Innovation leaders: talk about your stinky fish
You’re going to do it!
As a newborn Chief Innovation Officer, you’re going to foster innovation in your organization. A challenge, of course, but not impossible.
Others have done it, so why wouldn’t you?
To kick-start your innovation journey, you catch up with some design thinking articles or a lean startup podcast. You secure your financial resources and set up an innovation team with the brightest minds. Finally, you design a disruptive innovation strategy.
So far so good.
What is that feeling? Is it discomfort? Anxiety? Pressure, maybe?
Scary thoughts enter your head. What will happen if things go wrong? What if you don’t create that killer business model that disrupts the industry? What if the CEO and the CFO get too uncomfortable with your risky projects?
In other words: what will happen…if YOU fail?
Business Risk vs Personal risk
Much has been said and written on innovation and failure. But we believe the topic of risk, and how it affects innovative behavior, is worth exploring in detail. Two types of risk can play a role in innovation projects: business risk and personal risk.
Business risk is the possibility that your company will have lower profits than anticipated, or experiences a loss rather than taking a profit (1). So how do innovation projects effect business risk? Innovation projects differ from regular projects in three ways:
- You don’t know exactly what you will develop.
- You don’t know how much the project will cost.
- You don’t know if and how much revenue the project will generate.
This uncertain nature of innovation projects increases the possibility for your company of having lower than expected profits (business risk). For innovation leaders this means that they are in the hot seat, especially compared to the more predictable flow of the financial director or the operational director.
Remember that feeling of anxiety? This can be caused by the personal risk you are taking as an innovation leader. Personal risk is the risk of personal damage incurred by business leaders. Business coach Thomas Bragg identified eight types of personal risk (2), four of which are most relevant for innovation leaders:
1. The risk of unemployment
Senior business leaders benefit from increased visibility. Not only to employees from lower echelons, but also outside the organization. This visibility is nice when you are successful, but not so much when your projects fail. For… will you be hired after failing? You don’t know. However, you can imagine that a reputation as a failure can seriously limit your chances of landing your next job. This is a personal risk.
2. The risk of damaged relationships
Humans are social creatures. Our relationships partly define who we are. They matter to us. Now imagine your project failing. Will this damage the relationships with people like your peers and your boss? Will they stay positive about you, like they were when you were installed as the innovation leader?
Damaged reputation may hurt your ability to build meaningful relationships with stakeholders that are critical for current and future projects.
3. The risk of personal liability
Senior leaders can become personally liable, for example when they behave unethically. This liability may concern company losses, slander or identity theft.
Martin Winterkorn, for example, Volkswagen’s former CEO, is suspected to have played a major role in Dieselgate (manipulation of car software to pass emission tests) between 2006 and 2016.
In a recent article, The Financial Times* stated that the board wants to know if Winterkorn can be held liable for the 26 billion euros of company losses. All of a sudden, Winterkorn’s earned salaries and pension are at stake.
4. The risk of financial losses
Senior leaders can enjoy a financial income that includes recurring salary, stock options and a retirement plan. This package allows you to save for your retirement or your kids’ education.
But… innovation projects are risky. As an innovation leader you are in a hot seat all the time; a well-paid seat, but a risky one as well. Lower stock prices mean lower dividends. Lower dividends mean lower financial income. This is the financial risk of a senior innovation leader.
The Risk Paradox
There is something paradoxical about business risk and personal risk regarding business model innovation. Here’s why:
Innovation is a way to reduce business risk. With the introduction of new products or new services, you want to make sure that the organization remains profitable in the long run.
To innovate successfully, senior leaders should show entrepreneurial, risk taking behavior. But when you feel the weight of the personal risks you bare, you can be inclined to play the safe game. This will ensure your employment, your relations, reduce liability and improve your finances… in the short run.
Basically, when leaders let their personal risk drive their behavior, they will not reduce business risk in the long run. This is the risk paradox: personal risk prevents you from mitigating business risk.
So how can you deal with this risk paradox? Consider the following three pieces of advice to make sure the fear of personal damage doesn’t block you from showing your entrepreneurial spirit:
Talk about your Stinky Fish
The first tip is plain and simple. At Hyper Island, a creative business school they use a playful tool to deal with uncomfortable situations: the stinky fish (4). If you have something that is causing feelings of discomfort, stress or anxiety, think of this as a stinky fish that sits in your pocket. The longer you hide it in your pocket, the stinkier it will get. So, get this fish out of your pocket as early as possible.
Your stinky fish may be your fear of losing income when you fail, or your worries about getting a damaged reputation.
Imagine what can happen when you say this:
“Guys, I really look forward to execute on my new role, but I feel that my fear for unemployment may push me to play safe when I should be taking risks”.
In the best case they will support your projects with advice or sponsorship for your project.
Don’t compromise the law
The Volkswagen example demonstrates how innovation can cause legal conflicts. Of course, you may reason that the VW software is an innovative way to pass the emission test. But, crossing legal borders is a no-go. If you want to reduce the liability risk, stay on the good side of the law.
Apply a portfolio approach to innovation
Now that your board supports you, it is time to look at the hard measures to take. To limit your personal financial risks don’t bet all your money on one horse. You will need some successes to ensure board support and to keep your own confidence up. So, set up a portfolio of innovation projects in which you invest in both high risk and low risk projects.
Dealing with personal risk can have a serious impact on the success of renewing your business model. When you enter an innovators’ hot seat, having a detailed conversation with your fellow board members can make all the difference between winning or losing in the short and long run.
We are curious: how do you make sure that the weight of potential personal damage does not prevent you from being the innovator you want to be? Share your experience in the comments below!
Joey Gonesh MBA & Marc Vollebregt
(1) Business risk – investopedia.com
(2) Thomas Bragg – 8 categories of personal risk/thomasmbragg/com
(3) The Financial Times – VW board considers seeking damages from former CEO
(4) Stinky Fish – http://toolbox.hyperisland.com/stinky-fish-13d9ce8d-e64f-4085-8a06-8d212c627788