The innovation risk vs reward dilema


Innovation risk

Risk and innovation are natural bedfellows, as innovation is by its very nature something of a leap into the unknown. You’re doing something new and different, and the outcomes are far from guaranteed. It’s perhaps not surprising therefore that many organisations view ‘attitude to risk’ as a major barrier to innovation.

I recently flicked back through several reports from a few years ago to compare the numbers on innovation risk and the Boston Consulting ‘most innovative companies 2015’ report found that 31% of global innovation executives believed that a risk averse culture was the biggest obstacle to generating a return on investments in innovation/product development. [1] KPMG’s Global CEO Outlook 2015 [2] also suggested that 58% of Global CEOs were unlikely to back high potential but risky ideas. Figures that aren’t much different when you read some of the latest reports, so what’s going wrong?

The truth is that in far too many instances, organisations are so busy minimising the threat of risk that they forget to take that second vital step and maximise potential. It’s no wonder that areas such as health & safety get such a bad name; when the focus is on what can’t be done rather than looking at what can be achieved by taking a different approach and working out the most creative route to success.

So how can we start to get a healthier approach to risk that balances a need to avoid stasis (and the inherent risks involved in doing nothing), with the inherent risks involved in better the farm and getting things wrong?  Sadly, with something as complex as innovation, there isn’t a simple recipe for success you can follow to achieve this healthy equilibrium, but there are a few broad heuristics that will stand you in good stead.

Starting at the top

As with most things associated with organisational culture, things have to start at the top. How do you and your executive team assess risk? Are you familiar with not only the risks associated with innovating, but also with those associated with not innovating? Here we are talking about not simply the strategy to build a culture of innovation but also a deep understanding of, and willingness to engage in the activities that deliver truly innovative outcomes. That includes being prepared to use risk and risk mitigation techniques in order to develop potentially innovative solutions. There is absolutely no point in an organisation trying to be innovative if the leadership team are holding back; unwilling to commit funds towards a ‘what if’ project, or being reluctant to encourage greater collaboration in case it diminishes authority or reduces productivity.

As such, if executives want to lead innovative organisations, they themselves have to become familiar, and comfortable with the risks that are a natural part of innovation. It’s a mental challenge that has been covered extensively by Dr Max Mckeown in his book ‘#NOW: The Surprising Truth About the Power of Now’ [3] where he talks about ‘Nowist’ and ‘Thenist’ mindsets. Those with a nowist mindset have ‘a way of thinking that helps bring about effortless action’ making effortless, rapid or fast decisions driven by an ‘emotional superpower that helps maintain forward momentum.’ A nowist mindset is therefore one that will support rather than hinder your attempts at innovation.

By contrast, he outlines that when in a more ‘thenist’ mindset, leaders get stuck worrying about, or regretting, the gaps between what really happened and what they wish had happened. And that the same thing happens when considering the future in terms of seeing possible connections, but finding it difficult to make those connections work or too hard to imagine. It’s only a short step from there to a downward spiral of passivity which is then commonly recognized in thoughts such as ‘No idea how things turned out this way’ or ‘Not a clue where to go from here’.

A classic example being in 2013 when Nokia announced it was being acquired by Microsoft. At the subsequent press conference, then outgoing CEO Stephen Elop, a man that up to then had shown true innovation leadership, delivered a tearful speech saying, “we didn’t do anything wrong, but somehow, we lost”.

Whilst the executive team are key actors in the development of an innovative culture, it’s crucial that the right mindset isn’t confined to the boardroom. It’s time therefore to look at the culture, to promote beliefs, behaviours, attitudes and the mindset required to drive a more innovation-led way of working. Look around and find your intrapreneurs, those individuals who sit within the organisation who are comfortable with navigating uncertainty and exploring new terrain. Some will also be innovation champions or ‘i-agents’ as I call them. Others will be more comfortable working alongside i-agents and leadership teams to leverage strategy and structure in order to deliver change, differentiation and competitive advantage.

And when it comes to structure, don’t be afraid to revisit and reshape it for the future. Get rid of silos, think about whether a venture capital or dual operating system may be preferable, open the business up to external collaborations and draw customers and others in to the mix.

Whatever path you choose though, keep risk in mind; not the sort of ‘cavalier’ unconsidered risk or risk that paralyses action but the sort of managed and understood risk that opens up thinking, learning and opportunities and more importantly, delivers results. It’s what I’ve come to call ‘smart’ risk.

Properly understood, risk can be energising and invigorating, helping businesses to move forward, to seek out new territories and to make bold decisions. This then is the true destiny for innovation on the risk/reward matrix; managing risk and delivering rewards which come from the ability to step away from the everyday and create great, even world-changing, future-shaping solutions.

[1] https://www.bcgperspectives.com/most-innovative-companies-2015/
[2] https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/ceo-outlook/Documents/global-ceo-outlook-2015-v2.pdf
[3] https://www.amazon.com/NOW-Surprising-Truth-About-Power-ebook/dp/B01HBF22N4?ie=UTF8&ref_=asap_bc
This article was written by Cris Beswick for The Future Shapers and previously posted on 08/02/2018.

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