As leaders, we have a clear choice to make, to hope that what we have in our toolkit is enough or to take this opportunity to invest in the capabilities that will enable us to survive and thrive in a disrupted world, according to Ruth Murray-Webster and Eleanor Winton
That risk and innovation often struggle to work together or even engage with each other is one of the greatest missed opportunities in business. It’s a perfect example of where the organisational designs we develop to maximise efficiency can lead to siloes which have the effect of hampering performance.
In a stable environment that’s a shame. In a disrupted one, the one we’re living in, it’s a disaster. Our need as leaders to categorise change in our operating environment as risk OR opportunity rather than potentially both means that we are narrowing the potential scope of action we can take before we’ve even had time to consider the issue and its implications.
We have a great deal of professional experience of risk and innovation functions effectively being set up to work in conflict with each other. Only coming together at the end of their respective processes to battle it out for leadership support.
Our frustration was something we discussed at length when we first met in 2014. At that time we were both directors in a London-based ‘Big 4’ consultancy and the way we were positioned in the organisation typified the problem as we see it. Eleanor was responsible for the ‘Future Institute’, helping boards and senior teams to understand global mega-trends and stimulating them to be more curious, inventive and strategic about disruption. Ruth was responsible for the ‘Risk in the Boardroom’ practice, helping boards and senior teams to have better conversations about the threats and opportunities facing them, and to clearly communicate to shareholders and stakeholders how much variation from plans would be too much (their risk appetite). We knew that our service offerings were two sides of the same coin – but in our firm, we were considered two separate departments, two profit centres, two completely distinct client offerings.
The experience was repeated, albeit in a different context, just a few years later when we were asked individually to work with a major logistics company.
Working with the Commercial Director, Eleanor was asked to lead an exercise to scan the horizon for global trends and innovations which could be relevant for the organisation. The work generated around 50 ideas, each with a high-level business case. The senior team then worked to determine which of those ideas were in or out of scope in the context of the business’s appetite to implement.
The ‘winning’ projects, representing a range of ideas from incremental to radical and each accompanied by a rational business case, were presented to leaders within the commercial function who received them enthusiastically.
At the same time, Ruth was leading work with the senior team to explore the threats and opportunities that would have a material effect on company objectives in the next five years. Framed as risks and communicated through the company governance to the Board and their Audit & Risk Committee, the threats to sustaining performance were clear. It was absolutely accepted that new ways to create value were needed.
So, what happened next?
Only one idea lived beyond that session, and none were ever implemented, although many of the ideas that were considered radical at the time are now mainstream and reaping value for other businesses.
To us, the two pieces of work were inextricably linked and were both critical to addressing how the company was being disrupted and could be a disruptor. Some of the innovations were a direct response to some of the threats. Others, while looking promising in isolation, would have caused more problems than they solved. The CEO agreed yet attempts to join up the pieces of work fell on bemused and deaf ears in the wider leadership team.
These are not isolated incidents, rather typical examples of how thinking and acting in siloes is a key contributor to wasted effort and talent within business. Our particular passion is to empower risk and innovation to operate as enablers of change and generators of value.
Attention to some essential enablers of collaboration, detailed here, will reap rewards for leaders who are willing to engage with them.
Fostering a sense of common purpose
The changing context for business creates a compelling reason to bring these two together around a common objective. We are living in the moment that signals the beginning of the end of ‘profit at all costs’ and the transition to a more inclusive and value led definition of the role of business. In a statement in August 2019, the USA’s Business Round Table, consisting of the CEOs of leading US companies, pushed for a shift in emphasis – away from generating returns for individual shareholders and towards delivering value to the more broadly defined ‘stakeholder’.
So, the leadership conversation has changed – from generating returns, to generating value. Of course value generation is truly the function of both risk and innovation – making this explicit and aligning that to your overall game plan as a business will go a long way to aligning leaders in risk and innovation and encouraging collaboration and mutual respect between their teams.
Consider though: If a leadership team are not willing or able to clearly articulate what they are prepared to chance in order to pursue disruption, the chances of creating any lasting innovation and change is limited.
Common language and measures
Having established a common objective, risk and innovation must also have a common understanding (and some common measures) for what good looks like. A game plan for the journey ahead, owned by the whole leadership team, is an invaluable guide in the path to value because it enables disparate parts of your business to see their work in the context of something bigger than themselves. The question in everyone’s mind should be ‘How does / could this decision / action / idea help us to deliver value to our stakeholders?’ not just today of course but into the future and not in isolation but in concert with action and decisions elsewhere in the game plan.
To do their jobs well in a disrupted environment, both risk and innovation need to balance a growing range of ever-changing factors. In the absence of common objectives and common measures, the temptation to ‘manage’ rather than explore, and to return to siloed thinking is high. Resist!
Designing the right interactions
How often do we set up a ‘workshop’ or ‘collaboration session’ between disparate teams (innovation and risk as just one example) and just expect that the magic will happen? In our experience it’s common, but rarely does the magic materialise of its own accord. Where we expect teams to work together, we must provide the common objectives, discussed above, but we must also work to drive motivation around those objectives every time the teams come together.
The facilitator role is key to that – not just once at a ‘kick-off’ or ‘team building’ event but as a normal part of the way these teams engage on an ongoing basis. How many really strong facilitators does your organisation have? By that we mean people with the ability to design great interactions, the knowledge to anchor the process and the confidence to provide challenge, to even a senior audience. Few organisations acknowledge the value of the role in day-to-day operations, let alone factoring it into training budgets and programmes – a significant missed opportunity.
Partners for life
Looking ahead, our disrupted future presents us with an ever-growing range of complex global challenges to which there are no simple or quick solutions.
No individual person, team or organisation holds all of the answers so we must dig deep to find the will and the energy to collaborate at all levels and across all disciplines.
As leaders, we have a clear choice to make, to hope that what we have in our toolkit is enough or to take this opportunity to invest in the capabilities that will enable us to survive and thrive in a disrupted world. The prize is something that we see too infrequently – a truly sustainable path to stakeholder and shareholder survival.
Ruth Murray-Webster and Eleanor Winton, are experts in risk, disruption, innovation and foresight and co-authors of new book The Disruption Game Plan: New Rules for Connected Thinking on Innovation & Risk.
