7 Strategies for Building a Thriving Culture of Innovation

Employers who prioritize a culture of innovation see more diversity and inclusion, increased revenue, and higher employee engagement.

What does it take to be innovative today? A massive budget? A high-tech team in Silicon Valley? A dedicated R&D department?

How about inclusion?

Workplace diversity and inclusion are not something many organizations think about when they’re looking to grow and adapt to changing market conditions. But a company’s culture of innovation is closely intertwined with its culture of inclusivity.

And that connection can have big results: Companies that get innovation right by inviting every employee into the process outperform their competitors and see five and a half times the revenue growth.

Why innovation is a strategic imperative

Innovation is essential to an organization’s long-term success. Without it, you run the risk of falling behind your competitors and failing to attract or retain top talent who are craving new skills and challenges.

When innovation becomes part of your company culture, everyone develops the muscle memory needed to pivot quickly, solve complex problems creatively, and maintain momentum even during periods of uncertainty.

Your culture also becomes a talent magnet. When people know their ideas matter, you attract the kind of employees who want to drive transformation rather than just maintain the status quo.

To learn how you can increase innovation and agility in your organization, download our Great Place To Work? Innovation Insights report.

What does a culture of innovation look like?

A culture of innovation is one that encourages questions, conversations, and new ideas — from everyone. An innovative culture is essential for any business to survive. However, successful innovation doesn’t necessarily come from putting money into R&D or from adopting the latest tech. Rather, it comes from emotionally connecting all employees to the company’s mission strategy.

“Innovation comes ultimately from a diversity of perspectives,” says Frans Johansson, CEO of The Medici Group. “When you combine ideas from different industries or different cultures, that’s when you have the best sense of developing ground-breaking ideas.”

Johansson is describing what we have known at Great Place To Work for 30 years — inclusive workplace practices are core to creating a culture of innovation. This proven philosophy is what we call Innovation By All — when leaders cultivate the intelligence, skills, and passion of everyone in the organization. Everybody creates, everybody is connected, and everybody contributes.

How to create an innovative culture in the workplace

In our ongoing annual research on the Fortune 100 Best Companies to Work For?, we’ve found seven practices that cultivate this inclusive, innovative workplace environment.

1. Give all types of space

Creating an environment that values all voices is the hallmark of leading companies. They make room for their employees’ complete identities — mental, emotional, and otherwise — fostering a psychologically safe workplace where creativity and risk-taking can thrive. This culture of inclusivity and empowerment allows fresh ideas to emerge, which drives the organization forward.

Psychologically safe companies also don’t shy away from failure. Rather than something to be avoided, failure is presented as a learning opportunity. For example, training sessions at Ryan LLC encourage failure tolerance and vulnerability, with leaders sharing their own stories of failure.

Giving space also means acknowledging employees’ lives outside of the workplace. If employees are worried about things happening outside of work, then they won’t be able to function at their best.

At 1-800 Contacts, this space includes financial wellness. The company recognizes that financial troubles can be a huge source of stress for employees. And financially stressed workers miss more work. 1-800 Contacts mitigates this stress by offering mortgage training, get-out-of-debt training, and essential financial advice — creating more mental space for employees.

2. Create energy by thanking all

Recognizing employees for their efforts, not just their outcomes, doesn’t dilute the idea. Instead, it acts as a fertilizer. It energizes individuals and the entire organization. And encourages people to keep contributing. The enthusiasm around trying to make things better is infectious and fun. And that is itself a catalyst for creativity.

Energy reverbs from the words of this survey comment from an employee at OC Tanner:

“This is a recognition and appreciation company. That’s our business, but we’re really good at it internally as well. The whole company sees it done all the time; it is not contrived or fake, it is real and sincere. This makes all of us want to step up our game and recognize great work when and wherever we see it. This makes people kinder and more controlled as we work together shoulder to shoulder. We try to treat people as people and not as objects to walk over. Everyone is more cooperative and respectful in this company. Everyone can feel valued.”

3. Cultivate diverse interactions

Top-tier organizations stand out by fostering an environment that encourages unlikely alliances, creating spaces for collaborations between individuals who might not otherwise interact.

When asked to pinpoint what makes their workplace special, an employee at Agilent Technologies highlighted the inclusivity and adaptability of their team:

“There is a strong sense that everyone’s voice matters within projects, despite titles or roles. The team has been quite open to being influenced by new and emerging trends and listening to innovative thinking.”

