Innovation is definitely having a moment. As the nucleus of Prime Minister Turnbull’s Innovation and Science Agenda, the plan is that innovation will trickle down through all aspects of Australian business, hitting those key drivers of economic growth and development along the way.

For years, innovation has been the domain of start-ups and unicorns. But as markets shift and disruption becomes de rigueur, even the most risk-averse and entrenched industries are looking for ways to evolve. 

What is so exciting about innovation? It’s ultimately about making things better and bringing the unknown to the masses, says Dr Amantha Imber, an innovation psychologist and founder of Inventium. She also curates the AFR Most Innovative Companies list. Imber thinks we are headed toward an age where companies see innovation as essential as employee engagement.

However, innovation is conceptual, making it hard to quantify and pin down. Companies have traditionally relied on pseudo-science to prove its worth. Some get lucky and strike gold on their first try, but have little understanding of how and why they succeeded– ‘one hit wonders’, as Imber calls them.

It’s especially hard when companies in Silicon Valley or other similar hubs seem to have monopolies, creating something akin to an innovation tourism industry.

“Too often people look to the Googles and the Apples of the world for inspiration, but they are operating in a specific context,” Imber says. “You can’t with confidence say that it’s generalisable. When you look at larger populations, gather research and gain a cross-industry perspective, that’s when you are able to generalise what makes an innovative company.”

To get started, let’s define ‘innovation’. At its core, innovation is change that adds value, Imber says. And the factors that shape it are spread across individual, team, leadership and organisational levels.

There are outside factors that spark innovation; the government’s innovation package is a good example of this. Imber’s research has focused on the internal factors, and these can be broken down into three key foundations.

The Process

Let’s say someone at your company has a great idea. What is their next step? If the answer is “Take it to their manager,” that’s not good enough, says Imber. “You can’t rely on asking employees to let their managers know when they have a great idea, because sometimes managers don’t support innovation or won’t follow through with ideas that employees bring them simply because they don’t agree or don’t see the value in it.” There needs to be an established process that sits outside of workplace hierarchies so employees know their ideas will receive attention and consideration.

The Capability

What is your company doing to build up employee skills and knowledge? One hurdle is the perception that innovation is innate. You either can, or cannot. Although this is true to a certain extent, Imber says that much of it relies on building innovation capabilities within a workplace and providing employees with ample opportunities to up-skill and experiment. Mentoring programs and reverse mentoring are great ways to build capability, as well as continuous learning and development.

The Culture

This is where things get interesting. There’s a concept within academia of the ‘hero study’ – a seminal piece of research that defines a field. For innovation research, that study is the 2007 Climate for Creativity: A quantitative review by Samuel Hunter, Katrina Bedell and Michael Mumford from the University of Oklahoma. This comprehensive meta-analysis comprises data, literature reviews and academic papers all focused on what makes for an innovative workplace culture.  

The result is 14 variables that contribute to innovation, ranked in order of impact. Think you can guess number one? Let’s work our way up:

14. Autonomy

13. Resources

12. Reward orientation

11. Quality orientation

10. Participation

9. Organisational integration and collaboration

8. Mission clarity

7. Positive peer group support

6. Positive supervisor relationships

5. Top management support

4. Flexibility and risk taking

3. Challenge

2. Intellectual stimulation

And drumroll, please ….

1. Positive interpersonal exchange, aka cohesion

Obviously, all of these have an impact on innovation, but Imber’s own research shows that there are some very practical ways businesses can stimulate and promote innovation.

How do you promote innovation?

One reason that Australia lags in innovation (and thus why there is room for huge growth here) is that Australians aren’t as comfortable with risk as they need to be. Many companies and industries are very risk-averse, and failure can be costly to the bottom line and business reputations.

However, for companies to create cultures of innovation, senior leadership needs to give employees permission to fail. The best way to de-risk innovation is to create a step between concept and implementation: experimentation. “You don’t want to go straight from idea to product,” Imber says. “You must have a stage for prototyping. The scientific method is a great example of how to do this, because you test hypotheses and if you disprove something, it’s not failure – it’s learning, it’s progress.”

Companies also need to understand that innovation is a commitment. The biggest mistake Imber sees organisation make is when leaders just pay lip service. “They’ll put innovation as a core company value, or they will get a speaker at a conference, but they don’t actually devote any time, people or money to innovation,” she says.

Rewards and recognition supplement this. Monetary rewards work to a certain extent, but eventually the incentive plateaus and eventually decreases. Imber says it’s better to have recognition programs that highlight innovation success stories. For example, Coca-Cola Amatil has an annual Innov8 Awards, which coincidently also resulted in employee engagement increasing from 30 per cent to 70 per cent in three years.

Recognition for failure can be just as motivating. Some examples Imber points to are Tata’s Dare to Try Awards, Engineers without Borders’ annual Failure Report and admittingfailure.org as examples of how it’s all part of the experimentation process. Creating these extrinsic motivators leads into intrinsic motivators, says Imber. A clear sense of progress motivates employees to show initiative by pursuing future innovative projects.

Another contributing factor is whether employees feel challenged, as this builds internal motivation. Research shows that the average employee spends about 40 per cent of their time in the ‘challenge zone’, where their work is hard enough that they can’t do it with their eyes closed, but they also aren’t frantic and stressed. The challenge for leaders, then, is to find where that zone sits for employees.

“When managers hand out tasks, they need to think beyond who has time to do it,” Imber says. “They need to also think about who on their team will feel an optimal level of challenge from this task.”

Great examples of employees rising to challenges set by leaders are everywhere. One Imber points to is when in 2003, the CEO of GE, Jeff Imelt, started the Imagination Breakthroughs program, which tasked each director to come up with three ideas a year that would add $100 million in growth. People took to it, and within five years IBs had generated $3 billion in revenue. Another is LinkedIn’s [in]cubator program, which gives employees 90 days to work on any projects they want, so long as they successfully pass several checkpoints along the way.

The push for innovation will only increase as time goes on. More organisations are embracing it as instrumental to their growth. “Should I innovate?” has become “How do I innovate?”. Hopefully, you now have some ideas.