In today’s highly competitive business environment, creating a customer-centric culture within your organization is crucial for long-term success. A customer-centric culture ensures that all members of your organization are focused on meeting and exceeding customer expectations, leading to increased customer satisfaction, loyalty, and ultimately, business growth. Here are some strategies and case study examples to help you develop a customer-centric culture in your organization.
1. Empower Your Employees to Act in the Customer’s Best Interest
One of the keys to building a customer-centric culture is empowering your employees to go above and beyond for customers. Zappos, the online shoe and clothing retailer, is a prime example of an organization that prioritizes customer satisfaction. Zappos encourages its employees to spend as much time as needed with customers to ensure they find the perfect product. The company empowers its customer service representatives to act in the customer’s best interest and provide exceptional service, even if it means taking unconventional measures such as locating an item from a competitor’s store. By giving employees the freedom to make decisions that benefit customers, Zappos has cultivated a strong customer-centric culture that sets them apart in the industry.
2. Gather and Act on Customer Feedback
To truly create a customer-centric culture, you need to actively listen to your customers and address their concerns. Apple, renowned for its loyal customer base, exemplifies the importance of leveraging customer feedback. The company collects extensive feedback from its customers through various channels, including surveys, customer support interactions, and product reviews. Apple then uses this feedback to improve its products and services continuously. By actively seeking out customer input and acting upon it, Apple demonstrates a commitment to meeting customer needs and preferences. This customer-centric approach has undoubtedly contributed to their success and brand loyalty.
3. Align Your Organization’s Goals and Values
Creating a customer-centric culture requires aligning your organization’s goals and values with the needs and wants of your customers. Amazon, the world’s largest online retailer, exemplifies this alignment by making customer obsession one of their core values. This focus on the customer has driven Amazon to continuously innovate and find ways to make the shopping experience more convenient and personalized. By ensuring that every decision and action within the organization is driven by customer needs, Amazon has successfully ingrained a customer-centric culture into its DNA.
4. Invest in Employee Training and Development
To create a customer-centric culture, it is crucial to invest in training and developing your employees. Ritz-Carlton Hotels is a perfect example of an organization that places a high emphasis on employee training to drive exceptional customer service. The hotel chain is renowned for its personalized and luxurious customer experience, which is made possible by empowering its employees through intensive training and ongoing professional development. Ritz-Carlton provides its employees with the necessary tools, knowledge, and skills to anticipate and fulfill customer needs, ensuring that every interaction leaves a lasting positive impression.
Conclusion
Creating a customer-centric culture is essential for organizations looking to thrive in today’s customer-driven world. By empowering employees, actively seeking and acting on customer feedback, aligning goals and values with customer needs, and investing in employee training, organizations can foster a customer-centric culture that drives long-term success. Drawing insights from successful case studies such as Zappos, Apple, Amazon, and Ritz-Carlton Hotels can provide valuable inspiration and guidance in this journey.
EDITOR’S NOTE: Braden Kelley’s Problem Finding Canvas can be a super useful starting point for doing design thinking or human-centered design.
“The Problem Finding Canvas should help you investigate a handful of areas to explore, choose the one most important to you, extract all of the potential challenges and opportunities and choose one to prioritize.”
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In today’s dynamic business environment, organizations often face the need for cultural change to stay competitive and adapt to new market demands. Cultural change management refers to the structured approach and strategies employed by leaders to facilitate successful transformations within an organization’s culture. This article aims to explore effective strategies for cultural change management by presenting two case studies that exemplify successful cultural change initiatives.
Case Study 1 – IBM
IBM, a technology giant, embarked on a significant cultural change management initiative in the 1990s. At the time, the company was facing multiple challenges, including a rigid hierarchy and siloed departments that hindered collaboration. Recognizing the need for change, IBM’s CEO, Lou Gerstner, implemented several strategies:
1. Clear Vision and Communication: Gerstner articulated a clear vision for IBM’s future as a client-focused, solutions-driven company. He communicated this vision extensively to employees, shareholders, and customers, ensuring a unified understanding of the desired cultural transformation.
2. Training and Development: IBM invested heavily in training and development programs to equip employees with the necessary skills to adapt to the changing landscape. The company developed educational programs, such as the “e-business Institute,” which provided training in emerging technologies and client-oriented practices.
3. Collaborative Decision-Making: IBM fostered a culture of collaboration and inclusiveness by involving employees at all levels in decision-making processes. Initiatives such as “World Jam,” an online brainstorming platform, enabled employees worldwide to share ideas and engage in dialogue, breaking down silos and promoting a sense of ownership.
