Risk and Innovation - Joe Abittan

Risk and Innovation

To be innovative is to make decisions, develop processes, and create things in new ways that improve over the status quo. Being innovative is necessarily different, and requires stepping away from the proven path to do something new or unusual. Risk and innovation are tied together because you cannot venture into something new or stray from the tried and true without the possibility of making a mistake and being wrong. Therefore, appropriately managing and understanding risk is imperative for innovation.


In Risk Savvy Gerd Gigerenzer writes, “Risk aversion is closely tied to the anxiety of making errors. If you work in the middle management of a company, your life probably revolves around the fear of doing something wrong and being blamed for it. Such a climate is not a good one for innovation, because originality requires taking risks and making errors along the way. No risks, no errors, no innovation.” Risk aversion is a fundamental aspect of human psychology. Daniel Kahneman in Thinking Fast and Slow shows that we won’t accept risk unless we are certain that the pay-off is at generally about two times greater than the potential loss. We go out of our way to avoid risk, because the potential of losing something is often paralyzing beyond the excitement of a potential gain. Individuals and companies who want to be innovative have to find ways around risk aversion in order to create something new.


Gigerenzer’s example of middle management is excellent for thinking about innovation and why it is often smaller companies and start-ups that make innovative breakthroughs. It also helps explain why in the United States so many successful and innovative companies are started by immigrants or by the super-wealthy. Large established companies are likely to have employees who have been with the company for a longer time and have become more risk averse. They have families, mortgages, and might be unsure they could find an equally attractive job elsewhere. Their incentives for innovation are diminished by their fear of loss if something where to go wrong and if the blame were to fall with them. Better to stick with established methods and to maximize according to well defined job evaluation statistics than to risk trying something new and uncharted. Start-ups, immigrants, and the super-wealthy don’t have the same constraining fears. New companies attract individuals who are less risk averse to begin with, and they don’t have established methods that everyone is comfortable sticking to. Immigrants are not as likely to have the same financial resources that limit their willingness to take risks, and the super-wealthy may have so many resources that the risks they face are smaller relative to their overall wealth and resources. The middle-class, like middle management, is stuck in a position where they feel they have too much to risk in trying to be innovative, and as a result stick to known and measured paths that ultimately reduce risk and innovation.

Coaching Tactically and Coaching Strategically

I work for a tech start-up in the heath care space and within our company (at least in our office which is lead by a couple of former Microsoft ninjas) two key buzz words are tactical and strategic. I was not sure exactly what these words meant and how they were used in business until I had a very specific meeting with our site director who was my manager for roughly 6 months. I was in a one-on-one meeting explaining some challenges that I was facing in my role. Every day I was reacting to problems that bubbled up and needed my immediate attention, and I was not quite doing anything that would get ahead of those individual problems or solve the long term issues that grew out of acute problems. My boss at that point described the difference of thinking tactically versus strategically.


The daily grind and the individual problems that scream for our attention is the tactical work. The long term planning and insightful problem solving that stops those problems from showing up in the first place is the strategic work. The tactical is important and takes a certain set of skills, but the strategic is the differentiator, what separates the average companies from the excellent companies, what makes the top employees stand out from those who show up each day and punch a clock. What I was learning in that one-on-one was the difference between the two types of thinking, but now when I look back, I’m also able to see the difference in the coaching style that was taking place along those same lines.


In his book The Coaching Habit author Michael Bungay Stanier makes a distinction between two types of coaching, coaching for performance and coaching for development. He describes the two styles and approaches in the following way, “Coaching for performance is about addressing and fixing a specific problem or challenge. It’s putting out the fire or building up the fire or banking the fire. It’s everyday stuff, and it’s important and necessary.” In this quick quote he is describing tactical coaching. How can you help an employee, colleague, or friend navigate the individual challenges that are popping up in front of them and how can they get through those hurdles? Bungay Stanier continues, “Coaching for development is about turning the focus from the issue to the person dealing with the issue, the person who’s managing the fire. This conversation is more rare and significantly more powerful.”


