Innovation, the future and everything that comes along with it is uncertain, and by nature full of risk. In the corporate environment, which often has a risk averse culture, there can be a view and process to minimise risk and seek solutions to mitigate any and all possibilities of what may, or may not occur as the case may be. These processes and functions are designed to re-enforce what the company does well and keep them focussed on incremental ideas that support the agreed growth trajectory and market share targets.
From the get-go it appears that risk and innovation are polar opposites, but in fact they are best friends that go a long way back. And I really want you to think of them as friends in the process. There is often a view that risk is an adversary in the business but in reality, they are often keen partners in the process.
Risk averse is something that we tell ourselves, and often it becomes a self-fulfilling prophecy for the culture of the organisation.
To be innovative and open up new ideas we need to uncover our blind spots, areas of underinvestment or unsolved pain points to build a portfolio of ideas that will deliver bottom line value to the organisation.
To be successful we need to couple risk and innovation together through a balanced framework, process and culture that is not dependent on the judgement of individuals. Rather the outcomes are determined through a multi-disciplinary approach that focuses on value added to the eco-system.
When we connect the functions of risk and innovation inside the corporate landscape, we end up with better results, greater collaboration and shorter development times. In some organisations we need to positively agitate against the incumbent risk and stage-gate process, because if risk operates in a siloed environment it is likely that only the traditional, comfortable ideas will be approved.
Why? Quite often this a result of risk being brought in too late into the stage-gating process. Once this happens the default assessment process often defers, delays or completely cuts out ideas that may create a real shift because the structured decision-making process disempowers ideas that have higher levels of uncertainty. And when this occurs doing nothing can be seen as a viable option. What’s not considered is if doing nothing will heighten the risk or create greater costs in the future.
The results can lead to weeding out of larger ideas in place of smaller ones because the decision making framework suits this approach. Whereas what this doesn’t take into consideration is that these new ideas and innovations may be able to mitigate some of the risks these organisations are taking.
So how do we move to a process and culture where risk enables innovation? Here are a few of the key principles we embed in the organisations we work with:
Strategic integration of risk and innovation: Use risk to get early insight in how potential challenges can be overcome and what we can do to give confidence to the idea. We use risk to support the development of innovation through the expansion of thinking and identification of blindspots and areas for concern.
Celebrate all innovation learnings: Cultures that only celebrate success tend to be the most risk averse - therefore unable to embrace risk in a way that can add value. If we value learning and the benefit to the customer (internal or external). We need to move past the mindset that a failed innovation, done in a structured diligent manner will be a career-limiting move. A true failure only occurs through inaction, laziness and rogue behaviour where work is delivered in an unstructured and poorly thought out way.
Flexibility through a portfolio approach: You don’t want to bet the farm on one or two ideas. Create a portfolio of small, medium and large ideas so you can run a number of options at once, and if you’re one of our clients have a structured re-investment model that uses innovation revenue to pay for the development of future ideas.
Speed: When you get a great idea do something with it straight away…. don’t put it on the agenda for the next planning season. Innovation is never on time or on budget, and it certainly doesn’t fit neatly into the annual planning cycle. So instead of fighting the process, create a mechanism that allows you to have continuous progress against the right idea, no matter when it raises its head.
Control and Discipline through a Framework: We implement the Corporate Innervation Operating System to give organisations a critical innovation flow that provides enough structure, governance and process for innovation to continuously move forward. This framework provides the right amount of discipline, controls and boundaries in a complex risk environment to ensure it doesn’t stifle the process or advancement of ideas, but rather it increases risk tolerances to ensure ideas that are necessary for growth continue.
Risk management done right will enhance the transparency and discipline in your innovation portfolio. Want to know more about this, hear some case studies or just join in the conversation? Join James Ritchie, Bronwyn Smart and myself every second Tuesday on Clubhouse at midday in the Risk Innervation room. We’d love to talk to you and hear how you are enabling innovation through risk.