaizen approach, all employees contribute to the continuous improvement process, consistently making small changes to enhance business processes, product and service quality, and overall efficiency.

Embracing the kaizen philosophy encourages continuous growth and development in both people’s lives and organizations, emphasizing the importance of never remaining stagnant, but always striving for betterment.