Why is Risk Integral to Innovation?
Once, ‘being innovative’ was seen as a break from routine but today it has to be the routine. Through innovation, a business stays competitive by continuously renewing its products, services and (over time) its identity. Similarly, we need to be innovative as individuals in our professional and personal lives to stay ahead, given the astounding pace of change in technology and ways of living.
It is easy to talk about innovation, generate ideas and initiate actions. The tough part is converting innovative thinking into innovative practice. This can be a long journey, bringing many risks. Being an ‘ideas person’ is just the start, and insufficient in itself to bring about actual innovation. The successful innovator is someone who has mastered the risks involved in the entire translation process.
In practice, business and public sector organisations often misunderstand ‘risk’ or even treat it as a ‘taboo’ and ignore it completely. Moreover, ‘risk management’ is often not developed as a true organisational capability, embedded with the key people. These attitudes need to change if the benefits of innovation are to be realised.
Progress in the wealthy parts of the world has meant that some risks have, in fact, been dramatically reduced. Yet this has led us to seek and expect ‘zero’ risk. This expectation can become a real danger if it leads to a reluctance even to contemplate and discuss risk, and if it distorts judgements. For example, ‘virtual risks’ fuelled by speculative debate and interest groups (e.g. about trace contaminants in food), can divert attention from more serious risks based on scientific evidence (e.g. about obesity). It is important to examine risks in a comprehensive and objective manner and not to over-react to topical news stories.
Organisations need to develop a culture that systematically encourages discussion of risks and develops capabilities to manage them. Evidence-based risk management needs to become a natural part of day-to-day working across disciplines and geographies alike. It is not something to be left to specialist risk management ‘departments’ or to individuals who happen to have the right mindset and skills by virtue of their formal training. Speaking the right language, and having the right tools and mindset, are the essentials in building a true organisational capability for risk management.
'Managing risk' is embedded in the mindset and work routines of many professionals (e.g. architects and engineers). But many projects present challenges that call for a new model - 'Mastering Risk'. Professionals leading complex projects confidently manage the familiar areas. The tough part is managing unfamiliar areas or those with high uncertainty.
Mastering Risk - Today's Biggest Challenge for Project Managers
The more ambitious, innovative and complex the project, the more critical effective risk management becomes. As an illustration, consider:
- Developing systems to manage records for the 60 million potential customers of the UK National Health Service
- Implementing, globally, the next generation of mobile communications technologies
- Delivering full traceability - ‘from field to fork’ - for thousands of food products sourced from across the globe
- Developing alternative technologies to tackle climate change.
Our Mastering Risk Programme develops risk management systematically as an organisational capability.