Culture, Not Location, Drives Innovation

Culture, trust, and incentives matter more than whether or not your employees are working from home........

In one of those "what were they thinking" headslappers, IBM has mandated that everyone who works for IBM must report to an office. I'm old enough (it was only a decade ago) to remember when IBM told almost all of their employees here in Raleigh, NC to work from home--even those who didn't want to do so. Telecommuting was going to free up time. Further, IBM would save money by reducing the amount of office space it needed.

IBM isn't the only company to require people to return to the office. Yahoo! did so as well, as one of Melissa Mayer's more controversial acts as CEO.

She rather forcefully required all Yahoo employees to work from an office. Both IBM and Yahoo! stipulated that bringing people back into the office would ensure more productivity, more interaction and more innovation. Having a critical mass in one location would lead to serendipitous meetings which would lead to more innovation. This raises an important question for innovators and entrepreneurs--how important is it to have all of your employees in one physical location, especially if you want a lot of innovation?

Failing to understand innovation drivers

I'm afraid our friends at Yahoo! and IBM don't understand the real innovation drivers. It's true that people interacting in interesting and serendipitous ways may generate more ideas. To take this to an extreme, people will be more creative and more innovative in all sorts of unexpected, unusual and serendipitous interactions. But you don't see IBM sending its teams to interact with more customers, or traveling to other countries to interact with more people.

Interaction and social engagement MAY lead to more ideas, but that wellspring of ideas is predicated on a culture that encourages innovation. I can create thousands of planned and incidental interactions but they won't necessarily lead to more or better ideas. I also need to increase incentives for creative thinking, reduce concerns about risk and free up funding and time to explore and experiment. In fact I think we can safely say that creating more interactions without changing corporate culture may simply turn more people off more quickly.

Lessons for startups and small companies

IBM and Yahoo! want the right outcomes, but are focusing on the wrong attributes. You can have a highly innovative company that is completely distributed, as long as you build trust, sustain great communications, encourage idea flow and reward the right actions and outcomes. Conversely, you can build a tightly knit team where everyone works in one open plan office that cannot innovate, because they don't have the right cultural imperatives.

For some startups and smaller firms it may be necessarily to have a distributed team. You may have designers in one location, "back office" in another location and developers in a third location. Sometimes communicating with this distribution can be challenging, especially if the team members are operating in significantly distributed time zones. But if you have shared goals, good incentives, and the right people with enough passion, you can easily innovate as a distributed team. If all of those factors are true with a co-located team, it's even easier to innovate, but location and centrality alone won't make a team more creative.

Correct, but incomplete

So, we can say that IBM and Yahoo! were correct in their assumptions that co-location can drive more innovation, but their thinking and rationales were incomplete. If all they do is force people back into offices, but don't make changes to culture, incentives, communication and trust, there won't be more innovation. Co-location can be an innovation accelerator for any company, large or small, but only when the other environmental conditions are in place.