I recently read that you become a more complete person every time you come out of your comfort zone and take a risk. Don’t get me wrong, I’m all for self-development and feeling fulfilled. But risk? Unless you’re addicted to the adrenalin rush, my sense is that there are enough opportunities for self-development without standing on a ledge.
Growing your company shouldn’t be about taking on risk.
Far better to gamble on a sure thing than take a punt. That’s why I’m a fan of innovation. According to NESTA, innovation is proven to be the best way to bring about step-change growth. With it we expand outside of our current bounds. Without it, we become yesterday’s news, very slowly.
But like many things in life, risk is subjective. NESTA’s strong evidence base and clear factual demonstration of the upsides of innovation don’t take in to account our emotional responses to the idea of doing something new.
The fear of ‘losing’ money looms larger than the fear of ‘missing out on more money’.
Why is it that entrepreneurs are happy to take the leap of faith required to set up in business, yet as established company owners, they can often become risk averse?
Undoubtedly when we’re working in uncertain times, the fear of possible downsides loom larger. Just like the monster under the bed that appears when the sun goes down.
The fear of losing something you already have is more compelling than the fear of not ‘gaining’ something new. If you have money in your hand, you would rather keep it there than use it to create future gains. So it’s no wonder we don’t want to risk the family silver, dabbling in new ventures that may not pay dividends.
Why is it we don’t perceive the risk of keeping things as they are?
The trouble is that leaves you with the definite loss of future gains from innovation, that are not being factored in to the equation. The opportunity cost of not innovating today, is ‘definite’ loss of future revenue and ‘probable’ loss of existing customers to more dynamic competitors. By standing still, we have to accept that we are moving backwards, waiting for other companies and even industries, to challenge us head on.
Resulting cost / benefit x Probability of something happening = Expectation value (Risk Factor)
Risk management isn’t about eliminating all risk, it isn’t possible. It’s about managing and minimising risk. Surely the same should apply to the management of innovation.
If you approach it right, constantly evolving your company and its product range can open up new market opportunities, increase the lifetime value of customers and give you a robust defence against competitor threats.
Take the story of the Oxo cube. If you were in the bottled gravy browning business, things bubbling along nicely, it might seem risky to try out a brand-new product format. From where we stand now, the far bigger risk would have been to ‘not’ innovate.
The return on investment from creating those first tiny Oxo cubes is almost immeasurable. But it would have been all too easy, to leave the idea on the table.
To find out more about how we can help you with your innovation challenges, in Lancaster, Lancashire, the North West and beyond, get in touch.