4. Recognizing and Celebrating Success: IBM acknowledged and celebrated the achievements of individuals and teams who embraced the cultural change. This recognition fostered a positive environment, encouraging others to embrace the desired behaviors.
The successful implementation of these strategies led to a cultural shift at IBM, transforming the company from a hardware-focused business to a global technology and consulting leader.
Case Study 2 – Zappos
Zappos, an online retailer renowned for its exceptional customer service, underwent a cultural change management initiative to maintain its strong organizational culture during rapid growth. In 2013, the company implemented a managerial framework called “Holacracy” to enhance employee empowerment, autonomy, and decision-making.
1. Holacracy Implementation: Zappos introduced Holacracy, a non-hierarchical management approach that aimed to distribute authority and decision-making throughout the organization. The framework emphasized self-organization, accountability, and transparency. Employees were grouped into self-governing roles and circles, allowing greater flexibility and adaptability.
2. Employee Involvement: Zappos actively involved employees in the implementation of Holacracy by encouraging their input and soliciting feedback. The company recognized the importance of engaging employees in the change process and allowing them to shape their own work environment.
3. Continuous Learning: Zappos placed a strong emphasis on providing training and support to help employees understand and adapt to the new management framework. Regular workshops, mentoring programs, and knowledge-sharing initiatives were conducted to nurture a learning culture.
4. Respecting Core Values: Throughout the cultural change, Zappos remained committed to its core values of delivering exceptional customer service and maintaining a positive, supportive company culture. This consistent focus on values helped anchor the change within a familiar framework.
Zappos’ cultural change management efforts based on Holacracy resulted in increased employee engagement, operational efficiency, and innovation.
Conclusion
Cultural change management requires a holistic and strategic approach tailored to an organization’s specific needs. The case studies of IBM and Zappos showcase successful strategies, including clear vision and communication, training and development, employee involvement, and upholding core values. These strategies, when implemented effectively, foster a positive cultural shift and enable organizations to thrive amidst change. By embracing cultural change management, companies can remain adaptable, innovative, and ready to meet the challenges of the ever-evolving business landscape.
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As today’s volatile business climate demands that organizations continuously improve and innovate, developing a culture of continuous improvement is essential for organizations to stay competitive. While this may seem like a daunting task, there are certain steps managers can take to foster a culture of continuous improvement.
1. Talk About Continuous Improvement
The first step to developing a culture of continuous improvement is to make sure that the organization is actually talking about it. Whether it’s part of the mission statement, a portion of an all-staff meeting, or a project goal, the importance of continuous improvement should be prominent.
2. Embrace Failure
Failures must be seen as learning opportunities instead of causes for retribution or punishment. By embedded this mind-set throughout the organization, employees will be more likely to try out new ideas instead of playing it safe.
3. Promote Innovation
Encourage employees to think about how their tasks can be implemented more effectively or replaced with new technologies or processes. Employ systems like suggestion boxes and make sure that employees are aware that their ideas will not be judged but instead be seen as opportunities for improvement.
4. Make Continuous Improvement a Priority
Leaders should identify areas in need of improvement and then set objectives and determine the necessary resources for those objectives. For example, if the goal is to reduce overhead costs, the organization should form a task force or committee that is focused on meeting that goal.
5. Communicate the Benefits of Continuous Improvement
Explain to employees why continuous improvement is important for the organization. Help them understand how the specific improvements will lead to specific benefits, such as cost savings, increased efficiency, or better customer service.
Another Approach
The workplace has changed drastically in recent years, as organizations are increasingly looking to create a culture of continuous improvement. With this kind of environment, employees are constantly motivated and challenged to learn and grow, leading to better results and more satisfied customers. While there is no one-size-fits-all approach to developing such a culture, there are a few tips and strategies that can help get your organization on the right track.
#1 Embrace Technology
Technology plays a major role in the ability to create a culture of continuous improvement. It enables employees to quickly connect with each other from any location, share ideas, and get feedback. It also allows businesses to automate and streamline various processes to free up time for more critical thinking and creativity. Investing in the right technology can have a tremendous impact on the success of your efforts.
Case Study: Netflix — The streaming giant is renowned for its culture of continuous improvement, having managed to adapt to changing market forces and create products and services that customers love. Technology is a major reason why. From their streaming platform itself to their internal systems, Netflix has embraced the power of technology to optimize workflows and enable faster decisions.
#2 Encourage Autonomy and Collaboration
Creating a culture of continuous improvement means providing employees with the freedom to think, act, and create on their own, without having to wait for lengthy approval processes or wait in line to discuss an idea with a manager. As such, businesses should provide employees with the autonomy to decide how they want to tackle a problem and collaborate with others in order to come up with creative solutions.
