Mike Fromowitz
Aug 22, 2013

The most critical risk of all is not taking risks

It’s been said: “The most critical risk of all is not taking risks.” However, most people view taking risks as irrational, foolhardy, and assiduously to be avoided. Unfortunately, life is not like that. Everything we do involves risk. There are dangers in every type of travel, but there are dangers in staying home too — 28% of all fatal accidents occur there.

The most critical risk of all is not taking risks
 
 

To take a page out of Apple, one of the most successful and innovative companies of our time, if you're not in the business of taking risks and making mistakes along the way, think again.  By “mistakes” I really mean making an intelligent, well-reasoned attempt that didn’t meet expectations. 

Mistakes happen when people take risks. Mistakes happen when you get creative; when you experiment; when you take ideas and concepts from paper to initial product; from product to the marketplace. Perhaps the biggest risk one can take is to not take one.

Comedian and TV host Ellen DeGeneres once quipped: “When you take risks you learn that there will be times when you succeed and there will be times when you fail, and both are equally important.”

To be an innovative company you need a culture that’s open to risk taking, that tolerates, expects and welcomes mistakes.  Risk-taking lies at the heart of innovation. To successful companies like Apple, risk-taking means trying out new ideas and banishing the climate of fear that's all too common in today's corporations.  It means casting out an environment that rewards ‘me-too’ thinking or maintaining the status quo. It means changing attitudes so that “good enough” isn’t “good enough”. How often have we heard: “If it ain’t broke, don’t fix it.”  Or “If something is working adequately well, leave it alone.”

Change Behavior, Not Just the Rules

Companies need a climate of trust and learning where mistakes can be openly discussed rather than sweeping them under the rug.  You augment this attitude by steadfastly declining to fix blame on others, and refusing to tolerate others who do so. 

The culture of an innovative company must not be obsessed with mistake-avoidance, but with playing to win.  In a culture that stresses playing to win, taking risks is integral to the business process.  Corporate heroes are those who put their necks on the line, not the time-servers who play it safe.

Culture

Typically, rewards and recognition are given to those who succeed.  But if you want to reward the competence, judgment and dedication that lead to risk taking, you must make certain that everyone in the organization recognizes that the award is for the risk-taking behavior, not the outcome.

Establishing a culture that rewards risk-taking requires diligence, trust and persistence.  It's a journey that has no end, because innovation has no end.  But the exhilaration and rewards along the way more than justify the effort.  And in a time of ever-accelerating change, the risks of standing still are definitely more significant than the risks of taking risks.

It’s risky not to take risks

Why do successful companies take risks? One reason is that they believe they can exploit these risks to their advantage and generate value. General Motors in the 1920s; IBM in the 1950s and 1960s; Apple, Microsoft and Intel in the 1980s and 1990s, and Google in this decade were some of the most successful companies. They share a common characteristic. They achieved success not by avoiding risk but by seeking it out. They continuously go back to the well again and again in search of new ideas, replicating their success on new products and in new markets. To do so, they must have a culture for dealing with risk that gives them an advantage over the competition.

Being too cautious is the greatest risk of all

If a company does not create an environment where people can take risks and occasionally fail, then innovation will be stifled, the company won’t grow, and it will need to make its bottom-line numbers through cost-cutting. Such an environment will create more anxiety and trigger a continuation of the cycle. Eventually, the company will shrink itself out of existence.

One such example is Kodak. The company has been in a decade-long struggle financially since the late 1990s as a result of the decline in sales of photographic film and its slowness in re-inventing itself as a digital player, transitioning to digital photography and digital printing— this despite having invented the core technology used in current digital cameras.

In mid-2013, the company emerged from bankruptcy selling many of its patents to a group of companies (including Apple, Google, Facebook, Amazon, Microsoft, Samsung, Adobe Systems and HTC). If there’s one thing that took the company down it was its approach of pursuing innovation and cost-savings concurrently. The company reduced headcount substantially, which no doubt sent a wave of fear into the remaining staff and reduced their boldness to take risks. The climate for risk-taking among employees fearful of their company’s short-term viability becomes undoubtedly bleak.

The mixed messages sent out by many companies, of “we need to grow” and “we need to cut”, leave employees confused, stressed, anxious, and risk-averse. The reality is that in an economy with high unemployment, most people do not want to do anything that will put their jobs in jeopardy.

Over the past few years, I’ve taken part in several Webinars and panel discussions that included some huge international corporations such as Proctor and Gamble and Unilever. Each one explained how their company keenly promotes and encourages risk taking.

I don’t believe a word of it.

Despite all their resources, most large corporations are not “innovators”. Most tend to buy up small companies that create ideas and new products. Besides, they cannot replicate what entrepreneurs do. I think small, founder-run companies are much more innovative and giant institutions are at heart conservative. Case in point Apple vs Microsoft. What has Microsoft really invented over the past decade in comparison to Apple?

