In the final part of this series – having already examined managing the process of innovation and how to manage staff within that process – I want to now discuss managing risk within the process of innovation.
With emphasis on innovation processes to establish differentiation and long term competitive viability, a question I’m often asked is how to balance the need for creativity with implied risk. Of course, it will be impossible to perfectly and continuously balance yourself and your employees between these two spectrums, but there are tactics that you can employee to maximise innovation and minimise risk.
One of these is to take on innovation with a portfolio approach. In a similar way to a stock market investor minimising risk by spreading investment across a number of stocks, an innovative business can achieve similar risk reduction by spreading innovative impetus across a number of projects simultaneously. From this broad base of creativity, successes can be run while failures will be discarded.
Learn from Failure
The idea that failures will occur is an important concept to accept.
Management reaction to failure is usually the most extreme, and cultivates a fear of failure. In turn this leads to an anti-risk culture, naturally closing down creativity and invention.
By encouraging experimentation, and allowing your people to learn from failure rather than be punished because of it, you will encourage a problem solving environment to flourish. Along with this, over time, the performance of the organisation will improve, as will the willingness of your people to stand up and be counted. They will become more engaged, more goal focussed, and better team players.
Seek out Ways to Motivate
Motivation comes in two distinct forms: intrinsic and extrinsic, and the two aren’t necessarily mutually exclusive. Research by Henry Sauermann and Wesley Cohen found that productivity was driven by either the desire for intellectual challenge and independence (intrinsic) and/ or financial reward and job security (extrinsic).
Further than this, their studies discovered that early stage innovation was more likely to be encouraged by intrinsic motivations, while later stages of the process were less dictated by such motivators. Managing risk in the innovation process is largely about designing the right environment, and this centres on placing people in those areas which motivate them most. An engaged and motivated employee is more likely to stay the course and produce the results your business needs – and that in itself lessens risk.
Encouraging Diversity, Promoting Identity
As well as diversifying innovative efforts across several projects, risk of failure is also minimised by employing a cross section of people in the creative effort. This diversification of employees will lead to fresh perspectives and different ideas, both in process and product innovation efforts.
Take the example of the Brown University Brain Science Program. This combined people from various disciplines – from mathematicians through doctors to computer geeks – in neuroscience research. The diversity of thought, ideas, and creativity, eventually led to getting a monkey to move a cursor on a computer screen using only brain power.
It shouldn’t be forgotten, either, that many people consider themselves to have multiple identities – African and Hispanic, for example, or a male nurse. Such people tend to see more possibilities for problem solving, and so are naturally more creative. Stifling such creativity will stifle results.
Be innovative to manage innovation risk
Ultimately, the innovation process is one which needs to be approached innovatively. Traditionally, businesses have systemised creativity by concentrating on problem solving. More so today, companies are turning this process upside down. Rather than creating a centralised team to solve problems and then looking for innovation to flow from this process, today’s innovative companies are:
- Setting innovation goals
- Building dedicated workgroups
- Being non-restrictive as to profit goals
- Allowing autonomy of the innovative approach
- Letting ideas flow naturally, encouraged by an innovative culture