Part 6 - When culture blocks the pivot: Innovation & Adaptability Risk

Part 6 in the Culture Risk Intelligence Series for Boards and Executives

“A leader needs to spend 40 to 50, to 60% of his or her time on innovation for the organisation to take innovation seriously … Leaders create the conditions for innovation to flourish. They need to create the right culture, the right guidance, the right incentives.” - Alex Osterwalder (Innovation thought leader & Author)

Many organisations want to be more innovative than they are. They set bold transformation targets, refresh their digital strategies, and talk openly about disruption. But culture often lags behind strategy and in that gap, innovation risks stalling.

This is where Innovation & Adaptability Risk emerges: when the prevailing culture resists change, punishes failure, and reinforces the status quo. In theory, innovation is a strategic priority. In practice, it’s inhibited by unspoken norms - risk-aversion, siloed behaviours, and legacy mindsets that still shape how people collaborate, decide, and learn.

And without cultural conditions that unlock customer centricity, enable experimentation, curiosity, and adaptability, even the most well-resourced innovation strategy can fail to deliver.

What is Innovation & Adaptability Risk

Innovation & Adaptability Risk arises when a rigid, siloed, or risk-averse culture constrains an organisation’s ability to adapt and evolve. It’s not about a lack of ideas - most companies don’t suffer from innovation starvation - more so a lack of permission, psychological safety, and cross-functional trust.

Organisations may talk about agility, but their behaviours tell a different story: leaders avoid uncertainty, collaboration is fragmented, and “safe-to-fail” experimentation is nowhere to be found.

Why It Matters

Adaptability isn’t a competitive advantage, it’s a survival trait. Organisations that can’t evolve fast enough risk falling behind, not just in product or service innovation, but in relevance.

When culture inhibits innovation:

• Risk is seen as something to avoid, not manage.
• People protect their patch instead of collaborating across silos.
• Failure is stigmatised, not mined for learning.
• Strategic shifts stall in middle layers due to cultural drag.

Without deliberate cultural enablement, transformation becomes a slide deck rather than a lived reality.

What It Looks Like in Practice

Innovation & Adaptability Risk often shows up subtly. Not in strategic plans, but in the behaviours and blockers beneath them:

• Cross-functional initiatives that lose momentum due to turf protection.
• Smart people self-censoring, reluctant to speak up with new ideas.
• Legacy leadership behaviours reinforcing “proven” methods.
• Projects that only receive support once success is proven, killing off early-stage experimentation.
• Change fatigue setting in because nothing seems to change meaningfully.

The culture doesn’t outright reject innovation, it simply doesn’t make room for it.

Why This Risk Is Rising

Several macro forces are increasing the pressure and the stakes for adaptability:

• Accelerated technological disruption, especially in AI, is reshaping industries faster than many cultures can pivot.
• Changing customer expectations demand quicker iteration and deeper responsiveness.
• Sustainability, ESG, and purpose-driven strategies are challenging traditional models, requiring new mindsets, not just new metrics.
• Hybrid work and digital collaboration demand new ways of thinking, leading, and working, many of which clash with deeply embedded norms.
• Boards and regulators are increasingly expecting that adaptability and innovation are actively governed, not just encouraged.

Put simply: the pace of external change now outstrips the pace of internal adaptation in many organisations and culture is often the lagging variable.

Questions for Board and Executive Consideration

• Does our culture support experimentation, learning from failure, and safe-to-fail testing?
• Are silos, geographies, hierarchies, or leadership behaviours inhibiting collaboration or agility?
• Are innovation and adaptability regularly tracked and reported as part of culture, risk, and strategy governance?
• Have we built the leadership and cultural capabilities to reinvent, not just improve?
• Are we investing enough? Not just in new ideas, but in the cultural conditions for those ideas to succeed?

Conclusion

Culture can be a source of creative energy or a quiet constraint.

When innovation stalls, many leaders look to funding, process, or strategy. But often, it’s culture that’s doing the quiet blocking. Not through loud rejection, but subtle signals: unchallenged norms, punished risk-taking, or reward systems that prize predictability over possibility.

Alex Osterwalder reminds us that culture doesn’t innovate - people do. And people only do so when the environment invites and enables it. Boards and Executives play a critical role here not in being the innovators themselves, but in creating the conditions where innovation can thrive.

In that sense, culture isn’t just a risk to manage. It’s a lever for performance or a brake on potential.