How can leaders break down barriers to innovation, including risk aversion and fear of failure? Below is an example of how seeking out the “ridiculously reasonable” can shift company culture, at no expense.

Innovation on pain of death

"When we innovate here, people die." 

These were the words with which I was greeted by the General Manager of a large industrial plant, after stepping off what seemed like the world's smallest airplane at an air strip in West Virginia.

Many companies struggle with a culture of risk aversion, which acts as a barrier to innovation and growth. In many cases, this culture is a product of political or emotional influences. But in some cases, it is the very industry in which a company operates that justifies its risk aversion. 

So when the General Manager greeted me with this sobering statement, I was charged with unpacking a big question: how do you overcome risk aversion and innovate in these industries? Should you even try?

Overcoming risk aversion

The first thing to recognise is that risk aversion is cultural. This isn't always a bad thing: if you operate in a space where mistakes have severe human and environmental consequences, a set of rules alone can’t cover every conceivable scenario. Inevitably, it will miss some. The role of culture is to fill in the gaps. Therefore, the universality of a culture that is front of mind in decision making is extremely valuable. However, the corollary of this universality is that it sits at the front of people's minds whenever any sort of risk comes up.

Balancing risk of failure

This brings us to the second idea. As we know, a risk equation has two components: 1) the probability of an event happening, and 2) the consequences of an event happening. The cultural universality of a certain value tends to conflate these two components, smudging that distinction.

In the case of our industrial client, even a small possibility of an accidental discharge of a noxious gas would be fatal. This is not an area to begin innovating in. But there are areas where the possibility of failure might be very high, but the impact is inconsequential.

Finding Ridiculously Reasonable

So what did we do? Inspired by a recent Special Mission, in which one of our entrepreneurs pushed through cultural trepidation by making such a ridiculously reasonable request that the company’s partner couldn't say “no”, we went in search for Ridiculously Reasonable.

We talked to management and found an indisputable contender: stationary acquisition. One of our analysts discovered that this company had not reevaluated its stationery supplier in the last 20 years. Why? Because reevaluation is change, and change is risky. But we double clicked on this risk.

Our client was paying several multiples of what they should be for stationary. If they tried a new supplier, what was the worst thing that could happen? Pink paper clips? Even with a 50 percent chance that pink paper clips would be procured (a clear failure in at least some people's minds), the impact of this would be minimal. Certainly, it would not be in the league of a noxious gas leak, as the company’s risk culture would have everyone believe.

Key Takeaways 

1. Some industries have a legitimate risk-averse culture - an engrained mindset necessary to reduce unacceptable accidents in an environment where it's impossible to regulate every contingency.

2. Not all aspects of a company's operations have equal risk profile, and recognising this opens the opportunity for innovation.

3. The way to illuminate these opportunities is by disaggregating the risk equation. 

4. The first step to driving action is by starting in the high probability, low impact quadrant of the risk equation.

People shouldn't fear failure itself, even in dangerous industries. They should fear the impact of failure. This distinction is the key to innovating without compromising safety.

Ready to find your pink paper clip? Speak to one of our Directors today.

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