Case Study: Amazon — The e-commerce giant is all about autonomy and collaboration. This is evidenced by their flat structure, which allows employees to communicate and collaborate without having to go through a hierarchical chain of command. This has enabled their employees to think more creatively, come up with better solutions, and move faster than the competition.
#3 Celebrate Success
Creating a culture of continuous improvement requires positive reinforcement and recognition for employees who are doing a great job. Whether it is through awards, bonuses, public recognition, or other forms of reward, celebrating success is vital to encouraging employees to push themselves and come up with innovative solutions.
Case Study: Apple — The tech giant is known for its passion for innovation and has long relied on recognition and encouragement to drive their employees to excel. The company regularly recognizes employees for their successes in their internal publications, while also providing rewards and bonuses for noteworthy accomplishments. This emphasis on celebrating and recognizing employees has fostered a culture of continuous improvement, driving Apple to the top of their industry.
Conclusion
Creating a culture of continuous improvement requires commitment and a forward-thinking approach to management, but the long-term benefits are invaluable. With these tips and examples, businesses can start to build a culture where employees are encouraged to learn and grow, and customers benefit from better products and services.
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Corporate culture is a set of shared values, beliefs, and attitudes that guide how an organization operates and interacts with its employees, customers, and partners. As companies grow and evolve, their culture often needs to change in order to stay relevant and competitive. Change management is a process used to help organizations successfully transition from one state to another. It includes activities such as identifying the need for change, outlining goals and objectives, planning and implementing the change, and monitoring and evaluating the results. Change management plays an important role in corporate culture change, as it helps ensure that the desired changes are made in a smooth and efficient manner.
Case Study 1: Airbnb
Airbnb is a popular home-sharing platform that has experienced tremendous growth over the past decade. As the company expanded, its culture and values needed to evolve in order to keep up with the changing business environment. To facilitate this change, Airbnb implemented a comprehensive change management program. This included engaging stakeholders, communicating the need for change, and providing employees with training and support. Additionally, the company created a set of core values that serve as the foundation for all of its decisions. These values include being open and honest, being a host of trust, and creating a sense of belonging. By taking the time to ensure that all stakeholders were on board with the transition, Airbnb was able to successfully transform its culture and continue to grow and thrive.
Case Study 2: Microsoft
Microsoft is a global technology giant that is constantly innovating and adapting to the changing business environment. In recent years, the company has made a concerted effort to shift its corporate culture from one that was focused on competition and individual achievement to one that emphasizes collaboration and team work. To facilitate this transition, Microsoft implemented a comprehensive change management program. This included engaging stakeholders, providing employees with training and support, and communicating the need for change. Additionally, the company created a set of core values that serve as the foundation for all of its decisions. These values include being passionate, having a growth mindset, and embracing diversity. Through its change management program, Microsoft was able to successfully transform its culture and continue to be a leader in the technology industry.
Conclusion
Change management plays an important role in corporate culture change. By engaging stakeholders, communicating the need for change, and providing employees with training and support, organizations can successfully transition from one state to another in a smooth and efficient manner. This is exemplified by the case studies of Airbnb and Microsoft, who both implemented comprehensive change management programs in order to successfully transform their cultures and remain competitive in their respective industries.
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A culture of innovation is a working environment in which creative thinking, experimentation, and risk-taking are encouraged and rewarded. It is a way of working that values the development of new ideas, products, and processes. It is also a culture that supports collaboration and open communication in order to foster creativity, problem-solving, and innovation.
Fostering a Culture of Innovation
When it comes to fostering a culture of innovation in the workplace, there are a few key steps that can be taken to get the ball rolling. By encouraging employees to think creatively and to be open to new ideas, businesses can create an atmosphere of growth and progress that can lead to increased productivity and revenue.
1. Set Clear Goals – Make sure that all employees are aware of the company’s vision and mission. Clarifying the company’s goals and objectives will help employees understand what they’re working towards and why it’s important.
2. Provide Resources – Provide employees with the necessary tools and resources to enable them to think creatively and come up with innovative ideas. This can include access to research materials, training opportunities, and brainstorming sessions.
3. Encourage Risk-Taking – Be open to new ideas and don’t be afraid to take risks. Encourage employees to take calculated risks and be willing to make mistakes—it’s often through trial and error that the best ideas come about.
4. Reward Innovation – Recognize and celebrate employees who come up with innovative solutions. Not only will this motivate them, but it will also show other employees that the company values creative thinking.
5. Foster Collaboration – Encourage collaboration and open communication between teams. By bringing different perspectives together, teams can generate new ideas and find better solutions to problems.