These diverse connections not only enrich the everyday work environment but also play a critical role during challenging times. Illustrating this, consider how Farmers Insurance CEO Jeff Dailey responded to a major crisis. He formed a cross-functional team comprising leaders from human resources, government affairs, internal and external communications, legal, and real estate teams to strategically manage the situation.

This example underscores the power of diversity in decision-making and problem-solving, reinforcing the fact that a broad spectrum of perspectives can lead to more comprehensive and effective strategies, even in the face of adversity.

Innovative companies also prioritize diversity and inclusion at the individual level. They recognize that when employees come to the table with diverse experiences, it can spur innovation and even boost revenue.

4. Invest in everyone’s growth

Lavishing resources only on employees who show “high potential” is misguided. It ignores the potential of others and can have unintended consequences. It often leads to feelings of frustration and favoritism.

But offering resources such as platforms for sharing ideas and allowing time for learning and ideation means everyone can have an equal chance to contribute.

For example, Stephen Howe, CEO at The Wonderful Company, says that senior executives often only see the wider problems a company faces, and not the ones within teams, where value can really be added.

As such, The Wonderful Company offers training and tools for frontline employees to directly solve the problems they encounter at work, and then recognizes the best projects globally with rewards like a trip to Hawaii.

The best leaders see the value of maximizing all human potential by training and developing every employee — including developing them outside of work.

At The Wonderful Company, this means going out into the communities where employees live. In one such community, Lost Hills, California, over 50% of households have a Wonderful employee. But the town was struggling.

“It was rundown, but it was filled with amazing people who just needed to be given a chance and an opportunity,” says Stephen.

The Wonderful Company interviewed residents to understand what the problems were and then invested in improvements that residents themselves suggested.

Efforts like this can help to fuel a culture of innovation by demonstrating that growth doesn’t just happen in the workplace but in all aspects of employees’ lives.

5. Democratize the idea generation process

Leading organizations leave no stone unturned. It’s not enough to put out a suggestion box. They make it simple for their people to generate ideas — and lots of them.

These companies go further by providing guidance for fleshing out a new concept. They adopt systems that allow peers to comment on and get behind promising proposals.

Texas Health Resources taps into the wisdom of employees regardless of their role. This egalitarian approach is possible with a dedicated communication tool. Used throughout the design process, the tool is called “Question & Resolve.” Employees can ask colleagues about designs until they reach a mutual understanding.

6. Inspire all with purpose

Our research shows that purposeful work and innovation are linked.

In many organizations, there is a downward trend in inspiration and the sense of purpose at work between the higher echelons of management and the lower ones. However, in companies that have cultivated a strong purpose-driven culture, leaders succeed in inspiring individuals across all tiers — from the C-suite executives to warehouse employees.

Consider the example of Playa Resorts & Hotels, where leadership not only espouses purpose but actively demonstrates it, trickling down to those on the front lines through community engagement activities.

Dayna Blank, senior vice president of human resources at Playa, recounts, “Our CEO doesn’t just talk about environmental responsibility, he practices it by cleaning the beach — donning gloves and picking up trash alongside all of us.”

Whenever Playa employees come together in different countries, they plan a community service where everyone participates, no matter who they are or what they do for the company, ensuring that meaningful work is felt at all levels.

7. Make space for experimentation

Innovation can’t happen when employees are too buried in their daily tasks to consider new ideas or ways of doing things. That’s why it’s important to allow time for experimentation.

This doesn't mean abandoning productivity or letting deadlines slip — it means building structured opportunities for creative thinking into the workday. That could be implementing innovation sprints or hackathons where teams step away from their routine work to brainstorm and test fresh approaches.

Employees at Atlassian have “ShipIt” days, a 24-hour hackathon when they get to collaborate with other teams and work on anything they’re inspired by or a problem they want to solve. Participants present their ideas via video, and then other participants evaluate them for rewards and prizes.

Innovation is not accidental — it’s strategic

By embracing diversity, enabling collaboration, and recognizing the potential of every team member, you can spark novel ideas. Foster psychological safety, and you’ll encourage bold risks.

Make idea-sharing simple. Help your team feel connected to a bigger purpose. That’s how you create a culture of innovation.

If you’re ready to build a fast-moving, idea-driven culture, try our employee engagement survey software — the same tool the Fortune 100 Best Companies rely on to make it happen.