Risk is no excuse for inaction when it comes to innovation. Yet it often causes corporate paralysis and it can even sound the death knell for some creative projects. It might even be the reason that theoretically great startup ideas never get invested in.
Innovation cannot be a reckless pursuit
Of course, it makes perfect sense to not go ahead with a proposal where there is quantifiable evidence of risk, that risk is high, there are no obvious or viable means to mitigate it and the hoped for success doesn't outweigh the clear risk involved.
But what where success could be substantial, but you can't meaningfully measure the risk of that particular proposal? What if your innovation activity will take you into the unknown?
For many disrupters and first-movers, that's exactly what they face.
Using a straightforward and very helpful quadrant-based analysis, the linked article contains some great case studies on different types of innovation activity and the levels of risk that they may carry. It looks at examples of how others have handled innovation and progress in such scenarios.
When you know you don't know - but you really want to do it
Particularly interesting for me is the discussion in the linked article about what to do when your project takes you into what the author, Geoff Tuff, calls: the 'unknown quadrant': that exact scenario that disrupters often face.
Essentially, Tuff's pragmatic and expert advice is to stop talking about risk in these scenarios: it is unquantifiable and therefore a waste of time.
Instead, to thrive in a world where projects falling into the uncertainty quadrant may well occur with far greater regularity, he counsels spending time on looking at how confident you are in the vision for the proposal, and how you might obtain the evidence that will make you even more certain.
In the domain of the unknown quadrant, Tuff observes that 'many companies spend lots of time running around collecting data to reduce risk in the attempt to make it more knowable.' This is their attempt to find the evidence they feel they need to help them to be comfortable with an unknown risk scenario. But if the outcome is truly uncertain, this activity is pointless, and may never get you to a position of comfort.
Handling uncertainty with innovation outcomes
I like the case study around Palm Computing's co-founder Jeff Hawkins especially. While Palm's heyday has long been and gone (consigned to the same museum section as finger-dial telephone apparatus and fax modems), at its inception, Tuff points out that 'Hawkins demonstrated the handling of uncertainty while minimising exposure exquisitely.'
Hawkins started from the premise that the palm pilot handset must be possible. By carrying rudimentary components in his pocket and capturing user needs and user experience 'in the moment', Hawkins developed a prototype and a test environment at pretty much no expense.
However, the exercise gave him the insights that no amount of data theory could have provided. In a short time, he knew what it would take to make the product real and desirable to its target audience. It worked because he'd brought it into real life interaction. He understood the nuances.
I'm sure some folks might argue that this wasn't particularly visionary. And it's certainly true that his approach was actually quite simple, But what marked him apart was the fact that he was experimenting, visualising, carrying something tangible than later became a prototype, while others were still locked in at the drawing board.
He created the evidence needed to help meaningfully quantify risk - as well as reward.
Some times, the best way to innovate, particularly where there is no evidence of the likely outcome and therefore no known risk rating, is to simply get on and prototype it.
By all means by sensible about financial and reputational risk, but if the vision is good, find the way to make it real.
We are living in a digital era increasingly dominated by uncertainty, driven in part by the rise of exponential change. The problem is, we are generally clogging up the gears of progress and growth in our companies by treating that uncertainty as risk and by trying to address it with traditional mitigation strategies. The economist Frank Knight first popularized the differentiation between risk and uncertainty almost a century ago. Though it is a dramatic oversimplification, one critical difference is that risk is – by definition – measurable while uncertainty is not.