Innovation is essential for any business looking to stay competitive and grow. By following these steps, businesses can create a culture of innovation and reap the rewards of a more creative and productive workforce.
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GUEST POST from Chateau G Pato LAST UPDATED: January 12, 2026 at 11:53AM
We often talk about Design Sprints in the context of products, features, or services. Teams huddle for five days, brainstorm, prototype, and test an idea with real users. It’s a powerful methodology for de-risking innovation and accelerating learning. But what if we applied this same rapid prototyping mindset to something even more fundamental to organizational success: our culture?
As a human-centered change architect, I believe that our work environment, our internal processes, and the very fabric of how we collaborate are all “products” that can and should be continuously designed, prototyped, and refined. Just as customer experience needs constant auditing, employee experience requires intentional, iterative design. The ‘Design Sprint for Culture’ is precisely this – a concentrated effort to identify a cultural challenge, brainstorm potential solutions, build a prototype of a new behavior or process, and test its efficacy in a short, focused burst.
Think about the common cultural pain points: siloed departments, ineffective meetings, lack of psychological safety, or disengaged hybrid teams. These aren’t abstract problems; they manifest as concrete frustrations in daily work. A Design Sprint for Culture allows us to treat these challenges not as intractable issues, but as design problems. It moves us from endless debates about “what’s wrong” to actionable experiments in “what could be better.”
Why Prototype Culture?
The traditional approach to cultural change is often slow, top-down, and prone to resistance. Large-scale initiatives, year-long training programs, or mandated values statements rarely achieve the desired impact because they lack immediate feedback loops and rarely involve those most affected by the change. Culture, after all, is the sum of shared habits and behaviors. To change culture, we must change habits, and to change habits, we must prototype new behaviors.
A cultural sprint offers:
Rapid Learning: Instead of waiting months to see if a new policy works, you can test a small behavioral shift in a week.
Employee Empowerment: By involving employees directly in the design and prototyping of cultural solutions, you foster ownership and reduce resistance.
De-risking Change: You don’t have to bet the farm on a massive cultural overhaul. Small, tested interventions are less disruptive and more likely to succeed.
Tangible Outcomes: The output isn’t a strategy document, but a tangible artifact – a new meeting agenda, a communication protocol, a team ritual – that can be immediately experienced.
“Innovation isn’t just about inventing new products; it’s about inventing better ways for humans to work together to create value. Our internal culture is the ultimate product of our collective efforts, and it deserves the same rigorous design thinking as our external offerings.” –- Braden Kelley
The Cultural Sprint Framework (Adapted)
While the exact steps can be tailored, a Cultural Design Sprint generally follows a similar five-day structure to a traditional sprint:
Understand & Define (Day 1): Identify a specific cultural challenge. Frame it as a problem statement. Map out current behaviors and their impact.
Diverge & Ideate (Day 2): Brainstorm a wide range of solutions. Think outside the box: what new behaviors, rituals, or processes could address the defined problem?
Decide & Storyboard (Day 3): Select the most promising ideas. Storyboard how the new cultural behavior/process would work step-by-step.
Prototype (Day 4): Create a tangible, low-fidelity prototype of the new cultural element. This could be a new meeting structure, a communication template, a defined decision-making process, or a micro-learning module.
Test & Reflect (Day 5): Implement the prototype with a small, representative group (e.g., one team, a few individuals). Gather immediate feedback. What worked? What didn’t? What did we learn?
Case Studies in Cultural Prototyping
Case Study 1: Re-energizing Hybrid Meetings
A global software company was struggling with disengaged hybrid meetings. Remote participants felt ignored, and in-office attendees found themselves distracted. Endless debates about technology solutions went nowhere. A small cross-functional team, including remote and in-office employees, convened for a 3-day Cultural Design Sprint.
They defined the problem as: “How might we make hybrid meetings equally engaging and productive for all participants?” They prototyped a new “Hybrid Meeting Protocol” which included:
Dedicated “Remote Ambassador” role for each meeting, responsible for monitoring chat and ensuring remote voices were heard.
A “5-Minute Focus” warm-up activity to align everyone before diving into content.
Mandatory use of a digital whiteboard for all brainstorming, regardless of location.
This protocol was tested with three pilot teams for a week. The immediate feedback was overwhelmingly positive. Remote employees reported feeling significantly more included, and overall meeting effectiveness improved by 25% (as measured by a quick post-meeting survey). The prototype was then refined and rolled out incrementally across the organization, rather than as a top-down mandate.
