What is Organizational Innovation?

Innovation may be essential these days, but what does that mean in the not-for-profit sector?

We arrived at our own working definition of innovation through our research and the work of our partner organizations in the field. It places innovation in the context of organizational change, and over the last several years our definition has achieved real traction in the field, being adopted by funders and becoming a reference point for arts and culture leaders.

Organizational innovations are instances of organizational change that:

  1. result from a shift in underlying organizational assumptions,
  2. are discontinuous from previous practice, and
  3. provide new pathways to creating public value.

The Roots of Innovation: A shift in underlying assumptions

Achieving organizational success over time means creating hypotheses about what is likely to succeed, acting on the basis of those hypotheses, and then reflecting on which ones turned out to be effective, and which did not. The latter are discarded, but the former become guidelines for repeated success. For instance, the idea that recruiting highly skilled artists to a theater company will help draw an audience frequently turns out to be true. By contrast, the idea that, with varied ticket prices, people from all walks of life will become the audience is not typically a reliable assumption.

Innovation Lab for the Performing Arts Participant: Dancewave (NY)

As the justified hypotheses go on leading to successful results, organizational leaders stop regarding them as theoretical, and assume they are reliable predictors of success. Over time, these assumptions no longer need to be discussed; they become taken for granted, the bedrock on which the company builds its business. So much so, that leaders often come to regard them as ‘universal truths,’ inviolable
and surely apparent to everyone. Questioning these assumptions can make leaders feel threatened:

“What do you mean, the technical brilliance of our musicians may make them less interesting to listen to?” “How can our shiny new venue create barriers to attendance for some people?”

Edgar Schein, Professor Emeritus at the MIT Sloan School of Management and ‘godfather’ of the study of organizational culture, notes the importance of questioning assumptions:

“Assumptions evolve as repeated successful solutions to problems. What was once a questionable hypothesis about how to proceed becomes a reality that is taken for granted. In order to innovate, organizations have to resurrect, examine, and then break the frame created by old assumptions.”

Every organization operates on the basis of some set of shared assumptions about why it exists, what its business is, and how it relates to the world. These assumptions act powerfully within every organization. They give rise to the culture of the organization, inform and limit its capacity for change, and explain much of its institutional behavior.

Times of great and rapid change, such as the arts and culture sector is experiencing now, demand that each organization re-examine the assumptions and beliefs that have led it to success in the past, in order to see if and where those assumptions may need to change—where they no longer reliably predict success. New hypotheses about success drive innovation and generate effective new strategies for these challenging times.

Business Unusual: A break from previous practice

The second part of our definition notes that innovation is not incremental change, nor a logical extension of ‘business-as-usual.’

Oakland Museum of California
James Irvine Foundation Arts Innovation Fund Grantee: Oakland Museum of California

Innovation takes an organization and its programs, down a new, previously unpredictable path—a path which turns out to be deeply linked to the organization’s purpose. For instance, varying ticket prices, up or down, to respond to economic and demographic changes is a logical step in extending
an organization’s business model. By contrast, changing the financial equation by moving an entire season from an expensive central performance space to a wide variety of community venues, in order to reach more people at lower cost, is innovative change in the making—a break from the past that changes the game.

The Ultimate Purpose: New pathways to public value

It is possible to develop new approaches that demonstrate a shift in assumptions and discontinuity
from past practices—but which are essentially change-for-change’s sake. The third part of the definition indicates that true innovations are not just novelties unrelated to an organization’s mission—and they are not merely variations on existing strategies.

The Cleveland Orchestra
Engaging the Future | Cleveland participant The Cleveland Orchestra (OH)

Innovation introduces an organization to alternative pathways of thinking and acting—ones never previously explored. Changes like this are always disruptive to some degree and, because they are initially unproven, they can mean high levels of uncertainty for extended periods. So why would an organization pursue this kind of path? The answer, in part, is that these types of change promise to have an unusually high impact on the organization’s ability to generate public value. Across the country, for instance, involving audiences in program planning, or having teens design youth programs, are proving to be powerful ways to achieve artistic engagement—but they would have been largely unthinkable just a decade ago.
