Building a sustainable culture of innovation to spur growth & profitability through transformative leadership

Agnes Wamburu is a Fellow of the Chartered Insurance Institute (FCII) and is a Doctoral Candidate (Doctor of Business Administration) at United States International University (USIU). She has previously held senior management positions in the insurance industry

“Innovation is an ongoing process that you build into your culture”

Tony Robbins.

Leadership is the ability of those in authority to influence others to deliver results by providing direction, motivation, support, and gaining the commitment of employees. Leadership is a group process as the leaders need followers in order to implement change. Leaders drive change by creating an environment that empowers others to act even as they take a central role and facilitate the change process. A fundamental principle of leadership is the ability to deliver organizational outcomes including competitive advantage, growth, profitability, and sustainability.

Transformative leadership is an ethically-based leadership model that focuses on optimizing the long-term interests of stakeholders guided by values and outcomes while at the sametime, honoring the moral duties that organizations owe their stakeholders. The core principles of transformative leadership include: acknowledging the impact of power and privilege; focusing on moral purpose as well as individual and collective advancement; deconstructing and reconstructing social-cultural knowledge frameworks; balancing critique and promise; implementing deep and equitable change and transformation; as well as demonstrating moral courage and activism. The aspect of deconstructing and reconstructing existing knowledge makes transformative leadership revolutionary and differentiates it from transformational leadership which is reform-minded.

Business growth and sustainability are today challenged by the uncertain, dynamic, and challenging conditions, including dealing with the impacts of the COVID-19 pandemic. Transformative leaders need to use reflection, creative enquiry, and creative collaboration in exploring and questioning their current realities as they construct new realities that will change, transform and renew their organizations in such a business environment. Transformational leaders can drive their organizational vision and mission guided by both moral and social responsibility as they facilitate organizational change and work collaboratively with others to move their organization’s from their current state to a desired future state.

Role of transformative leaders in creating a culture of innovation

Organizations and more so those in the insurance industry are faced with challenges from new competitors, new ways of thinking, new ways of working, technological advancement, globalization, and an ever more conscious, inquisitive, and knowledgeable customer which puts pressure on the need for change. What then is the role of transformative leaders in developing an innovation culture in their organizations that ultimately leads to business growth and sustainability? Leadership is a critical factor in developing an innovation culture within an organization. This is because leaders make decisions that drive the focus of the organization and can influence behavior. Therefore, leaders should align innovation to the overall business strategy, protect the right to innovate, question and experiment despite the risks and uncertainty that this poses. Their decisions and actions should communicate that innovation drives the profitability of the organization.

An organization’s human intellectual capital is a key resource that carries a rich and unique source of ideas, agility, and ability of an organization to innovate and respond to the changing environment. The key to building an innovation culture is leadership that encourages and supports employees to use their own intuition to generate new ideas. This can be done using brainstorming sessions, suggestion boxes, think tanks as well as opportunities for experimentation and learning within a safe environment. There is value in learning from what works and what does not work because the more a business experiments, the more efficient it becomes.

Resources that enable innovation need to be provided to employees including training that enables employees to identify innovation opportunities. Employees are also encouraged to share ideas and knowledge as this enables others to build on and strengthen such ideas. This should be guided by established metrics for exploring new ideas and learning. Transformative leaders create an environment that balances the needs of individuals, teams, and leadership and encourages teamwork, collaboration, and cooperation within their organizations. Transformative leaders act as facilitators while working with their teams to focus their energy and ideas towards collectively achieving challenging organizational goals.

Transformative leaders should communicate organizational objectives and goals as well as progress on goal achievement with the workforce. Leaders should recognize and value those who bring forth ideas as well as provide feedback to employees. Having a feedback mechanism shows that there is acknowledgment and review of all ideas both those that are implemented and those that are not, which fuels new idea generation. Innovation cannot be achieved alone as it requires a team to innovate and change a business. Therefore, leaders should encourage the harnessing of individual creative energy and initiative into achieving collective team goals. Leaders should also use reward and appreciation, whether intrinsic or extrinsic as a way of appreciating, generating, and embedding an innovation culture among the workforce.