Case Study 2: Cultivating Psychological Safety in a Design Team
A fast-paced agency’s design team was experiencing a drop in innovative ideas. Post-mortems revealed that junior designers felt intimidated to share early concepts due to fear of criticism from senior members. A one-week Cultural Design Sprint focused on improving psychological safety.
Their challenge: “How might we create a feedback environment where designers at all levels feel safe to share unfinished work?” The team prototyped a “WIP (Work In Progress) Review” ritual:
A designated “Safe Space” meeting for early concepts, with strict rules: “No solutions, just questions” and “Focus on the idea, not the person.”
A visual “Vulnerability Scale” where designers could indicate how raw their work was, setting expectations.
Anonymous feedback submission for certain stages.
The prototype was tested for two weeks. The design team observed a 40% increase in early-stage concept sharing. Junior designers reported feeling more comfortable and valued. The success led to integrating elements of the WIP Review into other team interactions, fostering a more open and collaborative critique culture.
Conclusion: The Future is Designed, Not Dictated
The challenges facing modern organizations are complex, and traditional approaches to cultural change are often too slow and too rigid. By embracing the principles of Design Sprints for Culture, we empower our people to become co-creators of their work environment. We move from abstract conversations about values to concrete experiments in behavior. We build cultures that are resilient, adaptable, and genuinely human-centered – because they are designed by humans, for humans. It’s time to stop talking about culture and start prototyping it.
Frequently Asked Questions (FAQ)
Q: What is a Design Sprint for Culture?
A: It’s a focused, short-term (typically 3-5 day) workshop where a team identifies a specific cultural challenge, brainstorms solutions, prototypes a new behavior or process, and tests it with a small group of employees.
Q: How is it different from traditional cultural change initiatives?
A: Unlike traditional, top-down, and slow initiatives, a cultural sprint is rapid, iterative, and bottoms-up. It prioritizes hands-on prototyping and immediate feedback from employees, de-risking change and fostering ownership.
Q: What kind of cultural challenges can a sprint address?
A: It can address a wide range of issues, such as improving meeting effectiveness, fostering psychological safety, enhancing cross-functional collaboration, defining hybrid work norms, or re-energizing team rituals. The key is to define a specific, actionable problem.
Extra Extra: Because innovation is all about change, Braden Kelley’s human-centered change methodology and tools are the best way to plan and execute the changes necessary to support your innovation and transformation efforts — all while literally getting everyone all on the same page for change. Find out more about the methodology and tools, including the book Charting Change by following the link. Be sure and download the TEN FREE TOOLS while you’re here.
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In the modern economy, financial valuation is less about the assets you currently own (buildings, cash, inventory) and more about the future value you can create. This gap between the book value and the market capitalization is what I call the Innovation Premium. It is the quantifiable reward the market assigns to a company whose culture and processes demonstrate a reliable, repeatable capacity for disruptive innovation and human-centered adaptation.
Innovation is often dismissed as a “soft” topic, a cultural flourish that looks good on an internal memo but doesn’t move the stock price. This is profoundly incorrect. A culture that fosters psychological safety, rapid learning, and deep customer empathy is the engine that drives perpetual growth, and the market sees it, values it, and pays a premium for it.
The Innovation Premium is not just about a single breakthrough product; it’s about the organizational resilience to produce the next breakthrough, and the one after that. It is the market’s belief in your company’s long-term adaptability.
The Three Cultural Drivers of the Premium
The premium is built upon three non-negotiable cultural pillars:
1. Learning Velocity, Not Output Velocity
Companies that command a premium prioritize learning over raw output. A culture focused on learning embraces small, contained failures as valuable data, not as career-limiting events. They don’t just “fail fast”; they learn faster. The market rewards this because accelerated learning cycles reduce long-term risk and ensure the organization corrects course before major capital expenditure.
2. Psychological Safety and Voice
Innovation stops dead when employees fear reprisal for suggesting a radical idea or — crucially — for pointing out flaws in an executive’s favored project. A culture of Psychological Safety ensures that the best ideas, regardless of hierarchy, can rise to the top. The market recognizes companies where information flows freely, because free-flowing information is a prerequisite for rapid, high-quality decision-making.
3. Deep, Ethnographic Empathy
The highest premiums are paid to companies that consistently solve problems customers don’t even know they have yet (the unmet needs). This capability is rooted in a culture of Deep Empathy — a commitment to ethnographic, human-centered research that goes beyond surveys and focus groups. This cultural practice ensures the innovation pipeline is filled with breakthrough ideas, not just incremental improvements.
