I’m hearing more and more lately about risk aversion as a reason not to pursue innovation. And being the basketball fan I am, I can’t help thinking about Michael Jordan. In his career, the Hall of Famer took more than 24,000 shots and missed more than 12,000, and once noted he missed 26 that would have won his team the game.a Yet he is known as one of the greatest basketball players of all time (perhaps the greatest). If you can make it to the Hall of Fame when you fail about half the time, what’s to stop us from taking a shot at innovation?
Fear of becoming the scapegoat
It’s true that some organizations react negatively to a failure and scapegoat people who try something new. But as I talk with my friends and colleagues in the field about new ideas to address a challenge, all too often the reply is, “I can’t take that chance.” Leadership that refuses to accept some degree of risk and to accept failure as an opportunity to learn is not only poor leadership but leadership that stifles innovation. Without innovation, our business will lose the game.
As fast as our industry is moving, innovation is an essential skill for financial leaders. Good leaders foster innovation and empower teams to critically assess a problem and pose a new answer. Fear of failure hinders innovation because no one wants to be scapegoated or lose a job over taking a chance.
From failure to flexibility
A crucial part of innovation is flexibility. Leaders can foster innovation simply by allowing for changes in the established plan. Does your organization stick to a plan verbatim, with little consideration of possible changes coming up that could influence that plan? I bet that there are at least a few readers who can think of examples of wins that would not have happened had they or their organization been afraid of risk. Just like an athlete who changes the play mid-course, you could go from a missed shot to a game winner with just a little flexibility. With that flexibility should come a sense of learning from experience, even when that experience does not turn out as we had hoped.
Flexibility and the ability to learn from experience provide the essence of innovation. I teach that concept to my students through the experience of taking and possibly failing an exam. Yes, there is a right or wrong answer, and they obviously want to avoid the wrong answer. But the wrong answer is not the end of their career. I do my best to show them that failure is a learning experience and not a career-ending catastrophe.
What I’ve seen from that experience, is that most success-driven folks (like us in finance) see what did not work and rarely make the same mistake again. I would bet that many of us can recall similar experiences with a missed accrual or a bad utilization assumption in a risk contract. We got through it. Let’s let our teams have the same growth. Those folks can be the starters of innovation. Let’s put them on the court and see if they can win. Let’s show the quiet confidence in our ability to constantly seek improvement, think out the opportunities for improvement, talk to all stakeholders, come up with a proposed innovation and take that shot. For all we know, that sort of strength in leadership is just what our organization is looking for — win or lose.
Victory by failure
How many of you would say that you are an entrepreneur? Well, entrepreneurs fail, and sometimes they fail more than once. What separates the successful entrepreneur from everyone else is how they respond to fear of failure. I work with a lot of entrepreneurs in the Prime Health Collaborative here in Colorado, and I can tell you, these folks are creative and unafraid to act on that creativity. They do not see failure as anything more than another lesson in their lifelong learning. There is no stigma or blame placed on an innovation that does not work out. Instead there is data to be gathered from that attempt that improves the next one. Many of these folks have told me that if they are not failing, they are not trying. That mindset seems to me like what's needed for a game-winning basketball shot.
5 tips for moving toward innovation and away from fear
It’s important for leaders to take calculated risks when it comes to innovation, the keyword there being calculated. I like to fly airplanes, but I am not foolhardy enough to jump in a plane and launch off into the clouds without some information.
The same holds true for innovation. Here are some pointers that might help inform your innovation and reduce that fear of failure.
1. Experiment with the idea. Where possible, try out an idea in a small part of the organization or a low-impact line of business so that you can get a “proof of concept” before pursuing an idea that may not work out.
2. Set objectives to gain from your innovation. Don’t just make a change for the sake of it. Know your goals and the benefits of reaching those goals. If you have reasonable goals, you are in a much better position to let people know you thought out the innovation, should things not work out.
3. Set reasonable milestones. Set some realistic timelines for things to progress in your innovation. But if you consistently miss those time targets, that could be a sign of trouble.
4. Find the “WIIFM.” Show some “What’s in it for me?” outcomes to people so you garner support to help your innovation mature successfully or to help you if things don’t work out.
5. Be willing to stop when it makes sense to do so. The sunk cost fallacy is a major contributor to small miscalculations growing into major failures. If things are not working out with your idea, don’t stubbornly keep pushing forward. Be willing to learn from what has been done so far and refine, re-tool or retreat as needed. As mentioned earlier here, be flexible and be willing to learn from something less than total success.
These strategies certainly can’t guarantee your success in innovation or prevent some unruly board member from making your life miserable if an innovation does not turn out as expected. But I’d argue that by showing due diligence and reasonable thoughtfulness, you can show you were prepared to take the risk for the sake of innovation.