How Do You View Risk? Positive for Innovation, or Something to be Removed?
Are you a risk-taker? That is not an uncommon question that gets asked in the course of business. In some cases, it might even be an interview question. The subject of risk is an interesting one. It can mean different things, and certainly, its scale is an important element to consider. Most of the risks we think about taking are on a smaller scale (they may not feel that way to us at the time, as individuals). Big risks, which are more for an enterprise level, can have long-lasting consequences.
Taking A risk versus a more globalized risk to the business. It is a key distinction to make. When thinking about risk, the ‘risk’ we take as a leader in a retail store or district is limited compared to the company risk that comes from entering a new market segment, as an example. Hiring someone with limited or no experience is a risk, especially when you have the option to hire a more experienced person who has done the job before. While that may seem like a simple comparison, it is a risk and one that has to be considered regularly for any retail hiring manager.
Risk vs Innovation
When thinking about risk versus innovation, the subject becomes even more interesting. Innovation is inherently fraught with risk. Innovation by definition means creating something new. Therefore, it is pure risk, since you are unsure of what the outcomes will be. Many of today’s innovations tend to be iterations of things that have been done in different ways, but that still doesn’t mean they aren’t new ideas or that the risk is any less. You simply have additional information to build upon.
Even as innovative as the iPhone was in 2007, Apple knew that mobile phones existed already and people liked those products. They knew that customers would like to continue to have music available on the go (after all, they had brought the iPod to life just a few years earlier). Apple was aware that searching and finding information from the web was important to people, and the internet, and things like Google had existed for years. What they did was put them all together in one single device that was easy to put in your pocket. In fact, when Steve Jobs initially introduced the phone he described it as a widescreen iPod, a mobile phone, and an internet communication device. Apple just happened to package them all together into what we now know as the iPhone. This is innovation and risk together.
Ideas in innovation
Real innovation is a risk in itself. It would be trying something entirely new, never before tested. That is hard to assess from a risk standpoint, as it has never been done. Innovation in your space could have some indications from other industries or similar products or services that are offered elsewhere, but be innovative in your specific business. At a company level, something like a drive-thru window could be an example. The first known fast-food drive through dates back to the 1920s, and then In-N-Out Burger utilized this for their first restaurant in the 40s. However, it didn’t become popular and widespread until the 70s when Wendy’s used it as a way to grow its early concept and McDonald's followed soon after and scaled it for their business. The concept of drive through for other businesses would be a potential innovation (i.e., banks, pharmacies) where they could look to use cases and demographics, versus those companies that first used it in the early and mid 20th century.
What’s the risk?
“What’s the risk?” This is a common question that a manager might ask someone presenting a new idea. It can almost be used casually in the conversation, especially when the request is considered a small ask. Can I change out this end cap for the weekend and put this other product here to see if it sells? ‘OK, what’s the risk?’ might be the response that comes back from the Store Manager. It is almost rhetorical in nature, dismissed even. “Sure, put the end cap up and let’s see what happens…the risk is low.” In other cases, it is not a serious question or one that needs lengthy discussion. “Can I move this aisle from here to there?” That is not something most Store Managers are going to take lightly. Or in a restaurant, “can we change the menu?” Now there is significant risk. That is not an easy fix, the costs could be high, and jobs are likely on the line for that type of change. The idea might be great, it may be an entirely new way to present the merchandise or menu items available, but it would require a much larger discussion.
Embracing risk and innovation
The concepts of innovating and taking risks are both critical to business growth and, in today’s world, survival. They must be calculated and thought out, while moving quickly. They need to be connected to customer needs, especially unexpressed needs, to make a valuable difference in how a solution presents to a customer. So, removing all risk is not ideal. There needs to be an opportunity for risks to be taken.
A culture for risk-taking
As leaders, the level of risk your team will take is dependent on you. If you snuff out creative ideas and are quick to challenge or correct people who try something different, risk will go down for sure, but so will innovation. Providing boundaries and encouraging the team to try ideas within the guard rails can open up the ‘idea box’ and innovation on the smaller scale can occur. In time, trust is built, and the team gathers experience in what taking risks looks like. While seemingly small, this is where real change can occur. Great ideas come from those that work closest to the customer or the process. Any time a small deviation from a company defined process is taken, it is a risk for the individual. They will at some point have to explain themselves. How you support that test will define whether your team continues to look for small, yet meaningful improvements, or just shuts down.
Different leaders will think about risk in unique ways. Some will embrace it and encourage it naturally. Others are more risk-adverse and structured to defined processes. There are benefits to both, ultimately though, innovation is the lifeblood of business and leadership itself. We must be looking for ways to improve process as well as our own development. Taking risks is a portal to doing so. Risk does not have to be bad. Not every decision has to be a ‘risk it all’ situation. Risk comes in all shapes and sizes. Work through your options, and you may find that you are more of an innovator, err…risk-taker than you thought.
How do you balance risk with innovation in your role?
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