Case Study 1: The Legacy Manufacturing Giant’s Digital Dividend
Challenge: Stagnant Stock Price and Obsolete Business Model
A century-old industrial equipment manufacturer (let’s call it “IndustrialCo”) suffered from low investor confidence. The market only valued its physical assets and depreciating machinery. Its Innovation Premium was near zero; it was viewed as a static utility.
Cultural Intervention: Designing for Digital Empathy
IndustrialCo’s leadership initiated a human-centered cultural transformation, shifting the focus from selling machines to selling uptime and efficiency. The change was explicitly cultural, demanding:
Mandatory training in human-centered design for all product engineers.
Redeployment of sales staff to function as ethnographers, tasked with documenting customer process friction, not just closing deals.
Creating Psychological Safety for employees to kill legacy products if data proved a digital solution was superior.
The Innovation Premium Result:
The result was a pivot to selling “Power-as-a-Service” through digitally enabled equipment and predictive maintenance. Within five years, IndustrialCo’s P/E ratio surpassed its peer group. The market premium was paid not for the new digital products, but for the cultural agility to embrace a service-based business model and successfully monetize data, moving them from a cyclical commodity stock to a technology enabler.
Case Study 2: The E-Commerce Pioneer and the Failure Feedback Loop
Challenge: Maintaining Exponential Growth in a Crowded Market
A leading e-commerce firm (let’s call it “E-Retail”) needed to maintain its high Innovation Premium, which was based on its reputation for constant customer-centric improvement. The threat was that rapid growth would lead to organizational rigidity and fear of failure.
Cultural Intervention: Codifying Learning from Failure
E-Retail deliberately codified a culture where failure was expected and managed. Instead of simply firing or punishing people for failed experiments, the company introduced the Failure Feedback Loop:
Mandatory, non-judgemental “After Action Reviews” for every major initiative, focusing exclusively on what was learned.
Tying promotion criteria not just to success metrics, but to the quality and transparency of learning documented from failed projects.
Allocating specific budget lines to “risk capital,” explicitly designed for experiments with a high probability of failure but a high potential for breakthrough insight.
The Innovation Premium Result:
This culture maintained E-Retail’s ability to innovate at scale. While competitors became paralyzed by internal politics and fear of making multi-million dollar mistakes, E-Retail’s culture allowed them to launch and discard hundreds of small features quickly. Their sustained, high Innovation Premium was a direct reflection of the market’s trust in their repeatable, low-cost learning methodology, proving that cultural mechanisms for managing risk are key market differentiators.
The Human-Centered Call to Action
The Innovation Premium is the CEO’s ultimate report card on culture. If your organization’s valuation hovers near its tangible book value, it means the market has no faith in your ability to adapt or surprise. Your culture is blocking your growth.
To unlock the premium, stop focusing solely on R&D expenditure, and start investing in the Human-Centered Change capabilities that make that R&D valuable:
Measure how quickly teams pivot and learn, not just how fast they ship.
Incentivize honest failure and transparent learning.
Make ethnographic empathy a required skill, not a specialized department function.
Your culture is not a soft side project. It is the hard math of future valuation.
“The market doesn’t pay a premium for what you currently own; it pays a premium for your documented, cultural capacity to acquire what’s next.”
Frequently Asked Questions About the Innovation Premium
1. What is the definition of the Innovation Premium?
The Innovation Premium is the difference between a company’s market capitalization (the total value assigned by the stock market) and its tangible book value (the value of its physical assets and cash). It represents the intangible value the market places on the company’s expected future growth, largely driven by its capacity for innovation.
2. How does a company’s culture directly influence this premium?
Culture influences the premium by determining the organizational capacity for change. A culture built on psychological safety, rapid learning, and deep customer empathy (Human-Centered Change) signals to the market that the company can reliably adapt, pivot, and generate new, high-value revenue streams, justifying a higher valuation.
3. What is “Learning Velocity” and why is it more important than “Output Velocity”?
Output Velocity measures how fast a team ships products or code. Learning Velocity measures how quickly a team can generate, test, and codify actionable insight from experiments (including failures). Learning Velocity is critical because it minimizes the long-term risk of solving the wrong problem, ensuring that future output delivers maximum market impact.
Your first step toward calculating your Innovation Premium: Calculate the ratio of your Market Capitalization to your Tangible Book Value. If this number is low, your next priority must be a cultural audit, asking: “Where does fear of failure or political rigidity slow down our learning cycle?” Use the answers to design a small, safe-to-fail experiment with an immediate reward for the team that documents the best insight from failure.
Extra Extra: Because innovation is all about change, Braden Kelley’s human-centered change methodology and tools are the best way to plan and execute the changes necessary to support your innovation and transformation efforts — all while literally getting everyone all on the same page for change. Find out more about the methodology and tools, including the book Charting Change by following the link. Be sure and download the TEN FREE TOOLS while you’re here.
