Creating a Culture for Innovation and Creativity to Thrive

Company culture is the driving force behind creativity and innovation. How do you build the right culture for creativity and innovation to thrive?

Key takeaways from this article

  • For creativity and innovation to thrive, organisational culture must support it
  • The focus on creativity and innovation must be organisation wide
  • The key factor in creating a culture of creativity and innovation is leadership behaviour
  • Innovation should be reinforced through organisational values, rewards, recognition - and allowing time to innovate.

Innovation is an essential element of survival

As competition intensifies and the pace of change accelerates, innovation and continuous improvement have become increasingly important factors of organisational performance and long-term survival4.

The generation of novel ideas to exploit should not be the exclusive role of senior management or research and development teams.  Organisations need to harness the collective knowledge, ideas and experience from all levels and all functions of the organisation. 

For creativity and innovation to thrive, however, the organisational culture must support it.  Leaders must engage in the right behaviours and the right structure and support mechanisms must be in place.

In this article we explore the factors that allow creativity and innovation to thrive and provide a research-based guide on fostering innovation in your organisation.

Exploratory Innovation vs Exploitative Innovation

There are two distinct types of innovation; exploitative innovation and exploratory innovation.  It is important to make the distinction between these two types of innovation, as the outcomes are very different.

Exploratory innovations

When people think of innovation, exploratory innovation is usually what they mean; game changing ideas that revolutionise the way we do things. 

Exploratory innovations are radical innovations and are designed to meet the needs of emerging customers or markets6,9. The result of exploratory innovation is new products and services that reshape markets or create new markets altogether (e.g. social media, online shopping and smart phones). 

But - despite their high profile - successful exploratory innovations are far less common-place than their less glamorous cousins...

Exploitative innovations

Exploitative innovations are incremental innovations designed to meet the needs of existing customers or markets6,9. They improve established designs, expand existing products and services, and increase efficiency of existing distribution channels1

Although not as glamorous as exploratory innovation, research shows that pursuing exploitative innovation increases an organisation’s financial performance, even in highly competitive environments4.    Bottom line; you don’t need to change the game in order to win. 

The operational levels of an organisation where employees know the customers and the realities of day-to-day operations are an ideal source of ideas for exploitative innovation.  Employees at all levels can contribute to efforts in a meaningful way. 

How leadership behaviour from managers can promote creativity & innovation

Leaders represent and reinforce the organisation’s culture and serve as an example for others to follow.  

For innovation to thrive in an organisation, its leaders must consistently engage in the supporting behaviours...

Mistake handling

The way in which leaders handle mistakes will determine whether employees feel safe to act creatively or innovatively10. When mistakes are ignored, covered up, or used to punish people, it sends a message that making mistakes is not ok.  Leaders need to treat mistakes and failures as a learning opportunity and create opportunities to openly discuss and learn from mistakes. 

Intelligent risk taking

Risk-taking and experimentation are essential to innovation.  If excessive controls are put in place to prevent employees trying new things, it will inhibit risk taking and consequently, creativity and innovation11.  This doesn’t mean that leaders should allow their employees to take silly risks – risk taking should be well thought through – but they must accept that all innovation carries the risk of failure and allow employees to experiment.

Open communication & Conflict management

It is essential for the generation of new ideas that employees feel they are safe to propose new ideas and solutions without being judged or criticised.  It is also essential that ideas can be openly discussed and debated, and a range of possible solutions explored3.  A good leader creates an environment in which opinions are shared and disagreements are handled constructively - promoting creativity and innovation10. 


Employee empowerment is positively related to the level of creativity and innovation in an organisation5.  Leaders should provide high-level guidelines to work within, but allow employees autonomy to make decisions and determine how they get work done within those guidelines.


If your managers need help exhibiting these behaviours, Leadership Success has a number of assessments which are designed to help identify leadership styles and skill-gaps for managers.

View Our Leadership Assessments

You can also learn more about leadership assessment tools and how they can help reveal areas for development in management



Does your company's vision focus innovation in the right areas?

