In a recent Harvard Business Review article, To Change Company Culture, Focus on Systems—Not Communication, Benjamin Laker and colleagues published compelling research revealing a fundamental truth about organisational culture:
“Culture doesn’t fail because it’s forgotten. It fails because it’s misunderstood. It’s treated as branding, not behaviour.”
While their findings apply broadly to cultural transformation, the challenges they identify become exponentially more complex when innovation capability is declared a strategic imperative.
After working with Fortune 500 companies and governments around the world on innovation strategy, leadership, and culture, I’ve witnessed this dynamic repeatedly: executives acknowledging that innovation is essential to their growth strategy, yet the very behaviours required for innovation—calculated risk-taking, learning from failure, challenging the status quo—remain conspicuously absent from their own leadership repertoire.
The result isn’t just cultural misalignment. It’s innovation paralysis.
The Innovation Culture Paradox
Innovation presents unique cultural challenges that amplify the problems Laker’s research identifies. Unlike other cultural values such as integrity or collaboration, innovation explicitly requires behaviours that contradict our evolutionary wiring. When leaders “champion values like empathy, inclusion, and integrity” but fail to consistently demonstrate them, employees lose trust. When leaders champion innovation but punish the very experimentation it requires, they create what I call the innovation culture paradox.
Consider the psychological reality: our brains are hardwired to feel potential losses approximately twice as intensely as equivalent gains—a phenomenon known as loss aversion. When executives demand “breakthrough thinking” while maintaining governance systems that penalise unsuccessful experiments, they’re essentially asking employees to override millions of years of evolutionary programming without providing the psychological safety to do so.
The Corporate Executive Board reports that 60% of employees have withheld innovative ideas specifically due to fear of negative consequences. This isn’t a communication problem—it’s a credibility problem. As the research shows, “employees rarely judge values by how often they’re named. They judge them by what leaders are willing to give up to uphold them.”
When Innovation Theatre Meets Innovation Reality
The Harvard research found that “across companies that had launched formal culture initiatives since 2022, 72% showed no meaningful improvement in employee trust, engagement, or retention one year later.” For innovation culture initiatives, this failure rate is even higher, with 78% of corporate innovation programs failing to deliver expected outcomes.
In my experience, the pattern is predictable: organisations establish innovation labs, run design thinking workshops, and create ideation campaigns while leaving the fundamental operating systems unchanged. They’ve built what has become known as “innovation theatre”—the elaborate staging of innovation activities without addressing the cultural and leadership foundations required for innovation to flourish. And thus, never generating any ROII (Return on Innovation Investment).
One pharmaceutical executive recently confided:
“We’ve spent millions of Dollars on our innovation approach and culture, but when someone proposes an idea that might cannibalise our existing products, the conversation stops. We say we want disruption, but we’ve never actually demonstrated we’re willing to disrupt ourselves.”
This executive had unknowingly identified the core challenge: innovation culture requires leaders to embrace what I call “productive loss”—being willing to sacrifice short-term certainty for long-term capability. Without this willingness to bear costs for values, “values remain performative—they read as theatre, not truth.”
The Middle Management Innovation Multiplier
The Harvard research also reveals a critical insight that’s particularly relevant to innovation culture: “In most organisations, culture flows downhill—at least in theory. Senior leaders announce a set of values or launch a new initiative, then step back. Middle managers are expected to translate intent into action, often without the training, authority, or consistency needed to succeed.”
This challenge is amplified dramatically when innovation is the cultural goal. Innovation requires middle managers to navigate unprecedented ambiguity, facilitate cross-functional collaboration, and create psychological safety for experimentation—capabilities that go far beyond traditional operational management.
One of the frameworks I use extensively to tackle this is something I call ‘ODC’ (Own-Drive-Contribute). In ODC, middle managers are identified as the critical “DRIVE” layer in building innovation capability and culture. They operate at the perfect intersection to leverage what I call “Differentiated Innovation”—the strategic middle ground between continuous improvement aka incremental innovation, and radical or disruptive innovation. Yet research shows that “69% of middle managers say they feel solely responsible for delivering on cultural commitments. But only 14% believe senior leaders are modelling those same behaviours themselves.”
For an innovation-focused culture, this disconnect is particularly damaging because innovation inherently involves visible risk-taking. When executives expect middle managers to encourage experimentation while they themselves avoid the uncertainty that innovation requires, they create an impossible dynamic.
Consider this scenario: A middle manager encourages their team to pilot a new customer engagement approach. The pilot shows promise, but doesn’t deliver immediate ROI. In the quarterly business review, executives focus exclusively on short-term metrics, effectively penalising the very behaviour they claim to want. The message becomes clear: innovation is vital until it affects the numbers that matter to leadership.
