Introduction
We’re all aware of the inherent dangers in taking risks. We’re generally less aware of the dangers in playing it safe. In a business context, that’s because there used to be some merit to playing it safe –– to having ambition but pacing oneself, choosing a slow, incremental trajectory over a fast, steep one. As Doug Sundheim, author of Taking Smart Risks: How Sharp Leaders Win When Stakes are High, writes in Harvard Business Review: “The dangers of playing it safe aren’t sudden, obvious, and dramatic. They don’t make headlines. They…are hidden, silent killers.” [1]
Without risks we wouldn’t have put planes in the sky or man on the moon, nor have any of the everyday innovations we take for granted. But for each of history’s bold risk-takers, there were many more steady, risk-averse contemporaries sitting on the sidelines. And for a long time there was nothing wrong with that. As Steve Dennis, a strategic advisor and author of Leaders Leap: Transforming Your Company at the Speed of Disruption and Remarkable Retail, writes: “A heavy focus on business optimization and continuous improvement was eminently sensible. Until it wasn’t.” [2]
Things have changed.
Dennis writes of the large-scale disruption we have seen in recent years. Businesses like Airbnb, Netflix, Uber, and OpenAI did not simply emerge as major players in their respective industries. They totally reshaped how those industries functioned.
“Many brands that moved far more cautiously, or that are currently slow-walking their transformation efforts, have dramatically increased their risk of irrelevance,” Denniswrites. “Or even set themselves on a path to extinction.” [3]
Such companies tend to follow a path of what Dennis calls “infinite incrementalism”. Essentially, every year these companies would offer a slightly better version of what they had always done. That’s no longer enough. Not with the speed of change we’re accustomed to in today’s world.
Rishad Tobaccowala, the former chief digital officer of Publicis Group and author of Restoring the Soul of Business, says that in recent years we’ve moved through three distinct “Connected Ages.” [4] Each “Connected Age” changed how we connect and do business. We went from e-commerce to smart devices, to 5G, VR, the cloud, and AI.
The state of business today is unrecognisable from what it was twenty years ago. And who knows what it’s going to look like twenty years down the line? No one is quite sure and there are no guarantees. But the idea that one can just drift along at a snail’s place without being left behind feels increasingly naive. As the landscape shifts, businesses must shift with it.
Dennis concludes, “Faced with constant and accelerating change, doing what we’ve always done but just a little bit better may feel safe, but it is often the riskiest path we could possibly choose.” [5]
Rethinking our relationship to risk
To stop playing it safe, companies need to reassess their relationship with risk. Of course risk can bring failure. (As we’ve established, playing it safe can too.) But those failures don’t need to be failures. Through a shift in mindset, they can instead be viewed as opportunities for learning.
“If we are open to taking more risks, it’s more opportunity for diverse experiences and more opportunity to learn and grow as individuals,” says Jon Levy, author of The 2 AM Principle, speaking to Forbes. “It isn’t the success or failure, it’s who you become in the process.” [6]
This approach is in line with that of Microsoft CEO Satya Nadella. Nadella moved Microsoft from a “know it all” to a “learn it all” culture [7]. That meant that rather than condemning staff for taking risks that failed, he would reach out to congratulate them after a “failure”. What he understood that many don’t is that you can’t simply praise the risks that work and condemn those that don’t. You have to create an environment in which your team feels comfortable failing and doesn’t fear facing recriminations if things don’t work out. Such an approach can shift the mindset of the whole company.
Any cricket fans who witnessed the ‘Bazball’ revolution of the England team these past few years will have seen this approach in action. There was no change to personnel, just a change to messaging. If a player got caught on the boundary in the old administration they may be admonished for trying to hit a big shot. Under the new management, they were told “next time hit it even harder.” England had won just one Test from their previous seventeen prior to the change in approach. Following it, they won ten out of twelve.
Of course not all risk is good risk. There are many situations in which caution is a better option. The Silicon Valley mantra of “move fast and break things” has its uses, but it is not necessarily advisable to adopt it wholesale. As Dennisnotes, it might be better to move fast and fix things [8]. To do that, one needs to assess whether they are dealing with an actual risk or a perceived one.
Unlike actual risks, perceived risks are the ones we’ve bigged up in our minds out of a fear of the unknown. It’s not sending off that job application because you’re afraid you’ll get rejected; not trying that new strategy because you worry it might make you look stupid. Such fears are rational, human even. But they serve little purpose. As Eric Hutto, Chief Executive Officer at Diversified, writes in Forbes, “You can’t build a futuristic company when leadership has a legacy mindset that focuses on risk management over taking risks that could result in better performance.” [9]
One need only look at Amazon to see what can happen when a company takes a risk rather than settling for incrementalism. Jeff Bezos could easily have continued as a very successful online book retailer. Instead, he upscaled. The rest is history.
How to implement risk
A 2021 McKinsey study found that more than 80% of executives say innovation is among their organisation’s top three priorities, yet less than 10% say they are satisfied with their company’s performance. Meanwhile, 61% say their organisations are not adapting fast enough to stay ahead of disruption and 78% believe it is increasingly challenging to know which disruptive forces to prioritise. [10]
There is an appetite for risk. But that appetite is being outweighed by fear. The good news is that, ironically, there are ways to implement risk in a relatively risk-free way.
If you’re trying to cultivate a culture of experimentation, Dennis advocates for finding ways to “shrink the change” [11]. By that he means breaking complex and seemingly overwhelming initiatives into a series of more manageable pieces. In other words, don’t try to overhaul everything in one fell swoop. And don’t obsess over the final destination. Take it one step at a time.
Meanwhile, Sundheimrecommends creating a culture in which you question everything.
“What does this business look like in five years? What are our customers worrying about today? What will they be worrying about tomorrow? What are our employees seeing but not saying? Where are we communicating effectively? Where are we failing to communicate? What strengths aren’t we capitalizing on? What opportunities are we letting slip through our fingers? How would we try to beat ourselves if we were our competitors? What weaknesses would we exploit? And where are we settling for “good” when we should really be going for “great?”” [12]
Questioning everything helps ensure you don’t slip into a place of complacency and stagnation. As Sundheim says, it makes it “more uncomfortable to play it safe than to think critically and take risks.” [13]
Writing in Forbes, Rhett Power, CEO and Founder of Accountability Inc., recommends three risks that are usually worth taking, even for those who are generally risk-averse. They are: (1) Moving forward without substantial investor support (2) Hiring on a tight budget (3) Growing your business. [14]
Moving forward without substantial investor support forces one to focus on only the most essential components of their business –– a useful exercise for anyone. Hiring on a tight budget is important because it stops one from taking their team for granted, overloading them with work in the belief that they can pick up the slack. It might work short-term but long-term leads to burnout, resentment and lower-quality work. If you can’t afford to hire full-time, get someone part-time.
While acknowledging that growing one’s business too fast can be a nail in the coffin, Power says that “the risks associated with growth are worth the opportunity to see more success for your business and your team.” [15] To grow successfully, he recommends not conflating overheads with infrastructure and having an operational infrastructure that transcends your employees and management team.
The dangers of playing it safe
Taking risks is dangerous. But so is playing it safe. In a fast-moving global order in which the foundations that held up industries for decades can crumble almost overnight, infinite incrementalism can be a silent killer. Companies need to be open to risk.
To start embracing risk, businesses must first shift their relationship with it. Risk is not an opportunity for failure, it is an opportunity for learning. That does not mean moving recklessly. Rather, it means assessing whether a risk really could be perilous or that’s simply a perception. Companies want innovation. They need to accept that they’re going to have to take some risks to achieve it.
More on Risk
Innovation: Gains, