Learning to Innovate

Nearly every organization has rightfully made innovation a priority, and management journals dedicate significant column inches to how to manage innovation. But Joaquín Alegre, associate professor of management at the University of Valencia, and Ricardo Chiva, associate professor of management at Jaume I University in Castellón, Spain, argue that before you can innovate effectively you have to prepare your organization to be open to innovation by creating a learning organization. In their 2007 working paper, “Gaining From Organizational Learning Capability,” the authors tested key organizational characteristics discussed in the secondary literature as potential drivers of learning and innovation. They identified the most important characteristics required to create a high performing and innovative organization.

The authors collected survey data from June to September 2004 regarding the European Union’s ceramic tile sector. This sector was selected because of its multinational presence and its dependence on both process and product innovation. By selecting a single industry, the authors hoped to eliminate any bias from intersectional studies. Examination of the data revealed that organizations that were above the mean in innovation performance were also above the mean in several organizational learning skills identified in the secondary literature. Given the connection, it is possible for an organization to measure its organizational learning capability and determine its strengths and weaknesses. The authors identify five key characteristics of high OLC organizations: experimentation, risk taking, interaction with the external environment, dialogue and participative decision making.

Experimentation is the degree to which new ideas and suggestions are dealt with sympathetically by the organization. It includes searching for innovative solutions to problems using distinct methods and procedures. Experimentation produces a flow of ideas and proposals that challenge the established order and is a manifestation of the creative environment. Organizations that are innovation-resistant tend to have rigid management structures that are not open to these types of challenges.

The second characteristic of high OLC organizations is risk taking, which is essentially the tolerance for ambiguity, uncertainty and errors. The risk-taking organization understands the value of learning from both successes and failures. Risk-averse organizations tend to miss the opportunities that come from risk and fail to see that the nature of innovation requires some uncertainty. Even among organizations with high OLC, risk taking is the least exercised aspect of learning. When assessing their own skills, companies scored their risk taking the lowest among the five key characteristics.

The third characteristic, interaction with the external environment, is defined as the scope of relationships with factors that are beyond the direct control or influence of the organization and include competitors, the economic system, the social system, the monetary system and the political/legal system. Relations and connections with the environment are very important, since the organization attempts to evolve simultaneously with its changing environment. More turbulent environments generate organizations with greater needs and desires to learn; it is the ability to respond to the turbulence that is the key to learning.

Another key to learning is dialogue, which is defined as a sustained collective inquiry into the processes, assumptions and certainties that make up everyday experience. Dialogue is best used as a way of spreading information and skills throughout an organization, and it helps create multiple viewpoints. Interestingly, the data show that both high-learning and low-learning organizations list engaging in dialogue as their greatest strength. However, low learners have much more to learn than their high-learning counterparts.

The last learning characteristic is participative decision making, which refers to the level of influence employees have in the decision-making process. Participative decision making has significant motivational effects. Employee involvement, job satisfaction and organizational commitment all increase when stakeholders feel involved in the decision-making process. Not surprisingly, poor-learning organizations rate themselves worst at allowing participative decision making. The kind of unilateral decision making that is characteristic of poor learners pervades all aspects of the organization, including innovation and learning.

These five characteristics combine to create an excellent snapshot of an organization’s OLC. The authors suggest that an organization can use surveys and other internal metrics as a way of measuring its ability to learn and innovate. If an organization measures an improvement in its learning capability, it will very likely see a concurrent increase in innovation.

For more information, contact Joaquín Alegre at joaquin.alegre@uv.es or Ricardo Chiva at rchiva@emp.uji.es.