Recognising Your Risk Profile for Innovation

This morning I attended a short workshop facilitated by a member of The Holos Group team, Adam Jorlen. Adam is a foresight practitioner working with organisations at the intersection of futures thinking, creativity and more agile approaches to organisational innovation and strategy deployment. Adam’s session focused on a well researched but not often used model for understanding the process of individual and collective change, called the Four Rooms of Change (developed in Sweden by psychologist Claes Janssen).

The model shows the four ‘rooms’ within an individual or group’s mind that are transitions through when preparing for, initiating and traversing the territory of change. Basically, the model proposes that the unfolding of change traverses the ‘inner territory’ of contentment (there is no need to change), denial (a lack of willingness to change), confusion (a lack of understanding of the change territory) and renewal (the creation of the ‘new self’ as a result of undertaking the change journey). The model has utility at an individual and group level, as well as at an eco-system level.

For those well versed on change management models and processes it must be said that the model itself is not ground-breaking (in reality, there are many models of change and psychological transition available – even The Holos Group has its own!); however, an exploration of the model in Adam’s session this was very interesting within the context of The Holos Group’s work in designing and deploying more adaptive and innovative cultures in organisations.

As Adam’s workshop participants started to explore a person (or group’s) transition through the rooms of change – from being comfortable staying within the status quo (the Contentment ‘room’) to exiting that room to become an ‘outsider’ either by choice or by necessity, the concept of risk emerged. Risk is a concept often utilised by The Holos Group (“Is the change proposed worth the risk?”) and we conceptualise risk as the potential that a chosen action or activity (including the choice of inaction) will lead a re-definition of the status-quo. In other words, an activity that results in a perceived loss (which is often considered an undesirable outcome) by those involved in the change activity . For example, the decision to create a new product to address a newly identified market need is likely to result in the review and re-calibration of the individual and collective behaviours required to deliver that new product/service to market. For those content with the ‘old ways’ this may feel like a trap door being opened and an emotional ‘falling through’ into a new and undesired work context coupled with with new expectations.

However, within the context of organisations needing to become more agile and innovative in navigating an increasingly volatile, uncertain, complex and ambiguous (VUCA) global marketplace, risk is a necessary aspect of remaining viable. Within this context, risk involves moving ‘outside’ of the room of contentment to experience confusion and inner conflict (for an unknown period) before embracing the change process and becoming inspired and renewed.

As the conversation unfolded, three aspects of risk – as it related to leadership and organisational agility and innovation – were highlighted: Risk Identification, Risk Propensity and Risk Tolerance.

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In addition to these three aspects of risk, The Holos Group work with organisational leaders to identify and develop the Risk Readiness of the organisations they lead.

1. Risk Identification relates to an individual (or team’s) openness to identify opportunities to undertake smart risks in order to question or challenge the status-quo of the work they do, or the team/organisation they are a part of. In essence, the opportunity to evolve an organisation (or its leadership) towards optimal effectiveness is not possible if the opportunity to challenge and evolve the status-quo is not identified.

The key question to for evolutionary leaders is:  To what extent am I noticing opportunities to evolve the culture and strategy of the organisation and people I lead towards greater effectiveness?

2. Risk Propensity relates to an individual (or team’s) capacity and courage to initiate opportunities to change, to be more creative, to try new things, and to agitate organisational norms in service of the organisation becoming more effective, vibrant and sustainable.

The key question for the evolutionary leader as it relates to his or her willingness for to initiate risk is:  To what extent am I willing to initiate opportunities (in the face of potential opposition) to evolve the culture and strategy of the organisation and people I lead towards greater effectiveness?

3. Risk Tolerance relates to an individual (or team’s) capacity to remain resilient during the process of being innovative and bringing something new, novel and yet to be fully appreciated and understood into existence; that is, remaining committed to being creative and adaptive once having decided to step into VUCA territory.

The key question for evolutionary leaders in determining their risk tolerance is:  To what extent am I able to remain resilient and adaptive in sustaining the innovative journey, whatever its duration?

These three aspects of risk make up an evolutionary leader’s Risk Profile – their willingness to initiate change towards some yet to fully understood and appreciated future. And even more systemically, an organisation’s Risk Readiness – an organisation’s capacity to quickly respond to opportunities to lead marketplace-wide innovation efforts, will influence its leader’s personal risk profile. For example, if a leader does not perceive that the organisation is ready and/or able to undertake the change journey then his or her risk profile will narrow.

Increasingly, organisational structures available to support evolutionary leaders to be more innovative are inadequate.  So much so that in a recent Harvard Business Review article by John Kotter, called Accelerate, Kotter advocated outsourcing innovation to specialist innovation incubators ready-designed to be adaptive and agile in designing, delivering and scaling organisational innovation initiatives.

Without promoting The Holos Group too much in this article (!), this is one aspect of what The Holos Group offers – we partner with organisations and organisation leader as their ‘outsourced’ innovation incubator. Our Innovation Lab takes 10 of our most evolutionary, adaptive and innovative change-makers and partners them with 10 highly innovative and adaptive leaders selected from within a client organisation to create a ‘pop-up’ innovation incubator. Through a structured ideation and implementation process, we take an ‘inspiration’ to a tangible prototype, and then field test that innovation with potential customers/buyers until it is market-ready and able to be scaled once deployed live.

But, we are not taking the innovation process ‘out of the hands’ of our partner organisation. Our aim is to up-grade the Risk Readiness Profile of our client organisation and the Risk Identification, Risk Propensity and Risk Tolerance profiles of the 10 highly innovative and adaptive leaders that enter the Lab. And at the conclusion of an Innovation Lab Process, the organisation will be noticeably more adaptive and innovative to respond to and capitalise upon emerging market trends.

To date, we have only worked with smaller organisations and some not-for-profit ventures in this way – in essence, because many smaller organisations do not have the in-house resources to undertake full product/service innovation and deployment and these organisations are smaller they are great forum to ‘real-test’ our lab prototype. However, we are ready to scale our own Innovation Lab Process in 2013 and partner with larger organisations to undertake some truly cutting-edge innovation projects that create game-changing solutions to complex challenges that inspire market-wide evolution.