Culture of innovation and organizational performance

Innovationreferstocreativitythatleadstotheimplementation of an idea for a positive change or value addition in the eyes of a consumer. Though innovation is considered risky and expensive, it leads to efficiencies and cost savings that make the business more competitive which ultimately, impacts business growth and performance. An organization can either adopt incremental innovation or sustaining innovation. Incremental innovation focuses on gradual enhancements leading to better, faster, and cheaper performance to the existing core business while sustaining innovation is evolutionary and disruptive as it focuses on reimagining what is possible and completely new ways of doing business. The choice of an innovation option is guided by the innovation strategy that is anchored to and aligned to the overall business strategy and risk appetite.

In the insurance industry, the business value chain can determine the type of innovation including configuration, the offering, and the experience. “Configuration” innovations are more internal to how the business operates which includes, the business model, people, and structure in terms of the way of working, internal business processes, and the collaborations or partnerships to create new opportunities. “Offering” innovations relate to solutions from the insurance industry including products and services and pricing. “Experience” innovations relate to interactions with customers including distribution, branding, and marketing as well as customer experience.

Consumers today are more digital and insurance customers’ expectations are shaped by their experience with other companies. COVID-19 drove the digital revolution in insurance inKenya especially with the adoption of mobile phone technology as a matter of necessity. This enabled payment of premiums, communication with customers, and seamless provision of products and services which has led to greater customer engagement. The high growth of mobile usage in Kenya, estimated at 60 million subscribers in 5 years from the current 40 million subscribers according to the Communication Authority of Kenya (CAK) offers an innovation channel for insurers to distribute their products and services to their customers. Some companies are also adopting Artificial Intelligence (AI) to improve their service delivery and collect customer data and feedback. This is because the key driver to change in the financial sector and the insurance industry specifically is innovation through new technologies or “InsurTech” that leads to immense efficiencies. Technological innovation lowers transaction costs and expedites service delivery, especially when dealing with intangible products like in the insurance industry.

An organization with a culture of innovation demonstrates energy, enthusiasm, taking responsibility, and initiative aimed at achieving strategic goals. In contrast, most organizations have a traditional culture that is either paternalistic, individualistic, or team-based. An organization with a culture of innovation calls for values, attitudes, beliefs, and ideas among members that shape individual and organizational behaviors that facilitate innovation. Further, an innovation culture requires a mindset of change and flexibility, encourages risk-taking and future market orientation as well as sharing of knowledge, skills, and capabilities among its members.

“An organization with a culture of innovation demonstrates energy, enthusiasm, taking responsibility, and initiative aimed at achieving strategic goals.”

Transformative leaders need to create a work environment that encourages creativity, continuous experimentation and learning. Organizations should build a shared value system that stimulates open communication, sharing of ideas and collaborative implementation of ideas. When an innovation culture permeates an organization, there is an effective use of organizational resources that contributes to sustainable innovation, competitive advantage, and organizational performance. Organizations with a culture of innovation are more flexible and adaptive which enables them to identify and respond to new opportunities with greater capacity.

Businesses are operating in an era of transformation that calls for transformative leaders who can deal with the complexity of reality and the reality of complexity. Further, transformative leaders in the 21st Century and beyond are challenged to develop new cultures that allow exploring new ventures while continuing to exploit existing business. This would allow them to remain innovative, competitive, and build sustainable businesses. Transformative leaders need to work on the premise that changing culture and more so to an innovation culture takes time and is essentially dependent on getting all employees involved in the process of innovation.

Innovation in the insurance industry has the potential to increase coverage including to the lower income bracket hence increasing penetration rates. Innovation is driven by the environment in that organizations operate in which calls for collaboration and partnership among industry players and with the government and policymakers. Considering the major role that government plays in innovation, there is a need to broaden, develop and implement regulations, policies, and systems that support innovation, provision of funding for research and development, and review of tax requirements to facilitate greater innovation capabilities. This should also address challenges that hinder the adoption of innovation which is a key driver for economic growth. Innovation will lead to the collection and storage of more granular and sensitive information from customers hence the need to address cyber security, data sharing, and data privacy. Regulators, therefore, need to move with the market changes in order to provide requisite legislation and policies in response to new ways of doing business.

Agnes Wamburu is a Fellow of the Chartered Insurance Institute (FCII) and is a Doctoral Candidate (Doctor of Business Administration) at United States International University (USIU). She has previously held senior management positions in the insurance industry

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