In this chapter we approach culture as the unwritten rules that determine what people do when no one is watching: whether they put forward their ideas, whether they admit their mistakes, and whether they experiment. We examine how these rules take shape and the ways in which they change.
A government agency launched an internal campaign titled “Try, Learn, Advance,” hung its posters in the corridors, and the CEO devoted his annual address to accepting failure as a path to learning. A few months later, a pilot launched by one team to simplify an online service ran into trouble, and the agency received complaints from some service users. An investigation committee was formed, and the team leader was transferred to another department. No circular was issued afterward, and none was needed; employees had understood the real rule. In the next round of the ideas competition, the number of submissions fell by half.
The posters were sincere; they expressed a genuine wish on the part of the leadership. But employees learn culture from what they witness more than from what they are told, and in a single week they learned what an entire campaign could not teach them. It is this gap between what is declared and what is practiced that we examine in this chapter, in order to see how to build a culture in which innovators find what they need.
After studying this chapter, the reader should be able to:
Organizational culture has many definitions, the most widely used being Schein's, which describes it as a pattern of shared basic assumptions that a group has learned as it solved its problems, and that has worked well enough to be taught to new members as the correct way to perceive, think and feel (Schein, 2010). Schein distinguishes three levels of culture, illustrated in Figure 8.1.
The value of this distinction is that the deepest level is the one that governs behavior. In the opening case, the artifacts and the espoused values changed, while the basic assumption remained as it was: mistakes are punished. When what is declared conflicts with what is assumed, people follow the assumption. This is why many “innovation culture” programs that begin with colorful spaces and slogans fail: they work on the two upper levels and leave the third untouched.
Alongside culture, the concept of climate is used to describe the patterns of behavior and feeling that people observe in their daily work, such as the degree of trust, openness to ideas and room for experimentation (Ekvall, 1996). Climate lies closer to the surface and is easier to measure, which makes it a useful indicator of culture; we return to it in the chapter on measurement.
Innovative culture is usually described in attractive terms: tolerance of failure, freedom, collaboration and openness. Pisano argues that this description is incomplete, and that stopping at it explains why such a culture is so hard to build. Each of these qualities needs a counterweight to balance it, or it turns into its opposite: tolerance of failure without standards becomes laxity, and freedom without discipline becomes chaos (Pisano, 2019). Table 8.1 summarizes these tensions.
| Desired quality | Its counterweight | What happens when the balance is missing |
|---|---|---|
| Tolerance of failure | No tolerance for incompetence | Avoidable mistakes are excused in the name of experimentation |
| Willingness to experiment | Rigorous discipline in experimentation | Many experiments that test no clear hypothesis and are not stopped when they fail |
| Psychological safety | Candor in critiquing work | Politeness that protects relationships and weakens ideas |
| Collaboration | Individual accountability | Consensus decisions whose consequences no one owns |
| Flat structure | Strong leadership | Endless debate, with no one to settle the direction |
This analysis is consistent with the concept that ties this book together: autonomy within boundaries. An innovative culture is clearer than others about its boundaries, and freer within them. That is what makes it difficult: it asks leaders to be supportive and demanding at the same time.
Edmondson defined psychological safety as a belief shared by members of a team that the team is safe for interpersonal risk-taking: asking a question, admitting a mistake, disagreeing or offering an unfinished idea without fear of embarrassment or punishment. In her study of fifty-one work teams in a manufacturing company, she found that psychological safety was associated with team learning behavior, such as seeking feedback and discussing errors, and that learning behavior was in turn associated with team performance (Edmondson, 1999).
Psychological safety is sometimes understood as comfort, niceness or lowered expectations. Edmondson stresses that it is the opposite: it is what makes candid discussion possible. To illustrate, she places it on one axis and the standards expected of the team on another, as in Figure 8.2 (Edmondson, 2019).
The figure explains the point made in Chapter 3 that the environments most capable of innovation combine genuine care for people with high expectations of them. A leader who raises expectations without building safety pushes the team into the anxiety zone, where performance looks good until the hidden problems come to light. A leader who builds safety without expectations creates a comfortable team that does not innovate. The learning zone requires both together. Psychological safety is also tied to employee voice: safety is the condition that leads people to speak up, and an open leader is the first thing they test before deciding to do so.
In your next meeting, before offering your own view, ask: “What could make this plan fail?” Then wait. If an objection comes, thank the person who raised it before you respond. A team learns more from how you respond to the first objection than from any talk about openness.
Many organizations say they accept failure, then treat every failure the same way. Edmondson proposes distinguishing among types of failure according to their causes, because each type calls for a different response (Edmondson, 2011). Figure 8.3 illustrates this distinction.
Intelligent failure has conditions: the experiment must take place in genuinely unknown territory, serve a valuable opportunity, build on what is already known, and be small enough that its loss is bearable. An experiment that fails after meeting these conditions yields knowledge that was not available before. In the opening case, however, an experiment of the third type was treated as if it belonged to the first, and employees learned not to experiment.
Economic research supports this distinction. Azoulay and colleagues compared life scientists funded by the Howard Hughes Medical Institute, which provides long-term funding, tolerates early failure and leaves researchers free to change direction, with comparable researchers funded by a government program with short cycles and predefined goals. They found that the first group produced high-impact papers at a markedly higher rate, and also produced more papers that attracted little attention; in other words, they experimented more and succeeded more (Azoulay et al., 2011). This is what theory predicts: incentives that tolerate early failure and reward long-term success are the best suited to motivating innovation (Manso, 2011).
This complements what Chapter 7 presented about the learning loop in the innovator's path: an idea that did not succeed returns to the start of the path with new knowledge if it is treated as an intelligent failure, and its owner's willingness to try again ends with it if it is treated as a shortcoming.