The ODC Solution: From Delegation to Demonstration
The Harvard research offers a powerful alternative model: “one Southeast Asian conglomerate took a different approach. Instead of pushing culture downward, it started at the top—by redesigning senior leadership meetings to reinforce cultural alignment. Executives began co-creating agendas with junior staff, practising open dissent in front of peers, and recording sessions for wider team visibility.”
This approach aligns perfectly with my ODC Framework, which recognises that a repeatable innovation capability requires executives to actively and visibly own the innovation agenda, not simply delegate it. This level of ownership goes beyond sponsorship to include:
Strategic Ownership Elements:
- Setting the innovation vision and direction that guides decision-making
- Implementing governance frameworks that enable rather than restrict innovation
- Modelling innovation behaviours through visible risk-taking and learning from failure
- Allocating dedicated resources to experimentation—especially when ROI is uncertain at the early idea development stage
Enabling Middle Management to DRIVE:
- Providing psychological safety specifically designed for the middle layer
- Equipping managers with innovation tools and frameworks tailored to their unique position
- Establishing clear accountability that balances governance with autonomy
- Creating cross-functional forums where differentiated innovation can flourish
The Executive Vulnerability Imperative
The research emphasises that “employees aren’t waiting for leaders to be perfect. They’re waiting for them to be consistent—especially when it’s inconvenient.” For an innovation-led culture, this consistency must include visible vulnerability about uncertainty and failure.
Leaders who successfully build innovation-led cultures exhibit what I call “strategic vulnerability”—they acknowledge when they don’t have answers, share their own creative attempts (including failures), and demonstrate that uncertainty is not a weakness but a prerequisite for breakthrough thinking.
One technology CEO transformed their organisation’s culture to embrace innovation by changing the first five minutes of every leadership meeting to recognise learning from failure. Within 18 months, their middle managers felt empowered to take calculated risks, leading to a threefold increase in innovation-focused output.
The neuroscience is clear: when leaders model vulnerability, it reduces team threat response by 74%, building the conditions where creative thinking can flourish. This aligns with the research finding that “culture only changed when leaders changed first. Not in tone, but in structure. Not in principle, but in power.”
Systems Thinking for Innovation Culture
The Harvard researchers conclude that effective culture change happens when leaders focus on “three levers: Power: Who makes decisions, and who gets heard; Risk: What leaders are willing to lose to live their values; Modelling: What behaviours get demonstrated—not just demanded.”
For a culture of innovation, these levers translate into specific systemic changes:
Power Redistribution: Moving from command-and-control to coaching-and-enabling models that empower middle managers to drive innovation on a day-to-day basis without requiring executive approval for every decision.
Risk Reframing: Shifting from risk avoidance to intelligent risk-taking, where calculated failures become learning opportunities rather than career limitations.
Behavioural Modelling: Demonstrating innovation-focused behaviours consistently, especially when they conflict with short-term performance pressures.
Beyond Innovation Theatre: A Call to Action
The research offers clear guidance: “Before you announce your next culture initiative, stop, step back, and ask: What are we asking people to believe that we haven’t yet proven through our own behaviour? Lead that first. Then name it.”
For a culture of innovation, this means:
- Audit your own innovation behaviours: When did you last take a visible risk? Share a failure? Challenge conventional wisdom in your organisation?
- Examine your resource allocation: Are you dedicating meaningful resources to experiments that could fail? Or only to ideas with guaranteed returns that you label “innovations”?
- Review your recognition systems: What gets measured and celebrated in your organisation? Innovation-focused activity or genuine customer impact?
- Assess your middle management enablement: Do your middle managers have the psychological safety, resources, and authority needed to drive innovation, or are they caught between innovation rhetoric and operational reality?
The sobering truth is that building a genuine innovation-led culture is neither quick nor easy. It requires executives to embrace uncertainty, middle managers to navigate ambiguity, and entire organisations to work against their natural risk-aversion tendencies.
But for organisations willing to do the difficult work of aligning systems with aspirations, the rewards are substantial: companies that successfully embed innovation in their cultural DNA achieve 3.4 times greater total shareholder returns and consistently outperform industry peers regardless of market conditions.
As the research concludes, “if those don’t shift, nothing else will.” For a culture of innovation, the stakes couldn’t be higher. In an era of unprecedented disruption, the ability to innovate has shifted from a competitive advantage to a survival imperative.
The question isn’t whether your organisation needs to build innovation capability and culture—it’s whether your leadership is willing to model the behaviours that make it possible.