Turbocharge innovation through psychological safety. With Daniel Strode

Daniel Strode [00.00]

We know through academic research that those companies that do have psychological safety have far greater levels of engagement of happier employees, people who are retained by the company for longer periods and better profits. So we know that and we can evidence that. 

But the interesting example that I came across was in February 2021. I was sitting here where I am now in my home office and I was on the SpaceX website. SpaceX is a company that puts rockets into space and they were challenging the industry at the time. So they were the startup and the challengers fighting the big incumbents. So they had very small budgets, very intensive time periods. So they had a lot of constraints, which I mention as a factor for innovation and good cultures of innovation. 

And they were putting into space what they called the SN9 rocket. And they're a private company but I estimate these rockets to cost anywhere between $20-$45 million. And basically their competitive advantage is that they launch the rocket and they land it again upon re-entry to the atmosphere. 

And they were doing a live stream on their website and the chief engineer was doing the voiceover. So the rocket went up and the chief engineer explains, ‘okay, everything's going well. We're about to re-enter to the atmosphere now. Let's see if we can land.’ And so on, so forth. And he's explaining, live on this live stream, everything that's happening. And what happens when the rocket's about to land? It explodes. So 20 to 45 million dollars gone up in smoke. 

And obviously I love a good bit of schadenfreude and I said, well, maybe this is going to be interesting and the chief engineer's going to be a little bit upset and start swearing or start shouting over the live stream. And in fact, he did nothing of the kind. He said in a very calm way, ‘well, ladies and gentlemen, just to remind you, while we've had this failure upon landing, this was a test flight, we have a lot of good data to learn from. We're going to take the findings away and improve for the next time.’ 

And I said, wow, that's quite impressive that the guy manages to maintain his composure and at least externally gives such a positive message. And surprise, surprise, two months later they had figured out how to launch and land the SN9 rocket without explosion upon re-entry to the atmosphere. And now SpaceX is putting more tonnage into space every three months than the entire industry does in a year. 

So I think that was a good example of an environment where it was safe to fail and learn and safe to grow and develop.

Siân Harrington [02.46]

Hey, everyone. Welcome to Work's Not Working. The show about forward thinking people leaders, innovators and academics, and how they think we can fix work to make it more meaningful, healthy, inclusive and sustainable. Brought to you by The People Space. 

I'm Siân Harrington and on the show today Daniel Strode on why we need to develop more psychological safety in work to enable people to make mistakes, learn and grow without fear – and in the process drive innovation.

As we all know the pace of change in work – and society – today is relentless. And, as organizations, if we don’t change ourselves to keep up we won’t be in business for long. That’s why, says Dan, we need to innovate every day.

Key to innovation is psychological safety – a phrase coined by Harvard Business School professor Amy Edmondson who defines it in the context of a team as a shared belief that it’s OK to take risks, to express ideas and concerns, to speak up with questions and to admit mistakes — all without fear of negative consequences.

Perhaps becoming most famous via a study at Google that found psychological safety was by far the most important ingredient in its best teams, the concept was given more impetus during the pandemic, when organizations had to enact change fast and people needed to learn and adapt at speed, with all the tensions that brings. 

Later on we’ll find out why culture is the secret ingredient to driving innovation, we’ll discover the 8 principles related to culture that drive innovation and we’ll learn why we should all try brushing our teeth with the opposite hand we normally use.

But first, let me tell you about Dan. Dan brings an uncommon view to the culture table. He is a practitioner, as head of culture for Banco Santander – a 200,000 strong global bank – where he leads the global effort to implement a strong common culture across the whole workforce. For the past five years his culture work sees him cross 32 different countries globally, implementing “The Santander Way” and embedding the culture across a range of activities. 

Dan is also an academic, teaching at universities and business schools around the world including Madrid’s IE Business School in Spain, and Bologna Business School in Italy. His main topics of teaching focus on how to create cultures where innovation can thrive, how to lead in the digital era, and, how to give and receive world class feedback. 

And finally, he is an author and in 2023 released The Culture Advantage – Empowering your people to drive innovation published by Kogan Page. So I start by asking Dan about the role of culture in innovation.

