Innovation Doesn’t Have to Be High Risk

September 15, 2023

Sherry McMenemy

For organizations seeking to be more innovative, there’s a lot of advice out there about implementing new processes, disrupting internal mindsets, being more creative, and so on. All of these elements may be helpful, but research shows that many people translate what they hear as “more work and more risk.”

In one study of North American knowledge workers in six age cohorts, for example, only two groups scored higher than 25% for “drive for innovation” (lowest was 14%), and the range for “willingness to take risk” was 11% to 19%. As one person told the author, innovation is actually extra work with no results.

Concerns like these are some of the barriers that organizations and people encounter when they want to get better at innovation and experimentation. And the truth is that certain types of innovation can be very work-intensive and carry high risk. On top of that, innovation without guiderails often degenerates into something closer to chaotic growth that, if it happens, suddenly stops as fast as it started (with no clear understanding of how it worked in the first place).

Which factors actually contribute to innovation?

We know for sure that just telling people to “be more innovative” doesn’t work. One large-scale research project looked at data from 154 public companies all using a specific idea management tool to crunch the data for insights on variables that make a successful innovation program.

Among their key learnings, the researchers found that the variables appear to be independent of type of innovation (disruptive vs. incremental; process vs. product), industry, and company size. The key variable identified was ideation rate – defined as the number of approved ideas divided by total number of active users. Higher ideation rates correlated with growth and net income, likely because broad use indicates an innovative culture that generates better ideas and is better able to act on them.

The four variables with the greatest impact on the ideation rate were:

Scale. The more people who participate, the better the result. A larger group of people outperform a small group in terms of ideation. While the researchers attribute it to “wisdom of the crowd”, I think if you look at it in terms of experimentation, it also has to do with how many different sources there will be to capture hypotheses and build on each others’ ideas. Even a small company will do better with more people or all people involved.
Frequency. The more ideas or hypotheses generated, the better the result. You need a lot of ideas to uncover ones that are actionable and worth pursuing. The estimate is that you need five ideas to be generated to find one that’s worth doing. This implies that you need a constant stream of ideas to keep momentum, and that packaging “innovation” as a once per quarter or once per year initiative will not result in a culture of sustainable innovation.
Engagement. The more people involved in evaluating and building on ideas, the better it is. If innovation is owned and managed only within a small group, there will be a lack of “fermentation” that comes from engagement, feedback, and commentary.
Diversity. The more perspectives included, the better the result. While things may move faster with a targeted group in charge, diverse engagement delivers the lateral thinking and surprising connections that lead to true “aha” moments. Including all employees in innovation increases the chances of benefitting from your efforts. The other benefit of inclusive experimentation is that everyone sees it’s possible for them to directly contribute to company performance and make a difference.

Another key factor that impacts innovation is the mental model at play, as hinted at by how people interpret innovation mandates.

In an article for Harvard Business Review (HBR), Nadya Zhexembayeva says one simple but radical change that might help is to change how you frame it. Instead of “innovation”, use language specific to your industry and region that is tied to continuity and mutual benefit. She mentions “idea,” but in other contexts “experimentation” might suit – since it’s a model that emphasizes insights and small, fast, and cheap ways to explore ideas.

With a more modest risk profile, experimentation allows for a way to support innovation with lower barriers to get there.

Psychology safety as a springboard for innovation

Exactly when organizations need to be more innovative to deal with complex and compelling change, is often when these same challenges overwhelm employees and their capacity for change. Many leaders try to manage this with a strong focus on high-performance culture when what they really need is to foster a growth culture (personal growth as well as revenue growth).

According to HBR research, a growth culture has the following characteristics:

A “safe” environment with top leaders willing to role model vulnerability and take personal responsibility.
Focus on continuous learning through inquiry, curiosity, and transparency, in place of judgment, certainty, and self-protection.
Experimentation with everyone encouraged to carry out time-limited, manageable experiments with new behaviors and ideas. Experimentation is a counterbalance to an assumption that changing the status quo is dangerous or unwelcome.
Continuous feedback at all levels, driven by a shared commitment to helping each other grow and get better.

By contrast, "The Way We're Working Isn't Working" author Tony Schwartz says performance cultures often end up in a zero-sum game of winners and losers. Failures are not considered to be learning opportunities, and tensions or disagreements in points-of-view are often “hidden” and, as a result, end up festering. In other words, a culture with low psychological safety.

Psychological safety is needed to foster creativity and experimentation, says organizational learning expert Deepa Premkumar. In a culture with high psychological safety, people are more likely to:

Be curious. And act on that curiosity to take in ideas and considerations from other teams, other companies and other industries.
Be open to new and different ideas. They will consider many possibilities before choosing one.
Be willing to try new things. They are willing to speak up, try new things, and are willing to put in the effort to do so. They don’t see “new” as a prohibitive risk.
Trust their manager and their organization. They know that they won’t be penalized for exploring or experimenting, and that “failures” are learning opportunities.

In turn, teams and organizations that do a lot of experiments improve psychological safety. This creates a win-win: Psychological safety (how we feel) helps increase the team’s ability to experiment (how we work). And experimenting (how we work) increases psychological safety.

Small jumps from “what you know” to “what can be”

One way to source new ideas and potential experiments is by “exploring the adjacent.” Carmen Medina, author of “Rebels at Work”, provides some ways we might define “adjacent”:

Pursuing ideas that are “one adjacency away” from core business areas, that you can tuck into an organization’s value framework, or pursuing experiments that speak to something that leaders care about.
Predicting how much disruption a new idea will cause and how easy/difficult will it be to undertake. High disruption can be a barrier – whether that’s due to tolerance levels, or all of the extra stuff that needs to support change, like budget, training, new processes, or new standards. Adjacency is probably correlated with low levels of disruption.

To which I would add:

Conducting experiments that will give you insights on customers that you don’t currently serve as a way to “dip your toe in” without a big commitment. Any insights that help with customer intimacy and segmentation are worth the time and effort.
Looking at industries that are perhaps up or downstream from where your sweet spot is to see what they are doing, what they care about, and who their customers are.
Taking ideas from disciplines that are not your core discipline. Great excuse for some cross-functional teamwork.

What’s great about adjacencies is that the barriers to try are low, and you’ll likely be a more successful explorer on local terrain. Small jumps from what you know or what is expected to what can be is a great way to embrace innovation. Psychological safety makes those jumps possible.