For me, there is never enough talked about innovation risk. Innovation is held back so often because the quantification of it’s risk cannot fit into an organization’s current assessment and measurements of risk.
Innovation is often too intangible, full of unknowns as the very nature of anything new and different. Innovation risk leaves many executives very uncomfortable.
Organizations get uncomfortable when the words “radical” “intangible”, “unknowns” and other words like these when they form part of the conversation. It often starts to induce that “risk twitch” where that careful management for short-term performance might become threatened, or the manager feels any decision is ‘going out on a limb’ and possibly career threatening.
That growing uncomfortable feeling that innovation places their bonus at “risk” so they like to ring-fence innovation as much as possible. Now some of that ring-fencing is fine, you contain a risk to keep it manageable but most innovation does not constitute organization risk, yet it gets caught up in that risky fear that innovation seems to induce. Actually, if we were managing innovation at the core, our risk management for it would be very heightened and managed differently, but how many of our companies’ have innovation as their core?
So I always welcome discussion on risk and innovation. The more we talk about it the better for what is coming towards us. Continue reading →
I believe we need a new way to manage risk within our innovation activities. It needs to be treated differently from the general ‘risk management’ criteria applied within our business organizations.
In a three-part series,part one outlined the implicit need to align innovation to the corporate strategy and through this we can determine ‘acceptable risk’. In part two I offered up numerous reasons why we should recognize and treat innovation risk differently, so as to allow it to perform closer to its promise of driving growth and achieving real advantage.
This post here is the third and last part, part three, where I lay out different mechanisms and framing of risk and innovation. These need to be evolved to fit your own risk appetite, not one size fits all. I hope it helps.
Risks are certainly shifting. In a recent piece of work by Deliottes called “Risk sensing:the (evolving) state of the art, the risks of most concern are changing each year. Interestingly, the pace of innovation stands among the top three risks in 2015 and tops along with regulatory risk, the list foreseen in 2018. With technology disruption, business model disruption and growing competition, social and customer engagement challenges the ability to manage innovation is growing as a concern and in risk management. We need to formulate a more robust risk innovation framework. Risk management for innovation needs to evolve to keep pace with the changing demands and pace of change we are undergoing in business challenges. Risk is becoming an evolving capability.
We need to open up our thinking about risk and innovation management. We should aim for a really healthy construct that does help all involved or associated with innovation and managing risk, that gives a better chance of pushing beyond the incremental innovation that avoids most risk and disappoints those seeking real growth.
In this post two, within a three part series, I build the argument on why we need to treat innovation differently within any risk assessment. Part one focused on linking risk into an innovation strategy that needed to align to the corporate one.
Each organization finds its own level of risk appetite. Regretfully innovation, often by default, gets swept up in this generalization of “risk management” that is corporately driven and the serious message of “risk” dampens exploration. There is a real need to make a clear argument that innovation should be treated differently. It can still come under the broad risk umbrella but judging innovation risk is utterly different from organizational strategic risk.
I want to bring together some thoughts on risk and innovation. This is the opening part and sets the scene. I feel we spend less time on the management of risk within our innovation initiatives. We so often simply measure risk on established risk / return lines of known existing business criteria, treating it as part of our existing ongoing business and that is plainly wrong.
Risk assessment within our innovation activities need a different, far more distinct framing that reflects the nature of the unknowns we are working with, in my opinion.
Our organizations need to relate to the differences far more, to allow this ‘innovation risk assessment’ to play an increasing role in ‘advancing’ innovation and its understanding, at boardroom level to relate too and take a different risk-related profile position that many take today.
I have been really struggling in the past few weeks. Partly a niggling health issue finally got resolved with a ‘delightful’ week in hospital, a couple of operations later, with a reasonably speedy recovery now thankfully under way.
The plan of course was for me to really use this confinement period as one of those opportunities to catch up on an awful lot of reading around innovation, planning out some areas to focus upon in the coming months and year ahead.
My logic was at the time, well this is similar to a long train journey or flight, you use this time and climb into a number of areas that have been quietly ‘festering’ away in the back of my mind, sitting on on my desk or tucked away in my computer.
It really depresses me when you hear the remark “actually, in all honesty, we have no appetite for innovation, we are so risk averse.” Actually it is heard a fair amount if you ask about risk and innovation. This is often never stated in earshot of others within the same organization, it comes in a sudden burst of honesty, perhaps over drinks, and always outside their ‘normal’ working environment. Sometimes you have a rare exception, especially if you have been called in to help, when someone has just been appointed into the position to simply “do something about innovation, we are dying as an organization”
We all need meaning but we don’t like the risks associated with it
I was reading an excellent article by Teresa Amabile and Steven Kramer on “How leaders kill meaning at work” and they offer the insight about the lack of recognition that everyone within any organization requires as the single most important need,that is the feeling they are making progress in meaningful work. Managers often undermine the meaningfulness of work to us as individuals; it is too often dismissed or not thought as relevant to the work at hand.
In the article they suggest four traps to avoid and one of them ‘Mediocrity signals’ triggered this blog. The organization they used as the example within this trap drove new-product innovation into the ground as the top management was so focused on cost savings they no longer were a leader in innovation, they simply became followers. One comment made by an employee was “mediocre work for a mediocre company”, yet it was not previously like that. Risk aversion had become dominating and the organizations leadership was signalling “they were really more comfortable being ordinary”.
How do we arrive at this point of being just ordinary?