Siân [05.25]

I'm delighted to be talking today to Daniel Strode about the connection between culture, innovation and a growth mindset and why work doesn't work if we don't develop the psychological safety to enable that growth mindset to be put into place.

Welcome Daniel. I’d like to get straight into our discussion as this is a subject that is of great interest to many people. 

So you argue in your book The Culture Advantage that culture is the number one factor when it comes to driving innovation in an organization regardless of the size of the business, the type of the business and so on. How did you come to that conclusion and why is it important to drive innovation in the first place?

Daniel  [06.03]

The reason I came to this conclusion was because I've studied companies in different industries across the world, different sizes, and the truth is a strategy and a business strategy is something that can quite easily be copied. But what you can't tend to copy is you can't copy the execution of that strategy, which is driven by the people and the environment that you have, which is the culture.

And, before I got working in culture, I was working in corporate strategy so I have the view from both of these worlds, and that's kind of what piqued my interest. It was always interesting to me that you could go and change the price of a mortgage on a Thursday in an executive committee and on a Friday you would know the outcomes because you've done financial modeling. But when you wanted to change the behavior of a company or the way of thinking, that was something that took much longer and was much more difficult. And that's why I got interested in the culture. 

But why is culture and innovation important within companies? Well, you've probably seen the latest news about artificial intelligence coming to take all the jobs and so on and so forth. It's interesting to me because we're in this Fourth Industrial Revolution now where virtual reality, augmented reality, artificial intelligence, the Internet of Things, 5G, robotics, all these technologies are happening at the same time, which means the pace of change companies and consumers are experiencing is absolutely exponential.

And I think back to the steam engine. I wasn't born at the time, of course, but the steam engine, the internet, the first web 1.0 – all of those technologies changed our world. But they were one technology at a time. Because our world is now being changed by five or six major technologies at the same time that pace is so high. 

And I know you had Josh Bersin on the other week. Well, him and I say a very same thing about the S&P 500 companies. The fact that companies used to live longer than humans and now companies live, well, just as long as a teenager would live is quite a shocking statistic. And it means if we are not changing we're probably not going to be in business, and that's why we have to innovate every day.

Siân [08.15]

It's interesting you bring that statistic up because it's still something that people haven't quite got their head round I think. And, when we're talking about this change, and we're going to explore this a bit as we go on, but this change is both in terms of the organization but also as us, as people, changing our own mindsets, our own skills - the lifelong learning piece. But, but before we go into that, just keeping with the culture, quickly, how would you define culture?

Daniel [08.40]

So for me it's the way we do things around here when no one is looking. And I say the ‘when no one is looking’ is quite an important part because actually I tend to think you cannot trick culture or gain culture for your advantage because you want to win. You have to do it because you're coming from the right position, the right place. You have your intentions in the right place. So yeah, that's how I see culture. 

And the interesting thing is, I explored the word and it actually comes from the Latin word cultus, which means to care. So also when I think about culture, I think about caring for our people. And that might be our people in the company but it might also be our people as in the shareholders we have, it might be the communities we operate in, and it might be the customers that we serve as well. So caring about all of our stakeholders.

Siân [09.31]

Great. And in your book, The Culture Advantage, you talk about eight consistent principles that are behind having a culture of innovation. We haven't got forever so could you quickly run through those very briefly and then I'll pick up on one or two of them? 

Daniel [09.45]

Absolutely. Let me see if I do each one in 20 seconds or so, and let's see if I remember the eight as well! 

So the interesting thing was, it is trueI wrote the book having researched and visited and seen many companies, and these eight principles all came out as very consistent principles when it came to culture.

The first was about rethinking your business model. So companies that are being successful are pushing the boundaries of their business. They're thinking that they're going to do business in a new way. So that's the first principle. 

The second was creating creativity with constraints. I noticed that successful companies were innovating by putting constraints upon their innovation process, so less money, less resources, shorter time spans, instead of being like Nokia who had all of the money in the world and all of the time in the world and couldn't innovate their products because there was no constraint, there was no burning platform.

The third is around having a growth mindset, and this goes for companies as well as individuals. So really trying to learn new things every day. Trying to have new experiences, not being afraid of failure, those kind of things. 

The fourth principle that I have in the book is using the wisdom of crowds. So using the communities that you have available, be that your staff or your customers or your society that you operate in, really using them to help you create new ideas and come up with solutions. 