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Change is inevitable, and successful change leadership is the key to ensuring that change is successful. Change leadership involves effectively managing the transition process that accompanies any change to ensure that the desired results are achieved. With the right leadership skills, you can make sure that the change you want to implement is successful.
Here are some secrets to effective change leadership:
1. Understand the process: To be an effective change leader, you need to understand the change process. A good change leader knows what needs to happen at each stage of the process and how to effectively move from one stage to the next.
2. Create a vision: It is essential to have a clear vision of what you want to achieve with the change. This vision should be communicated to everyone involved in the change process. It should include the desired outcomes, the timeline for implementation, and any resources required.
3. Communicate: Communication is essential for successful change. You need to communicate with everyone involved, from the stakeholders to the team members. Make sure that everyone understands the change and their role in it.
4. Manage resistance: Change can be difficult, and it’s important to be prepared for resistance. Don’t be afraid to confront resistance head-on. Address concerns and objections and use techniques such as negotiation and compromise to manage resistance.
5. Stay focused: As a change leader, it is essential to stay focused on the goal. Don’t get sidetracked by details or become overly analytical. Keep your focus on the vision and the desired outcomes.
6. Empower your team: It is important to empower your team to take ownership of the change process. Allow them to be creative and come up with solutions. Support them and provide them with the resources they need to be successful.
7. Monitor progress: As the change leader, it is important to monitor progress throughout the process. Make sure that the objectives are being achieved and that any issues are addressed quickly.
By following these secrets of change leadership, you can ensure that the change you want to implement is successful. With the right leadership skills and a positive attitude, you can make sure that the desired outcomes are achieved. It is the leader’s job to guide their team through changes, both big and small. However, fostering a culture of change leadership in an organization can be a challenge.
Here are a few tips on how to encourage and develop change leadership in your organization:
1. Establish Clear Goals
The first step in fostering a culture of change leadership is to ensure that your organization has clear goals and objectives. Leaders need to be able to communicate the vision of the organization and what it is trying to achieve. This gives team members direction and helps them understand the importance of change.
2. Encourage Open Dialogue
Leaders should create an open and honest dialogue with their team. This includes allowing team members to voice their ideas and opinions. It is important to create a safe space for team members to be able to express themselves without fear of judgement. This will help encourage creative thinking and allow for more innovative solutions to the organization’s challenges.
3. Lead by Example
It is important for leaders to lead by example when it comes to embracing change. Leaders should be willing to take risks and try out new ideas. This will show team members that it is okay to think outside the box and that failure is part of the process.
4. Provide Training and Development
Leaders should focus on providing training and development opportunities for their team. This can include workshops, seminars, and webinars, as well as one-on-one coaching. This will help team members to develop the skills needed to embrace change and become better change leaders.
5. Embrace Failure
Finally, it is important to remember that failure is part of the process. Leaders should not be afraid to fail and should instead use it as a learning opportunity. This will help create a culture where team members are not afraid to take risks and try new things.
Fostering a culture of change leadership in an organization is not easy, but it is an essential part of ensuring success. By following the tips above, you can help create an environment that encourages team members to be creative and embrace change.
Image credit: Pixabay
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Excerpt from the May/June 2017 edition of The European Business Review
Every company begins as the nimble startup, organized around the solution to a single customer problem and executing that solution better than anyone else in the market (including incumbents with deep pockets). But this emerging leader soon becomes a follower as the organization evolves and scales into a more complex (but capable) next generation incumbent. Inevitably, every growing organization finds itself so focused on capturing all of the business for its existing solutions, that it finds itself becoming disconnected from evolving customer preferences.
The companies that last the longest manage to fulfill existing customer needs with well-delivered solutions, and identify new customer needs to satisfy as customer preferences continue to shift. But many large or growing companies fail to do so quickly enough, especially in our new digital reality where it is easier than ever to start and scale a solution around the globe with limited resources. Innovation is the key to remaining relevant with customers. Winning the War for Innovation is the key to remaining alive.
It is not too often that the leader of a Fortune 500 gives you an insight into how their company achieves competitive advantage in the marketplace in a letter to shareholders, instead of launching into a page or two of flowery prose written by the Public Relations (PR) team that works for them. The former is what Jeff Bezos tends to deliver year after year. This year’s letter is particularly interesting.
