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What's the risk.... really?

There are many organisations that manage risk as something that is strange and superstitious, where fear drives them. There are those that use science and mathematics. then there are the creative ones. When it comes to innovation, there is often a ‘risk’ consideration that is made and this will more than likely reduce the investment faster than it increases it.


To me, the risk of innovation activities is no different to many other change programs. The basic risk that should be understood first is the risk of doing nothing.

While many want to worry about ‘failure’ and the ‘risk of failure’, for me it is more about the risk of standing still. Disruption in an of it’s self puts some people into a state of denial and protection. Businesses have died a slow death out of not seeing the warning signs and choosing to do nothing.


In the latest Smart Disruption report, recently released by Optus Business, they call for an approach of

“Be risk-aware, not risk-averse’.

One way I suggested to an insurance firm on how to manage the business risk of disruption and the investment required in innovation is to answer this question: How many years do you have before your current business model is obsolete? If you had a number, let’s say 5 years, then if you started working on a new business model now, you are reducing the risk of your old model becoming defunct and not having a revenue or profit stream in the future. Using this approach, does it change how you consider looking at investing innovation of trying new things?


If the timeline was shorter? What if you stop winning deals and the commercial model you had was outdated yet was built around a strong margin proposition… How many months do you have before all the existing contracts expire and your customers don’t want renew on the same terms? Initially, changing the commercial model is extremely risky as it has delivered well for you and it is very hard to comprehend a different way of working. Yet as the deals dry up, without any revenue coming in, the profit margin is not protect at all and the risk of not changing far out weighs any uncomfortable feeling associated to changing.


Here are some facts:

• You miss 100% of the shots you don’t take (Thanks Wayne Gretzky)
• The earlier the you start, the closer you are to finishing
• You don’t know what the future will be, therefore the more time you have to work on options, the more resilient you will be to what the future holds

So, what is the risk? The worst that can happen, when you try something new, is that you learn. I sent some researchers out of a training room into the wild (real world) to interview random people on a topic. This was an exercise to help them understand empathy and how to create this with random people. To begin with they were quite fearful and worried about talking to strangers. Afterwards they had amazing insights and learnt a lot. This was the worst thing that happened. The best thing that happened was 2 researchers found an artificial intelligence startup and an opportunity to collaborate.


To me, there is little risk in trying to innovate. However, there is massive risk in doing nothing.


About the author: Ryan Liddle is a passionate innovator, entrepreneur, executive, creator, analyst and advisor. Through more than 20 years in industry, he works closely with organisations of all sizes to bring ideas to life.


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