The fifth is about embracing technology, which is very important. Strange as it seems I noticed that many companies run away from technology to their detriment and they get nervous about implementing and trying new things.

And then the final few principles were around hiring well, so making sure you're hiring for people who add value to your culture not align with your culture and look the same because you want diversity of opinion, diversity of thought. So that's very important. 

And then putting your people first is very important as well. And that's the seventh principle. So a company is only ever as strong as the employees it has how you treat them and the environment you give them is critical. 

And then the final principle was leaders must participate in culture. And this is probably the biggest failure I see when it comes to company culture. I see leaders outsource culture to human resources or marketing or chief of staff functions. And when you do that, it means you don't understand the value that culture brings and your efforts, unfortunately, are doomed to failure.

Siân [12.15]

It's the old value statement on somebody's wall, isn't it, but it’s the actual behavior day-to-day. And I like your point particularly about how it's when people aren't looking at you, that's really the key to it all. 

So one of the things you mentioned there was growth mindset and I think that's a very interesting thing to focus on given that we've got such a speed of change, as you mentioned earlier, with all the new technologies, the Fourth Industrial Revolution. Why in particular is that important? Could you just expand a bit on what a growth mindset is for people who may not know? 

Daniel [12.50]

Absolutely. So growth mindset was a term coined or made popular by Dr Carol Dweck from the university in the US and she wrote a book called Mindset, which is probably the book I promote or would encourage every business leader to read because she sets out that there's two types of people and inherently two types of companies – those who have a growth mindset and those who have a fixed mindset.

And if you look at individuals who have a growth mindset, they're typically people who believe that they can change the skills and the talents that they have rhrough hard work, dedication, effort, learning, those kind of attributes. And they value having new experiences and new opportunities because they know that this is an opportunity to grow even if they fail and don't succeed at that first attempt.

When you compare growth mindset to fixed mindset you have individuals or companies who believe the opposite of growth mindset, which is to say they think things cannot change. They think that their skills are innate, God-given and fixed. And no matter how much effort they put to something, the results will be more or less the same.

So with that fixed mindset, you tend to spend more time maintaining the status quo, arguing not to change certain things, and fighting against that position of change and resistance towards change. And of course, to me it's fairly obvious that when you have these two different types of mindsets, the consequence can be radically different for a company.

Siân [14.30]

Can we change from a fixed to a growth mindset? Some people might naturally just be more curious and want to keep learning, but one, can we change from it, and then two, how do we do that? What sort of conditions need to be in place? How much is it is us as people and how much of it is the organizational system around us? 

Daniel [14.50]

Yeah, so the good news is you can absolutely learn or teach a growth mindset and that's really, an encouraging thing for individuals, us as individuals and companies as a whole. But the question is how do you teach that growth mindset? What is the environment that you need? And it's very clear to me in the research that you need what is called psychological safety.

Now, I'm sure you know this concept very well but let me explain it in any case. Psychological safety is when you have an environment that is safe for employees to do their work, customers to give their contribution, whatever that might be, you have an environment which is safe and there is no fear or failure or reprisal to your actions. And it’s quite hard to build one of these psychologically safe environments. 

But let me explain what happens when you have it and when you don't have it. So when you have this psychologically safe environment, you have people who are willing to take risk, people who want to participate in initiatives, work with colleagues in a collaborative way.

Typically what you see is people are also happy coming to work because it's a good positive environment where you can develop, And people tend to work as teams. So when you work as teams, you can achieve more of course. 

When you don't have psychological safety you typically go into an environment where you are punished for speaking up, where there's a fear of failure. When you take a risk and it doesn't work out, you have a negative consequence assigned to that. And typically in those kind of environments people don't participate. They're not willing to come into work happy, they're not willing to collaborate. They spend more time covering their backs and checking the boxes rather than trying new things. And, again, it's a completely chalk and cheese example or scenario of when there is psychological safety. The question is how do you manifest psychological safety in the day-to-day?

Siân [16.48]

What you've talked about is exactly what it feels like as an employee, as a worker, going in somewhere. And I think that there's a lot of good evidence, as you said, to support how that will help people individually to be able to speak out, be more creative, innovative but it's not that easy to create the environment for this.