Innovation continues to come from Nike where they are embedding sensors into their trainers to measure the pressure created when the shoes strike the ground. Stefan Olander, head of Nike's three-year-old Digital Sport division said: "Really cool stuff can come from the opportunity to test without constraints." And that, in sum, is innovation, Nike-style: a messy, exhausting process culled from myriad options and countless failures. One of my fears is being this big, slow, constipated, bureaucratic company that's happy with its success.”

Amazon is another innovator. More than three years ago they introduced same-day shipping in major U.S. markets, but the e-commerce giant's significant 2012 expansion of its next-day and same-day delivery services was a huge jolt to the entire retail industry, and rivals such as Google, Walmart, and eBay could only attempt to catch up, launching modest pilot programs and making investments. Even shipping services UPS, FedEx, and USPS were forced to up their game.

A year ago, Pinterest, the social scrapbooking site was dubbed the fastest-growing web service in history. How do you grow from there? Pinterest is now one of the top 50 most-visited sites and retailers are excited: The average purchase off a pinboard nets more than double those off a wall post or a tweet.

 
The essential part of creativity is not being afraid to fail

At a recent global briefing of Unilever executives, its senior marketers Keith Weed and Marc Mathieu announced their ten-year plan to opt for the company taking more creative risks than continuing with the status quo of tried-and-tested safer options.

They argued that the company was looking to learn from its past mistakes. Unilever was now going to promote a more creative culture when it comes to branding strategies and campaigns going forward. They said that the company “needed to diverge from adhering to quantitative market research at the risk of losing creative spark and innovative branding ideas”.

Mathieu’s plan is to move Unilever away from digital marketing models used by rival organisation Procter & Gamble, while Mr. Weed, chief marketing and communications officer, would complete a marketing team overhaul. I wish them both good luck. It would be much better for their ad agencies and creative people in particular, if Unilever sticks to this plan. But I’ve heard stories like this many times over the years.

Check out Unilever’s website. It states: “Unilever's brands are known around the world for their thought-provoking yet entertaining advertising campaigns.” Hmm, No mention of the word “creativity or “innovation” here.  Should Unilever want to champion creativity now, that would be a good thing. Perhaps they’re seeing what creative ad campaigns like Axe, Dove, and Lynx are doing for their bottom line and want more of it.
 
Let’s wait and see.

P&G. Much better now thank you. 

I’ve heard much the same from Proctor and Gamble over the years too. “We’re innovative. We’re creative...” In fact, P&G is sometimes the brunt of one of my jokes. For years I called the company “Proctor without the Gamble”. P&G is not exactly famous for taking creative risks, nor do I see them as an innovations company. I’m not aware of any real breakthrough products that they’ve come up with

On the other hand, P&G seems to be doing much better now on the creative front (in advertising that is). They have substantially stepped up their digital and social-media marketing efforts and more than tripled measured internet ad spending. P&G also had one of the most widely watched social-media and viral-video campaigns ever with the "Responses" effort for Old Spice last year. It also had several videos, particularly for Old Spice and Gillette, notch top spots in the viral-video viewership charts in the past year, and launched their own e-store and added click-to-buy options or Facebook commerce for several brands.

What it takes to create an innovation culture

1. Give everyone in the company the permission to fail.

2. Give everyone permission to be creative; to try something new; permission to have crazy ideas.

3. Encourage unexpected surprises

4. Avoid rules. A little chaos doesn’t hurt.  Constant change, from the top-down, keeps people nimble and flexible.

5. Accept the fact that not all the smart, creative people work for your company. Find and work with smart creative people both inside and outside your company.

6. Hire different people, even if they are from outside your industry who would approach problems in different ways than you and your competitors would.

7. Make meetings less about delegation and task management and more about cross-pollination of ideas.

8. Build a kind of protective cocoon around creative and innovation teams by eliminating the bureaucratic policies or work pressures that discourage them.

9. Structure your company to be flexible. Creativity is often spontaneous.

10. Resist the temptation to get immediate results. They will yield only incremental improvements - the need to meet deadlines can sometimes kill the creative process

11. Commit to driving the best ideas through to implementation. Innovators are seldom the best salespeople for their ideas.

12. Understand that failures represent opportunities to learn.

13. Realise that failure is a fact of life for companies that pursue innovation.

14. Be a risk taker rather than being risk averse, and use common sense to balance the risk level.

15. Understand that innovation requires open communication and an environment build on trust.

16. You don’t always have to be first in the market. Building a better mousetrap always wins.

17. You need the support of everyone in your company to champion new ideas.

 
To see if your organization fits the bill, here’s a quick test:

Can any employee in the organization—no matter how junior—openly ask a question that challenges a firmly held opinion of the CEO ot MD?

If the answer is “no,” then your organization is probably not as open as you think it is.
You need to reassess your culture if you genuinely want to promote innovation and creativity - and reap their huge rewards.

 

Mike Fromowitz

 

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