The two key insights in this year’s letter were that:
#1 – Amazon strives to view itself as a startup champion riding to the rescue of customers
#2 – Amazon chooses to be customer-obsessed, not customer-focused or customer-centric, but customer-obsessed
Both of these are crucial to sustaining innovation, and are supported by Jeff’s other main pieces of advice:
– Resisting proxies
– Embracing external trends
– Practicing high velocity decision making
But, I won’t steal Jeff’s thunder. I encourage you to read Jeff’s letter to shareholders in its entirety, check out the bonus video interview at the end, and add comments to share what you find particularly interesting in the letter.
Keep innovating!
—————————————————————- 2016 Letter to Amazon Shareholders
April 12, 2017
“Jeff, what does Day 2 look like?”
That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.
I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?
Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.
True Customer Obsession
There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.
Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.
Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen.
Resist Proxies
As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2.
A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.
Another example: market research and customer surveys can become proxies for customers – something that’s especially dangerous when you’re inventing and designing products. “Fifty-five percent of beta testers report being satisfied with this feature. That is up from 47% in the first survey.” That’s hard to interpret and could unintentionally mislead.
Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you’ll find on surveys. They live with the design.
I’m not against beta testing or surveys. But you, the product or service owner, must understand the customer, have a vision, and love the offering. Then, beta testing and research can help you find your blind spots. A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won’t find any of it in a survey.
Embrace External Trends
The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.
These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.
Over the past decades computers have broadly automated tasks that programmers could describe with clear rules and algorithms. Modern machine learning techniques now allow us to do the same for tasks where describing the precise rules is much harder.
At Amazon, we’ve been engaged in the practical application of machine learning for many years now. Some of this work is highly visible: our autonomous Prime Air delivery drones; the Amazon Go convenience store that uses machine vision to eliminate checkout lines; and Alexa, our cloud-based AI assistant. (We still struggle to keep Echo in stock, despite our best efforts. A high-quality problem, but a problem. We’re working on it.)
But much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type – quietly but meaningfully improving core operations.
Inside AWS, we’re excited to lower the costs and barriers to machine learning and AI so organizations of all sizes can take advantage of these advanced techniques.
Using our pre-packaged versions of popular deep learning frameworks running on P2 compute instances (optimized for this workload), customers are already developing powerful systems ranging everywhere from early disease detection to increasing crop yields. And we’ve also made Amazon’s higher level services available in a convenient form. Amazon Lex (what’s inside Alexa), Amazon Polly, and Amazon Rekognition remove the heavy lifting from natural language understanding, speech generation, and image analysis. They can be accessed with simple API calls – no machine learning expertise required. Watch this space. Much more to come.
High-Velocity Decision Making
Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.
First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong? I wrote about this in more detail in last year’s letter.
Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.
Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.
This isn’t one way. If you’re the boss, you should do this too. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told the team my view: debatable whether it would be interesting enough, complicated to produce, the business terms aren’t that good, and we have lots of other opportunities. They had a completely different opinion and wanted to go ahead. I wrote back right away with “I disagree and commit and hope it becomes the most watched thing we’ve ever made.” Consider how much slower this decision cycle would have been if the team had actually had to convince me rather than simply get my commitment.
Note what this example is not: it’s not me thinking to myself “well, these guys are wrong and missing the point, but this isn’t worth me chasing.” It’s a genuine disagreement of opinion, a candid expression of my view, a chance for the team to weigh my view, and a quick, sincere commitment to go their way. And given that this team has already brought home 11 Emmys, 6 Golden Globes, and 3 Oscars, I’m just glad they let me in the room at all!
Fourth, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.
I’ve seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third party sellers to compete directly against us on our own product detail pages – that was a big one. Many smart, well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team.
“You’ve worn me down” is an awful decision-making process. It’s slow and de-energizing. Go for quick escalation instead – it’s better.
So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world’s trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.
A huge thank you to each and every customer for allowing us to serve you, to our shareowners for your support, and to Amazonians everywhere for your hard work, your ingenuity, and your passion.
As always, I attach a copy of our original 1997 letter. It remains Day 1.
Sincerely,
Jeff
———————————
If you’d like dive deeper into the mind of Jeff Bezos, then check out this interview with him conducted by Walt Mossberg of The Verge last year at Code Conference 2016:
And here is another fascinating peek inside the mind of Jeff Bezos from 1997:
Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.
Sign up here to get Human-Centered Change & Innovation Weekly delivered to your inbox every week.
It is not too often that the leader of a Fortune 500 gives you an insight into how their company achieves competitive advantage in the marketplace in a letter to shareholders, instead of launching into a page or two of flowery prose written by the Public Relations (PR) team that works for them. The former is what Jeff Bezos tends to deliver year after year. This year’s letter is particularly interesting.