Why Risk is the Biggest Risk to Innovation
Sometimes being ahead of the curve can be a lonely place
Every now and then a conversation gets going around it. Usually it’s a call to action or agreement with the meaning — particularly from those operating in organisations or roles where the meaning unfortunately reflects the reality for them. Normally the public sector.
Some comments from those conversations really make me sit up and take notice. And that’s what happened a couple of weeks back. Amidst a flurry of retweets was a piercing comment from someone working for the police in the UK. That risk management has become risk eradication — causing lots of risk averse, overly bureaucratic decisions & processes that stifle creativity, innovation and employee engagement.
And risk aversion is one of my pet hates 😬. Because of the impact it has on culture, engagement and performance.
Looking for risk in all the wrong places
Risk Management has it’s origins in the insurance & financial services industry. And this HBR report last year highlighted how extending it into wider business has led to an inappropriate focus on legal, financial and compliance issues, while missing the real strategic and operational risks.
60% had realised their company’s decision-making process was too slow because of an excessive focus on preventing risk, even though the vast majority of big losses in market value occurred because of mismanaged strategic risks.
And being too slow is just not a viable option given the pace of change in technology and the rise of the sharing and digital economies. The risks of not keeping pace with productivity, efficiency and becoming more agile to survive in an uncertain world are surely too high?
The only strategy guaranteed to fail is not taking risks
Given those HBR findings, you would think this Mark Zuckerberg message would by now resonate throughout the business and leadership world. Public & private sectors. Even Richard Branson recently cited it as one of his top 10 favourite quotes — stating how we all need to be taking the necessary risks to open the door to change.
Instead, all too often, like the police example, risk continues to get rolled up as an excuse. The very word gets abused as a term framed around the financial, reputational, regulatory or legal risk of failure. And it gets legitimised through ‘risk registers’, with whole new industries created in recent years churning out endless reams of risks with complex scoring mechanisms for likelihood, probability and organisational appetite for risk.
All that many of these risk registers are achieving is to institutionalise fear of failure, fear of criticism, and a risk averse culture. They are a perfect example of the complexity Yves Morieux has identified as the real cause for declining productivity across the globe.
In education in the UK it has led to ‘Conkers’ being banned in some schools because of the fear of injury, birthday cakes banned because of fear of allergies, even tinsel at Christmas banned because of a fear of strangling.
Elsewhere we see it corporately in;
- HR, where the fear is of the potential for litigation rather than the strategic impact on the business,
- Comms, where the fear is of losing control of the corporate message by allowing staff to use social media rather than seeing the strategic benefit,
- The public sectors such as housing and health services, where the fear of regulatory criticism leads to sector wide group think mentalities and ways of working, and
- Project Management, where risk aversion is more often used to stop new ideas in their tracks
Dame Judith Hackett, outgoing Head of the UK’s Health & Safety Executive, recently summed up her view of the real causes of these types of risk averse actions:
“They’re really afraid of civil litigation , but I honestly believe that a lot of it is more to do with can’t be bothered. Its actually an easy way of not doing it at all”
Failure isn’t Fatal, but Failure to Change Might be
Adam Grant demonstrates in ‘How Non Conformists Change The World’ that the most successful people of recent times ( e.g Steve Jobs, Bill Gates, Larry Page & Sergey Brin ) did not take unnecessary risks, they took and take calculated risks, and the most successful innovators spanning the known history of our world failed frequently on their way to success. Through numerous examples from across the ages, Grant proves that failure needs to be experienced and risks need to taken rather than eradicated.
And in this digital VUCA age where the average lifespan of Fortune 500 companies has halved, and machine leaning and algorithms are forecast to replace up to 25% of jobs within the next 10 years, there has never been a more pressing need for companies across all sectors to stop being so risk averse, and instead look forward — encouraging innovation, creativity and collaboration along the way.
All the most successful newer companies such as Apple, Amazon and Google (and those with a longer heritage of success & survival such as IBM, GE and John Lewis) cultivate environments where employees are given a great deal of discretion to collaborate and deliver the right outcomes for the business and customers. And they constantly look to and address their future risks — their ‘Uber’ competition and change on the horizon.
As JFK said,
“There are costs and risks associated to a programme of action, but they are far less than the long range risks of comfortable inaction.”
The researchers in the HBR research also noted that the English word “risk” shares roots with the Italian word rischiare — meaning “to dare.”
Reframing risk around that meaning is a much smarter, simpler and future proof approach. He or she who dares wins.