risk aversion in innovation | Paul4innovating Innovation Views

Developing a new framework for risk and innovation.

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 numerous reasons why we should recognize and treat innovation risk differently 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 was foreseen in 2018. With technology disruption, business model disruption and growing competition, social and customer engagement challenge 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.

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Treating Innovation Risk Differently, Dealing with Uncertainty

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 with 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.

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The Pressing Need to Link Risk into an Innovation Strategy- part one

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 managing 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 needs 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 the boardroom level to relate to and take a different risk-related profile position that many take today.

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Uncharted Waters Disrupting the Corporate Boardrooms

When you read a report that has within its executive summary this: “In combination the boards stand unarmed to enter the battlefield of future business creation in a disrupted world” it makes you want to read on.

In a recent report called “Radical Innovation and Growth: Global Board Survey 2016 ” (link opens the pdf) we have results from a survey jointly conducted by Deloitte Denmark and Board Network – The Danish Professional Directors Association, that opens up much that can concern us about the current boardroom and its great difficulty with managing more radical innovation.

It seems within our boardrooms they are ill-equipped to managing in today’s world, grappling with the past, holding on, perhaps too tightly, to the present and certainly being unsure of the future. It is struggling to adjust to all that is entering their world.

In this report, they surveyed 614 global board professionals from a total of 50 countries during the period covered from November 2015 through to February 2016 and then published in February 2016.

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Risk and Innovation frustrate me

I have been really struggling in the past few weeks.

Partly a niggling health issue finally got resolved with a ‘delightful’ week in the hospital, a couple of operations later, with a reasonably speedy recovery now thankfully underway.

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 my desk or tucked away in my computer.
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Risk aversion is just making us all feel ordinary

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 a 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?
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