So how can organizations do that? What do they do in a day-to-day way in terms of processes, systems, culture, to enable it? 

Daniel [17.16]

There's probably four things on the top of my mind when it comes to what can you tangibly do? And the first is when you are a leader you have to change your leadership style from the way that probably made you successful historically to what people expect now. 

And what I mean by this is one of the interesting things leaders can do is not rush to give advice to employees. This is one of the traps that I've noticed happening most commonly around the world in companies. Basically the role of a leader has always been to give the answers to the employees to have the solution straight away, but that doesn't create psychological safety. It creates a get-out-of-jail-free card for the employee. Oh, I just need to rush to my manager, tell them the problem, and they'll give me the solution. That's not really an environment where you can grow and develop. So not rushing to give advice and coming up with solutions is the first thing. 

But then leaders can do many subtle things as well. So they can celebrate courageous conversations. And what I mean by this is imagine a leader who comes onto the stage and talks about a time where they had a failure in their career and they learn something from it. That's quite a courageous conversation, and the more we can have those conversations and celebrate them, the stronger the company will be in regards to psychological safety.

The third and fourth things leaders can do is probably what I would say is remove ambiguity mismatches and threats and clarify expectations with the employees. Now, when you do both of those things, you tend to build psychological safety because you can say things like, ‘well, my expectation of you is that you innovate and you try something new. By the way, if you fail along that process, don't worry, there's nothing negative going to happen to you. We are going to learn as a company and improve the next time.’

 And to me, that's really an example of someone who said, okay, the expectation is you try something and there is no threat at the back of it if you fail. When you have a leader saying that in giving those messages, but then also importantly doing it and following through, I think you slowly build that psychological safety and that comfort level within the organization as well.

Siân [19.36]

How do you balance it with a more maybe negative side? I saw some research recently about some of the downsides maybe of this type of environment, particularly in terms of productivity. Have you come across anything there, particularly with the speed of changes we mentioned earlier. The balance between the two, the checks and balances, is really important. How can we do that? 

Daniel [20.00]

Yeah, I think this is the challenge that companies are grappling with at the moment. How to appropriately have this level of balance where you trade off the failures and the learnings and the speed of delivery and execution. 

And the general feeling that I'm getting from the market is that companies are focused and should be focused on reducing bureaucracy and layers within organizations. So, for example, you're developing a new product, how many approvals do you need to go through in order to have that product signed off and come to market? And is it just a case of one person out of a 100 saying no and the product's never seeing the light of day? And I think if we work on that from a process perspective that can help us.

Because what you don't want to do is you don't want people just to be doing failure after failure and the company doesn't progress at all. So we have to learn from those failures and institute perhaps what can be called this continuous review system where we talk and we share those experiences openly, so we learn as a collective instead of everyone failing in the same way, time and time again.

Siân [21.10]

Have you personally ever worked anywhere that you think hasn't had this sort of psychological safety or, in your research for your book, did you come across examples of people who felt that and what was the impact? What did it feel like to them, and what was the impact of the business, do you think? 

Daniel [21.26]

One of the biggest takeaways I have on this is when it comes to meetings. We spend unbelievable amounts, proportions of our life, in meetings – most of them without a clear agenda, a clear purpose, and too many people in the room. 

And one of the biggest traps that people are falling into, and I've experienced it myself, is one of these behavioral biases around speaking up. And you've probably heard of the term ‘sunflower bias’, but basically this is a bias where the most senior person in the room says something and everybody else nods their heads in agreement or alignment with what they've said. 

And that's terribly debilitating for a company because the company then has less good ideas surfacing, less innovation surfacing, and no challenge to different ideas or different perspectives. And as an individual I feel, and people feel, that they haven't had the chance to speak up and their voice wasn't accounted for. And of course that makes you feel disengaged with the company. 

And actually, one of the things I started to do, and I've seen and encourage others to do, is combat this by having the most junior person in a meeting go first. When the most junior person in the meeting goes first, their voice is respected and you can capture it and record it. And that challenges the sunflower bias. So there are always these tips and hints and tricks that we can try to deploy that don't cost anything but they just require us to be a little bit mindful perhaps.