Accepting failure does not mean celebrating it. An organization that celebrates every failure confuses the three types just as an organization that punishes every failure does. The test comes down to two questions: Was the experiment well designed? And did we learn from it?
Organizations often turn to awards and financial rewards to encourage innovation. These rewards raise a long-standing question in creativity research: do external incentives undermine the intrinsic motivation on which creativity depends? The meta-analysis by Byron and Khazanchi offers a balanced answer: rewards are positively related to creative performance when they are tied to creativity itself rather than to mere task completion, when they carry information about the quality of performance, and when they give the person some degree of choice (Byron & Khazanchi, 2012).
Three practical principles follow from this:
Yet reward, whether material or symbolic, remains only one form of motivation. An environment that meets the needs for autonomy, competence and relatedness nourishes intrinsic motivation, which is the kind most closely aligned with creativity (Gagné & Deci, 2005). Amabile and Pratt's model adds that the most powerful driver of people's working day is their sense of progress in meaningful work (Amabile & Pratt, 2016). These are things shaped by the details of daily management more than by budgets.
Recognition holds a special place for gifted and innovative people. In the phenomenological study with innovative entrepreneurs presented in Chapter 7, participants repeatedly stressed that a supportive community begins with appreciating and acknowledging talent. One of them described creative people as highly sensitive to recognition of their worth, adding that ignoring this need may drive them to withdraw or turn inward. For them, recognition extended from a kind word to smoothing the way for tasks, removing obstacles, and protecting creative people from having their energy drained by routine operational work (Alsamani, 2026 [Arabic]). This is consistent with a study of distinguished, successful innovators, which showed that working with a supportive team that handled operational matters was among the main things that freed them to focus on developing their innovations (Alsamani, 2023). Table 8.2 presents forms of motivation, most of which call for attention more than budget.
| Form | Need it meets | Example from the university |
|---|---|---|
| Acknowledgment and attribution | Recognition of worth | Naming the idea's owner at the college council or in the university newsletter, and keeping their name on the idea when it is implemented |
| Involvement in implementation | Meaning and belonging | Assigning the proposer to lead its pilot or to serve on the pilot team |
| Partnership in the work | Belonging and competence | A faculty member joining a student project as a partner and mentor, in addition to their role as assessor |
| Access to leadership | Recognition and influence | Presenting the idea directly to the dean or vice dean and hearing their view of it |
| Protected time and freedom | Autonomy | Hours set aside for the project in the schedule, and freedom to choose how to solve the problem |
| Meaningful challenge | Competence and meaning | Assigning a real problem facing the university instead of a hypothetical exercise |
| Removing obstacles | Progress | Streamlining procedures, and relief from some routine duties during the project |
| Documentation | Lasting recognition | Recording the participation in the student's skills transcript or in the employee's performance file |
Innovation programs tend to reward a single type of innovator: the person with a bold idea who presents it well. Kirton, however, showed that people differ in their style of creativity just as they differ in its level: some are adaptors, inclined to improve existing systems from within and with precision, while others are innovators, inclined to move beyond the existing framework and propose alternatives that differ from it (Kirton, 1976). An organization needs both styles: the first produces most of the incremental innovation on which operational efficiency depends, while the second opens up new possibilities. A culture that celebrates only one of them forfeits half its capacity.
The differences extend well beyond creative style. Some people think out loud and need dialogue, some need time alone before they share an idea, and some express an idea better through a prototype than through words. An enabling culture therefore needs flexible entry routes for ideas:
The value of these routes depends on all of them leading into the same system and being held to the same standards. Flexibility of entry means removing barriers unrelated to the quality of the idea, while the standards remain the same.
If people learn culture from what happens, then changing it runs through changing what happens. Schein identifies a set of primary mechanisms by which leaders embed culture, whether they intend to or not (Schein, 2010). Table 8.3 presents them, along with what people learn from each and an example from the university case we follow throughout the book.
| Mechanism | What people learn from it | Example from the university |
|---|---|---|
| What leaders pay attention to, measure and monitor | What really matters | If periodic reports ask only about exam pass rates, that is what professors will care about |
| Responses to incidents and crises | What is safe and what is risky | How the first experiment was treated when a professor changed the way a course was assessed and some students objected |
| Allocation of resources | What the priority is | Are hours or a budget allocated for developing courses through innovative projects, or does this remain voluntary effort? |
| Role modeling and teaching | What behavior is expected | Leaders who take part in judging student projects and ask about them |
| Allocation of rewards and status | What is valued | Does supervising students' innovative projects count toward promotion and the annual evaluation? |
| Recruitment, selection and promotion | Who succeeds here | Is the ability to teach creativity taken into account when selecting new professors and department heads? |
The table reveals why campaigns fail: they work with a single tool, rhetoric, while the six mechanisms pull in the opposite direction. The reverse route is slower and harder, but it is the only one that changes assumptions: leadership starts with one or two mechanisms that everyone can see, such as its response to the first intelligent failure, or counting the supervision of innovative projects toward promotion, and then keeps them consistent until people believe them.
Culture is what happens after the first failure, after the first objection, and after the first idea that comes from the most junior employee. These moments are more truthful than anything written about values.
With your team or a group of colleagues, recall the most recent incident of each type in the following table. Describe precisely what happened, without embellishment, then write down the message people took from it. Compare these messages with the values your organization espouses; the difference between them is the distance that culture change needs to cover. Then choose one incident and decide how you will respond to a similar one next time.
| Incident | What happened | The message people took away | The response we want |
|---|---|---|---|
| The most recent experiment that did not succeed | |||
| The most recent objection to a leadership decision | |||
| The most recent idea from a new employee or someone at a lower job level | |||
| The most recent mistake admitted by the person who made it | |||
| The most recent promotion or award |