Out of all the variables that have been shown to improve innovation, having a healthy attitude towards risk-taking tends to be the most challenging to adopt, especially for large organisations – both private and public.
Many organisations avoid risk-taking and thus struggle to find success through innovation.
Risk-taking is critical for innovation as innovation ultimately means venturing into the unknown. The most impactful kinds of innovation tend to involve creating something new. In order to do this, it is impossible not
to take a risk.
Leaders need to start by signaling to their staff that risk-taking is accepted. If someone takes a risk and it doesn’t lead to a commercially successful outcome then the team should not be penalised.
The Tata Group recognises the importance of risk taking. In the organisation’s Innovista program (an annual awards program set up to recognise its most successful innovations) management created a category of awards called the “Dare to Try” awards.
These awards are presented to innovations that were not commercial successes, but where the learning from the failed attempt was rich and useful.
When considering their organisation’s innovation process, leaders need to ensure that experimentation is a mandatory step. Rather than just going straight from idea to implementation, teams first need to run experiments.
This involves setting hypotheses as to why they believe an idea will add value to the customer and creating a minimum viable product (MVP) - the most basic version of the idea that will still allow for learnings.
The team must then set up an experiment to test their hypotheses using the MVP and based on the results, iterate or change course accordingly.
Experimentation is a critical part of Australian Unity’s innovation process. When working on innovation projects, teams of Innovation Champions are trained to run experiments to help cost effectively and rapidly test new product and service ideas with customers.
A group of over 40 Innovation Champions and several senior leaders have been trained across Australian Unity in how to run effective experiments.
Finally, rather than investing large amounts of money into every idea, leaders need to instead adopt a micro-funding strategy.
Micro-funding (also known as seed funding) involves allocating small amounts of money (typically less than $10,000) for teams to run experiments to test their hypotheses.
Micro-funding de-risks innovation. It forces teams to spend small amounts of money learning and iterating their innovation before proceeding to implementation.
It ensures that if the idea reaches implementation, certain assumptions have been tested with actual customers, which increases the likelihood of success in market.
It is impossible for an organisation to embrace innovation without first embracing risk-taking.
Leaders who signal to their teams that risk-taking is acceptable, that experimentation is mandatory, and that micro-funding is allocated to promising ideas, will win the innovation game.
Dr Amantha Imber is the author of The Innovation Formula and the founder of the innovation consultancy Inventium .
The most important drivers of an innovation culture are encouraging risk-taking and acknowledging that failure is not a dirty word, according to a meta-analysis led by Samuel Hunter from the University of Oklahoma.