Siân [23.00]

What's your feeling on how many organizations, what sort of percentage, have really developed this culture of psychological safety? Why is it so hard to do? What isn't working about it?

Daniel [23.12]

There's definitely far fewer companies who've cracked this nut – and it's a tough nut to crack indeed. And I think it's because when we've gone through school our mindset has always been to be correct and to be right. Every school around the world is absolutely focused upon examinations and, in an exam, you are either right or wrong. There's not normally any grey area in between. 

Because of that mindset, and that mindset which has come from the Industrial Revolution initially, we've been building companies not to take risks. We've been building governance systems to protect us. We've been building bureaucracy to slow us down. All those kind of things to protect us against taking risks.

So for companies now to change that behavior and mindset because they need to and they need to innovate is a cultural change that will take a number of years for most of them to do – if they do it successfully, of course, which is easier said than done.

Siân [24.12]

Putting your HR and culture hat on, is there anything in that side of the business, are any processes that are typically in place in organizations, that are actually helping people get a growth mindset? Or the detriment – are actually, getting in the way of people having this growth mindset?

Daniel [24.30]

Yeah, I think it's probably around feedback in companies – and I think human resources teams have a very big role when it comes to feedback. You need two things in order to have good feedback. 

So the first thing you need is a clear and actionable structure. So you need to enable employees to give and receive feedback with a good structure. 

A structure that's good is typically evidence-based. It comes with good intent so people are saying things for the right reasons. It's typically future focused so I'm talking about how we can improve as individuals. And it doesn't necessarily have to be feedback focused on the negative aspect of things only. So we should encourage people to go from good to great as well. And typically I can see us sending messages in that regard and doing okay with our communications and change management efforts. 

But the second element, which companies are typically falling foul love at the moment, is creating what I call a cultural climate. So a culture where you can give and receive feedback. And typically what this means is companies or HR functions need to do a few things. 

They need to enable multi-directional feedback, so feedback that isn't just top down or bottom up but in all directions. This is very, very important because everybody should have an equal voice and an equal opportunity to improve things in the company irrespective of level.

The second thing I think HR functions need to be focused on is, of course, doing the digital transformation and having digital tools for feedback. And that might be a mobile app where you can give and receive feedback but also promoting that cultural climate where people can do face-to-face feedback. That's critical. And typically we think our job is done when we implement a mobile app but actually it's not done at all. And we need to foster that face-to-face aspect. 

And what I would say is the final elements companies need to figure out is how do you give and receive feedback in a timely manner? And how do you also do that where it's fully embedded in the business. So it's not just happening in a small pocket. It's not just happening within your IT teams. It's happening everywhere. 

And, again, with culture, as you do these actions, you have that kind of flywheel and things start to grow and start to improve. But you need to attack all of these at the same time, otherwise it's very hard to get that momentum. 

So definitely focus on having a good, a clear and actionable structure, but also building a cultural climate as well, where you can give and receive feedback, again with a growth mindset without fear of failure or negative aspects being associated to it. 

Siân [27.24]

Yeah. and I guess in that cultural climate, that whole listening piece, being really able to listen in terms of that feedback, it's not always the most comfortable thing, is it? That's one of the reasons we have difficulty with it.

Daniel [27.36]

Absolutely people. People don't like this.

Siân [27.41]

Yeah. and do you find that trying to enable managers, in particular, who are on that frontline, often in that position of doing that feedback and doing the listening, the face-to-face, that's a key part of this?

Daniel   [27.53]

Definitely, and this is why I like to give them a structure and encourage them to go into conversations with a structure because we have to make the conversations more comfortable for everyone. If we give managers the chance to not have a conversation that's difficult, or have a conversation that's difficult, we know what humans are going to take. They're going to take the easy route. No one is going to put themselves in an uncomfortable situation. So having that structure and that pattern and that routine is also useful, I think. 

But it always comes down to the number one tip and tactic for changing culture within a company, which is leaders actually leading by example. We can't expect people to have these types of conversations if our leaders are not doing that. If the chief executive and the board of directors are not having those conversations themselves, then no one else will.

Siân [28.47]

So, we're coming towards the end but if I'm listening to this, and as an individual I think, maybe I'm a little bit set in my ways, I do need to have more of a growth mindset – what's the one top tip to me as an individual to start thinking about, developing my mindset this way? 

