Inventing new and better products, technologies, and business models. Experimenting. Realizing smart breakthroughs. We all know that innovation is crucial to stay competitive in today’s business world. Much has been written on how to boost innovation, but do executive leaders pay enough attention to the one important aspect needed for new ideas to bear fruit: creating a culture of transparency and openness in which people dare to share successes as well as mistakes?

Here is what Tesla Motors CEO Elon Musk says about it:

‘Companies are often too conservative. They want to innovate, but create the wrong conditions, leading to stagnation. In many organizations, people do not dare to think big and take the necessary risks. If they fail, they get punished heavily, and lose their jobs or bonuses. This leads to risk averse behavior.’ (Elon Musk quoted in Dutch Managament Team Magazine, November 2013)

‘Companies are often too conservative. They want to innovate, but create the wrong conditions, leading to stagnation.’ – Elon Musk

Asked how he ensured his companies (Tesla Motors, Space X, Solar City) remained innovative, and what he would recommend to other people leading innovation, the 42-year old CEO explained:

‘My philosophy is: reward people who come up with daring ideas that work, and only ‘punish’ them lightly if they fail (…). But I expect my people to bring me the bad news immediately and clearly. Everybody makes mistakes, but somebody who doesn’t tell me about it, wants to solve things on his/her own and lets the situation spiral out of control: that person is in trouble.’

What can we take from Musk’s experience? When it comes to creating an environment where innovation thrives, what can leaders do to encourage that culture of transparency and openness?

1) Adjust your communication style to stimulate openness

There is a direct relationship between your communication style and the openness the other person will show. In this earlier article you find useful advice on which specific communication skills stimulate openness (the article refers to a situation with a cross-cultural team, but the communication tips are also applicable in other situations).

 2) Create an environment where people dare to make, and share mistakes and learning experiences

Read here specific tips on how to break through the fear of mistakes.

Musk’s advice made me think of something I read the other day: the story of explorer Henry Hudson’s first journey as a ship commander in 1607. Europe’s growth back then was running out of steam, much as it is today. The English Muscovy Company, dreaming of new horizons, hired Henry Hudson to find a northern trading route to Asia. Hudson, in for an adventure, tried something nobody had ever tried before. Instead of sailing northwest (via Canada) or northeast (around Russia), Hudson steered his 25-meter sailing ship straight up north, in the direction of the North Pole. Hudson and his crew of twelve (amongst which his own son John) battled their way through mist and ice. They lived off rotten bear meat, survived heavy storms and a head-on collision with a whale. Hudson’s first undertaking was, in the words of Russell Shorto who wrote about it in his book ‘The island at the center of the world’, ‘completely insane.’  As insane as some of the decisions Elon Musk took as he set out to build Tesla Motors (premium electric cars) and Space X (quickly reusable rocket technology that could be used to colonize other planets)? You tell me.

How did the Muscovy Company react when Hudson returned empty-handed, reporting that it had all been for nothing, that there was no passage via this route to be found?

Did they yell at Hudson for not living up to expectations?

Did they fire him?

Did they consider the trip to be a total loss?

Far from it! Hudson had seen numerous whales in the region (this opens up new hunting possibilities, they thought). One route could now be crossed of the list of possible passages to Asia (progress, they thought). The Muscovy Company listened to the details of Hudson’s stories, saw the trip as a success, and stimulated Hudson to have another go at it.

Henry Hudson, by the way, ended up discovering the fertile grounds that would become New York.