Creativity and innovation in organisations begin with a shared vision statement that focuses on innovative behaviour8.  A simple example: “our organisation will innovate endlessly to create new and valuable products that delight our customers”. 

Employees need to understand the vision, and the gap between the current state (where you are) and the vision (where you want to be), in order to be able to act creatively and innovatively10.  This provides a clear focus for their innovative efforts.

Organisational values are also an important factor.  A strong organisational culture provides shared values that ensure that everyone in the organisation is on the same track13.  They set out the desired behaviours of all employees and tell them “the way we do things around here”...

Company culture: Fostering a shared approach to creativity and innovation

Rewarding the desired behaviours

If creative behaviour is rewarded it will become the dominant way of behaving5.  The issue is that organisations often encourage creative and innovative behaviour but incentivise employees to do the opposite. For example, encouraging risk-taking but incentivising people to produce fault-free work10.  Instead, employees should be rewarded for generating new ideas, risk-taking and experimentation.

Another mistake is choosing the wrong type of motivational lever to pull.  To drive innovative behaviour, the focus needs to be on intrinsic motivators (such as increased autonomy and opportunities for development) rather than extrinsic incentives (like a cash bonus).  Extrinsic incentives can be counterproductive and dull creativity7 because they focus attention on how to gain the reward, rather than how to best solve the problem.

For more information on types of incentive, check out our article Motivation – Strategies for better employee and team performance. 

Giving people the time to be creative and innovate

When problem solving, there are often lots of moving parts to consider.  It takes time to process complex things and put the pieces together.  Without adequate time to think things through, employees are less likely to generate creative solutions to problems.

Studies have shown that when employees are under significant time pressure, creative thinking can drop by almost half2.  What’s more, the drop in creative thinking can last for several days even after the time pressure is removed2.

To enhance creativity and innovation, where possible, employees should be allowed adequate time to generate ideas, experiment and solve problems.  Excessive time pressure will kill creativity.

References: Article is built on the following research

  1. Abernathy, W.J., K. Clark 1985. Mapping the Winds of Creative Destruction. Research Policy 14 3-22
  2. Amabile, T. M., Hadley, C. N., & Kramer, S. J. (2002). Creativity under the gun. Harvard Business Review, 80(8): 52– 61.
  3. Anderson, N., & West, M. A. (1998). Measuring climate for work group innovation: development and validation of the team climate inventory. Journal of Organizational Behavior, 19: 235-258.
  4. Anderson, N., Nik, K. P., & Zhou, J. (2014). Innovation and creativity in organizations: A state-of-the-science review, prospective commentary, and guiding framework. Journal of Management1297–1333.
  5. Arad, S., Hanson, M. A., & Schneider, R. J. (1997). A framework for the study of relationship between organizational characteristics and organizational innovation. Journal of Creative Behavior, 31, 42 – 59.
  6. Benner, M.J., M.L. Tushman. (2003). Exploitation, Exploration, and Process Management: The Productivity Dilemma Revisited. Academy of Management Review 28 238-256
  7. Byron, K., & Khazanchi, S. (2012). Rewards and creative performance: A meta-analytic test of theoretically derived hypotheses. Psychological Bulletin, 138, 809 – 830. doi:10.1037/a0027652
  8. Covey, S. R. (1993). Innovation at four levels. Executive Excellence, 10(9), 3-5.
  9. Danneels, E. (2002). The Dynamics of Product Innovation and Firm Competences. Strategic Management Journal 23 1095-1121
  10. C. Martins, F. Terblanche, (2003) "Building organisational culture that stimulates creativity and innovation", European Journal of Innovation Management, Vol. 6 Issue: 1, pp.64-74,
  11. Judge, W.Q., Fryxell, G.E., Dooley, R.S., (1997). The new task of R&D management: Creating goal-directed communities for innovation. California Management Review 39 (3), 72±85.
  12. Lundy, O. and Cowling, A. (1996), Strategic Human Resource Management, Routledge, London
  13. Robbins, S.P. (1996). Organizational Behaviour: Concepts, Controversies, Applications. 7th edition, Prentice-Hall, USA.