Major innovations require risk taking. There is no way around it. Innovation is inherently risky, and the more innovative the idea, the more risk involved. There are lots of ways to mitigate risk and fail fast and cheaply. But no matter the precautions and methods taken, risk can never be fully eliminated.
When I worked as an innovation leader at USAA, I would successfully launch 10% of our innovation efforts and be satisfied with that 10%. That means that 90% of the innovations were failing, and most of the bets didn't pay off. However, the 10% that succeeded more than made up for the losses of the others. In fact, innovation became a huge competitive advantage during my tenure at USAA. The successful innovations and their resulting advantages would never have happened without courageous leaders and innovators who swam against the risk aversion current.
Leaders need to take risks now more than ever, because innovation is on hyperdrive everywhere within financial services. The turnover rate for products and services is faster than ever, and the turnover of Fortune 500 companies reflects that. Giant companies are made small when their ideas become stale, and small companies grow rapidly when their ideas create new markets. Behind the successes and failures are leaders who boldly pursue new ideas or sheepishly avoid the risk. We've definitely entered a period of unprecedented innovation tempo, but history also teaches us that innovation requires leaders with courage and the ability to overcome risk.
Alexander the Great understood the need to take big risks to achieve big goals. On some of his larger campaigns, he moved across terrain for which there were no reliable maps. Imagine the risk of moving a large army without knowing for sure where it was going or what hazards would be encountered. He took the risks because he knew the rewards were even larger.
Christopher Columbus also took tremendous risks in his voyages of discovery. He was willing to travel into areas where known experts said the earth fell off into space. Imagine the burden he took managing a small fleet, financing the journey with loans from aristocrats, and running the risk of sailing off the edge of the earth. But the earth wasn't flat. There were amazing discoveries to be made, and it required a daring leader like Columbus to make them.
The conventional avoidance of risk is very strong in financial services. Most leaders have come up through the ranks learning to focus on incremental revenue growth and cost reductions. The art of taking risk has been subjugated to the skill of eliminating risk while growing. Many will talk about innovation, but few of the senior leaders I meet as an independent consultant are true agents of change.
A recent (short) engagement I had with a midsized financial service company that wanted to launch more big innovations illustrates this. I noticed right away that the senior leaders of the company lacked a vision for their innovations. As I talked with these leaders, each one deferred the vision to someone else. No one was willing to put a stake in the ground because of the risk of failure.
This company was very hierarchical in structure and decision making, so the CEO was probably the best source for the innovation vision. He would need to be this company's Alexander or Columbus and assume the risk. Unfortunately, when I met with the CEO, he also deferred the innovation vision, because he hadn't been meeting his board-directed goals. When I suggested that innovation ultimately would help him achieve and exceed his goals, he agreed and suggested that I come up with the vision. Needless to say, I didn't continue working with this particular company, because the leaders were so risk averse that they were afraid to make a plan and act on it.
Conversely, I work with a number of companies with very bold senior leaders who see the benefits of taking risk and know that it is their role to overcome fear and lead their companies to greater heights. Only those leaders who are willing to take risks will realize the benefits of innovation. Buzzwords don't launch innovations. Courageous leaders and innovators who are willing to take calculated risks launch them.
Mick is an independent consultant and thought leader on innovation in financial services. Previously, Mick served as the senior innovation executive for USAA, where he built and led the innovation program to world class status. During his tenure, USAA received numerous awards ... View Full Bio