The second piece is about coaching strategically, helping the individual see not just how to overcome one challenge, but how to adapt and change what they are doing, the process they work with, and how they are approaching obstacles to make them better in the long run. It is a focus on the individual and their growth as opposed to a focus on a problem and how to address that problem. Thinking strategically requires awareness and an understanding of common threads between problems and issues. When you coach strategically, that is what you are trying to build in the other person. You are working with them to find the areas of growth that will connect the dots in their own life and story, and you are working with them to shift their perspective to solve long term problems, build successful habits, and move beyond immediate issues. This is what my boss was doing with me when he explained the difference between thinking tactically in my daily work and angling myself and my operations to be more strategic.

That Brilliant Idea

Colin Wright writes about getting great ideas out of our head and into the world in his book Considerations, and he hits on all of the roadblocks that  keep our ideas locked away in our imagination.  He addresses the fear we have with bringing our ideas out of our mind and into the world to understand why so many great ideas never materialize.  When I first read through his book I highlighted a section reading, “…scared that perhaps our secret gift for money-making/cancer-curing/potato-chip-flavoring isn’t a gift at all, but just our own arrogance convincing us that we’re something special, when we’re not.”  I highlighted this section because it shows how easily in our minds we can begin to over inflate ourselves thinking we are special and amazing even though we have not accomplished anything.  That is not to say that the only value and measure of our worth is in our accomplishments, but it takes a level of self awareness to see that we are not special simply for having good ideas, or simply because we like the way we think. What can make us great, standout, and feel a level of accomplishment is taking the ideas we have and building upon them. Once we get those ideas out into the world and start working to actualize our thoughts, the special magic flows.


Wright addresses why our brilliant ideas often times stay locked in our heads, “The problem with great ideas is that they feel very valuable, and as such are something we want to protect … Part of why we do this is that we’re very proud of ourselves when we have good ideas, part is that we don’t want a competitor equipped with full financial-backing to steal it before we’re ready to act, and part is that we’re scared.”  With my own ideas I have faced all of these challenges.  I am often afraid of acting on my ideas because they may require additional work for me and that I spend extra time focusing on creating my idea rather than lazy leisure activities.  The fear of extra work and difficult challenges is a fear that I have yet to truly confront and overcome, but it is one that I believe I can change with a certain amount of self-awareness.


Wright also addresses the idea that another person may steal our idea before it is ready, which makes many of us think that it is better not to discuss our idea with people.  This fallacy can be damaging because it limits our ability to find those who could help us. When we are afraid of telling others about our idea then we miss an opportunity to have someone connect us with other people who can help us, and we miss a chance to have another person’s perspective on our plan. What we may find when we tell as many people about our idea as possible is that there are holes in our plan that other innovators can help us bridge in creative ways.


Wright offers one other thought on ideas and why we lock them away in our mind. He believes that we are often too enamored with our idea to let others poke holes in our theories. He states, “…scared that the idea might not be as good as it seems in the variable-less vacuums of our brains.” In our own minds we cannot see the shortcomings of our ideas, or perhaps we just chose not to see the weaknesses of our thoughts. Locked away in our own mind, the idea is pristine and perfect, but once we begin to tell others about our plan it is in danger of being ripped open.  Successful entrepreneurs would tell us that having others challenge aspects of our ideas is a crucial part of success, but on an individual level this can seem to be too much of a threat.


Wright encourages us to overcome this anxiety and fear by looking for abundance. Expecting that we will have more great ideas, better opportunities, and more chances to work on ideas in the future can help us feel more comfortable as we begin to develop our ideas. Seeing the success or failure of any idea as a stepping stone makes it seem smaller, reducing the gravity of a potential failure.  If we can approach an idea as a chance to grow, knowing that we will have an abundance of opportunities to act on another ideas or fit in with an existing idea in the future, then we are not paralyzed by the fear of executing an idea.