Tuesday, August 20, 2013

Why The Biggest Risk In Business Innovation Is Passing On Risk

The Biggest Risk Is Not Taking A Risk

I have written before about how the biggest risk to success is by passing on something that could have made the difference because you think it is too risky. 

This is something that, I believe, is one of the biggest barriers to innovation. It is especially a risk in large and successful companies. 

In large and successful companies there is a tendency to reward behaviours that are risk averse. They tend to reward behaviours which mirror things that have worked for the business in the past. Things that are comfortable and familiar to management and people through-out the organisation.

This leads to behaviour that I call being a “brand caretaker”. People managing the brands and business will focus mostly on optimising and making incremental improvements and adjustments. They will tend to be focused on how to make achievable improvements and incremental growth on today. They will become reliable and dependable managers. They will deliver steady and sure outcomes. 

However, they also will be responsible for slowly draining the business and brands of life by not injecting change and evolving the offer.

There is an insidious and threatening activity that will be going on within many organisations as a result. Unlike failures and flops of new ventures, products or extensions which will be highly visible and easy to measure, the desire to be risk adverse and optimising today will most likely mean that anything that looks to change, dramatically disrupt or reinvent the brand and business will not be looked at. 

That activity is passing on an innovation or new product because it seems different and unlike what is familiar and proven for the brand and business. 

Managers are generally not penalised for what they turn down or reject. They are only rewarded for successes, and punished for failures.

There are many examples one hears or reads about. Here are some examples:
  1. “American Idol” which has been a massive ratings and financial success for Fox TV in the USA. It was turned down by all the major networks as being too risky and unlikely to succeed. They ended up all having to try and imitate the success in the end.
  2. JK Rowling, author of the billion dollar “Harry Potter” series of books was constantly turned down by publishers who thought the idea of a 7 book series on magic would not work as did not follow the rules of child book. Finally Bloomsbury took the risk.
  3. At least 2 leading literary agents turned down the 2012 publishing sensation “Fifty Shades of Grey” by EL James for being too racy and different to what was selling for them.
  4. The Beatles were rejected by endless record companies.

There is a well known tale about a manager within IBM that had led a major initiative that had failed in the market. He reportedly went to the head of IBM to resign as he had assumed that his fate was sealed by the failure. The leader rejected that resignation saying that he had just invested millions in learning what had not worked, and he was not about to let him leave having invested into the employee. He was ordered to get back to work and figure out what to do with that learning to create a success.

Success for a brand brings with it huge, unfortunate and potentially fatal risk. The risk is that managers overly focus on what that success was created by or through. They then focus on how to enshrine that into the business. They focus on how to optimise and fine tune it. They tend to reward and focus on behaviours that emulate and retain it. Planting very often the seeds of decline and failure.

As I have written previously in ”You Cannot Win A Race Standing Still”, and “The Danger Of Focusing On Improving On Your Personal Best”, to ensure a vibrant and growing brand you have to focus on what you need to be doing to evolve, reinvent and adapt your business on the assumption that it will need to be different just to stand still. 

  • It is very easy to turn down and reject innovation that is different to what has or is working for you today. 
  • Many businesses actually unwittingly reward and promote people who avoid risk and focus on optimisation and fine tuning the present.
  • However, your business is more vulnerable to innovations and approaches that are different. 
  • As managers tend to be punished for failures, they will tend to turn away from things that are unfamiliar. 
  • It is hard to track and measure people on what they did not do, or did not do. So people are never held accountable or penalised for passing on the next big thing.

  1. What was the “next big thing” that your brand or business missed out on? 
  2. Can you work out why you missed it? 
  3. What can you change to ensure the next big thing is not missed or passed on? 

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