IIn order to survive disruption in today’s fast-moving economic climate, organisations must innovate. Innovation can be defined as “something new or different”. Innovation is typically used in reference to updating the products and processes of an organisation. But it does not mean changing and updating procedures just for the sake of it. It is important that innovation is done with a purpose, solving a problem or responding to a gap in the market.
Why does this matter? 50% of US annual GDP is attributed to product and service innovation (U.S. Chamber of Commerce Foundation, 2015). This highlights the close link between innovation and the bottom line. Furthermore, most executives are aware of innovation's value to their business. According to McKinsey, 84% of executives agree that innovation is critical for their business growth and future outcomes. But only 6% of executives are satisfied with their innovation performance and don’t know why it’s low. Whilst many leaders believe in the value of innovation, they are uncertain of how to fuel an innovative culture.
It is clear that innovation is important for organisations, but how do you fuel it within teams? By supporting team diversity and creating psychological safety. Teams need to be diverse in order to benefit from and operationalise a range of possibilities and mindsets. BCG (2018) found that more diverse management teams earned 19% more revenue as a result of innovation. Ideally, teams have "2D diversity" - this is composed of acquired diversity and inherent diversity. Acquired diversity involves traits gained from experience, e.g. having worked in South America. Inherent diversity involves traits present from birth, such as race or sexual orientation.
Organisations also need to create psychological safety. A term created by Edmondson (1999), psychological safety is a state where individuals feel safe to take risks and be vulnerable in front of each other. It is a climate based on a combination of trust, care, and respect for each other’s competencies. Psychological safety allows employees to feel confident that their team will not embarrass or reject their ideas or opinions when speaking up. For organisations to create psychological safety, Edmondson (2019) advocates a climate of candour, fearlessness, and willingness to take risks, and one in which people can challenge authority and ask for help. This kind of organisational climate allows innovation to thrive.
Establishing psychological safety is also a powerful predictor of team and organisational performance (Edmondson, 1999). Team members are more likely to speak up if they feel respected and confident amongst team members, which provides a greater learning opportunity. Psychological safety gives employees the tools to ask questions, give constructive criticism, ask for help, feel comfortable offering ideas, and tolerate mistakes in a safe working environment. This is highlighted by Project Aristotle, a research programme into the effectiveness of Google’s teams. Researchers found that the most effective teams were the teams that had psychological safety (New York Times, 2015).
In sum, diversity is vital to fuel innovation in teams. It is not, however, enough. Psychological safety is needed to provide an environment in which team members are able to leverage their diversity by contributing to the team. While it is possible to have psychological safety in a team but not in the wider organisation, innovation has the best chance to thrive when the organisational culture is also psychologically safe.
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