ABCs of Innovation: R is for Risk
Innovation is difficult. It means managing a host of people and moving parts through an elaborate and dynamic process with no guaranteed outcome. And in spite of all the effort, all the study, all the books, gurus, and hype, the success rate for innovation remains remarkable only because it’s so dismal. The many lessons learned and shared notwithstanding, it’s more difficult to innovate today than ever before.
While there are many factors driving this dynamic, a fair degree can be directly traced to an absence of conviction and belief. For at the critical moment, the crucial question becomes, “How do we know this is going to work?” Both a valid question in its own right and an unveiled reference to the overwhelming issue in many board rooms, one that can become a crippling concern, the issue of risk.
Operations and Innovation at Odds?
The problem many companies face is that innovation itself is almost intrinsically at odds with the health and well-being of the operation itself. In many fundamental respects the corporation is a very efficient engine, a train barreling down well-defined, highly-polished tracks. Of course, many things at the company matter but nothing really matters quite as much as keeping that train running on time, 24/7, 365 days of the year. In this way, the company is largely a closed system. One created, maintained, and optimized, by the leadership and employees. A system they all know, respect, are justifiably proud of, and are constantly tinkering with to increase its performance.
This the direct result of a laser-like focus on productivity and efficiency. But such a focus can also narrow the lens you view the world through. In fact, the better you get at managing what you’ve created, the more you tend to lose track (pun intended) of what really matters: the outside world and your consumer’s wants and needs. Taken together these form an invaluable outside/in perspective. Without which everything's at risk because the world at large, and especially your consumers, are changing a lot faster and a great deal more frequently than companies ever can.
And any train, no matter how well run, will only go so fast. At some point, the company needs growth, not just performance. You need something that's game changing. But game changing innovation is scary because it runs the risk of actually changing the game; threatening to derail the very system the company’s been built on.
When you're the CEO, or part of the management team charged with publishing your performance, and justifying your existence, every ninety days this will give you pause. The short-term thinking behind the dominance of the earnings schedule is a topic for another day, but in and of itself it’s an obvious drag on the thinking and investment that looks well beyond the current model - much less the necessary patience and fortitude to see it all through to pay out. (Which of course are not only the names of the two marble lions outside the New York Public Library but a pretty good definition of what’s required to succeed at large scale innovation these days.)
Seems the sea of consultants serving the innovation ambitions of corporations exist at least in part because they bring with them a conviction to create change; an impulse many enlightened CEOs find in short supply internally.
Virtually any well-run company can approach innovation on their own. They clearly know enough and they're obviously smart enough. But even with the best intentions, it's very hard to act in anything like a disruptive fashion if what you're trained to do, assigned to do - and bonused to do – is keep the system running at peak efficiency…
When everyone’s focused on keeping the company on course, a respected outside agent with a fresh perspective on how to enhance the model can add a lot to making more informed, risk adjusted, decisions about the future. They can provide an objective point-of-view about the road you’re on today and where it may or may not actually lead. And they do this fully aware of - yet politically and emotionally unencumbered by - the company’s past, current capabilities, even the current talent profile.
The critical distance an external team brings can also help identify, address, and resolve issues that the internal team, charged with running the day-to-day business, often choose to overlook or actively want to avoid. In this way, the outside contribution is often far less about importing smarts than adding much needed perspective and its cousin, courage.
Getting comfortable with risk is largely about keeping current with who you are and where you are as you constantly adapt to your surroundings, right? Again, it’s taking stock of what’s happening outside the company, with consumers, retailers, and suppliers that informs the evolution of the business and the future path to growth. Keeping current isn't just about keeping up it's about looking ahead as the only way to stay ahead
As the former Chairman and CEO of GE, Jack Welch quite famously said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”
The CEOs and executive teams I’ve worked with all express something like the same concern, “I wish I knew how to accelerate change inside the company.” It’s an enormous and never-ending challenge; to keep everyone not simply aware of but crucially engaged with how - and how fast - everything keeps changing. It’s obviously daunting but it is doable.
The real Achilles’ heel is mistaking risk itself as the threat, as opposed to the profound impact of change that we’re all constantly swimming in. A somewhat knee-jerk, fear of failure that's focused on the pressing-present and suggests if we just keep pushing as we have in the past the future will take care of itself. Well, history strongly suggests it won’t.
So open the windows and let the outside in. Encourage employees who think differently, who enjoy experiments. Reward the risk takers. Promote shared instead of siloed interests. Welcome new points-of-view. Be willing to make a few big bets and bring your people along with them.
Obviously, there has to be a balance. Leaders have to deliver the present and the future. But the companies that are market facing learning organizations are far better positioned because they recognize and value growth as an enterprise. They're comfortable seeking and adopting the appropriate insight regarding who they are, what they do, and how best to do it. So much so that the company and its employees are culturally primed to address risk. And when they need to embrace change, to innovate, they can, with courage.