Daniel [29.06]

I guess, you may laugh at this, but as I say you can learn a growth mindset. So what I would say to any listener today is try something new. And I'll tell you what new thing to try, brush your teeth with the opposite hand that you normally use. So if you're right-handed, brush your teeth tonight with your left hand.

And what you will do by doing this is you slowly rewire the brain. You change the messages that you're sending to your brain basically. You share and you experience that you can do new things. You can do things in a different way. And the brain is like a muscle. A growth mindset is like a muscle. The more you practice, the better you get at it.

So start with these small things. Do these strange things like brushing your teeth with the backwards hand and you'll start to see an improvement there. And then, of course, you can start thinking about your topics that you want to learn or develop new skills on.

Siân [30.00]

Yeah, I'm already imagining that because I'm useless with my left hand whenever I'm doing something. So that's a good tip. And what about from your own experience, your own career, can you think of an example where you might have done something a bit differently if you'd come to it from this type of mindset?

Daniel [30.15]

Definitely. Many years ago now, I've taken the decision to change countries, change languages, put myself into a different part of the business. I actually came to human resources with no human resources experience. I came to Spain with not one word of Spanish. And that was a big change for me. A change which has been wonderful in my career, made me learn lots of new things. 

And my reflection from that is basically put yourself into more new situations. Try to say no much less and say yes much more. Because the upside that you have when you go into new situations and you say yes far outweighs the negative consequences of saying no.

So just be brave and be willing to try new things, I would say. And if I had have done that right at day one of my career, then of course I would be in a different place as well as would everyone. But it's something to reflect on and I often spend time thinking about that.

Siân  [31.14]

Yeah. I think also knowing to say yes to the right things so that you don't get too overwhelmed by saying yes to everything. So knowing the right thing to say no to and the right thing to say yes to will really help that. 

So to end with. Let’s talk about some practicalities for organizations. So if they're looking at improving psychological safety and they want to make work work better in this particular subject, what are the first three steps you think they should take?

Daniel [31.42]

The first thing on my mind is to say I would recommend that companies implement a structured model for giving and receiving feedback, as well as working on the cultural climate. I think that's something that you can do quite quickly. You can go online and find a feedback model that you align with and go and publish that.

But then the second thing to do to really reinforce this is to create what I would say is a safe space for open and regular debate. And that might be your management team holding a town hall meeting where they do live Q&A or other variations of that topic. But definitely having a space where people can have open debate in real time and on a regular basis is important.

And then the third thing I would do, and this is one that I find really interesting, is I would take five of your best leaders and I would study them and I would say, what common traits or attributes are they displaying? And maybe we need to take those, learn from them and replicate them across the organization. Maybe they should be our leadership behaviors, for example. 

Because I'm a firm believer that success leaves clues, and the more we can look to our role models and learn from them, the better we are going to be as a company.

Siân [33.00]

That was Daniel Strode on why we need to improve psychological safety to create the circumstances for innovation in our organizations.

As he notes, there are plenty of examples of companies failing thanks to ego, fear and sunk cost fallacy whereby people factor in their previous decisions into their future ones because they have invested so much time and resource into them. 

In his book he talks about those companies who have achieved an innovation advantage and I particularly like the example of Chinese conglomerate Ping An – which has financial services, healthcare and smart homes and cities among its interests. It has consistently enacted elements that fit all eight of Dan’s culture of innovation principles. It’s a fascinating organization and I’ll highlight just one example, which is rethinking the business model. 

Ping An was the dominant force in insurance and could have rested on its laurels. Instead in 2013 it partnered with its two largest rivals – Alibaba and Tencent – to form China’s first fully online insurance company. Rivals became partners but at the same time Ping An’s existing insurance business was cannibalised. A brave move that could only have been done with huge vision and appetite for risk. The result? Today this company is an insurance giant in its own right with more than 500 million customers. And Ping An itself is ranked as one of the World’s top 500 Most Valuable Brands.

So for now, thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. Follow me on LinkedIn at Sian Harrington The People Space. And if you want more insights and resources on the future of work, check out thepeoplespace.com. 

This episode was produced by Nigel Pritchard and You’ve been listening to Work’s Not Working… Let’s Fix It! Goodbye