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Make Room for Innovation: Evaluate Risk with Lisa Bodell, Founder & CEO, FutureThink
Defining risk or what we call a smart risk is critical when you’re talking about innovation and change. And the reason I say that again is because people are often told with innovation to take risks or they know inherently that they have to do it but they’re very scared by it because they don’t know how much risk they’re really allotted to take. So what leaders need to do is they need to define not just what a risk is but what a smart risk is for people and then they need to communicate it.
So, when you’re defining what a smart risk is I want you to think about as a leader how much risk are you really willing to take. If someone came to you with a big idea, would you be willing to take that risk? And if you aren’t, or if it’s maybe, what is the information specifically that you would need to know? Because it’s different for each person by the way. Risk can be very personal. What is the information that you would need to know in order to move forward with an idea or a risky topic? For some people it can involve things like you need to know that it’s on strategy. It needs to only be spending a certain amount of resources, meaning time or money. It can only take up so much of an existing budget. It can only involve people or resources from the outside, et cetera, et cetera. So, you’re deciding what you need to make a decision and then you’re going to define it using only three or four of those things. What also happens with leaders is they start to define smart risks and it becomes this laundry list of a definition that actually doesn’t allow people to take a risk at all. So write down all the things that would help you make a decision around a risk or what you would allow people to do and cut it down to only three or four things in terms of the definition.
I would then ask you to come up with what is a stupid risk because often people see smart risks but then they’re not quite sure if something is smart or not. Define also what a stupid risk is because that really helps set those guardrails for people of where they can operate. Often now I think stupid risks happen when people don’t know the boundaries that they’re allowed to operate in. There are of course those outliers when people did things that are illegal, that are so high risk that they could put a company out of business. Of course those are stupid things, especially if they did them on their own without permission. So stupid risks can be things where people didn’t know the definition of risk, that actually put a company financially at risk or legally at risk, when people operate alone and they haven’t been given permission by it or at least vetted that idea with other people. Those tend to be the stupid risks.
Lastly then you need to figure out how to best communicate it. So it can’t be just on your Intranet; it can’t be some plaque on the wall. It’s got to be something that’s disseminated to people either trickle throughout the organization, ideally it’s done in person and ideally it’s also accompanied with some examples. So, defining what you need to make a risk and only using three or four things as part of that final definition, coupling that with a stupid risk and some examples of what define both and then communicating it out, that will help you get change going in the organization.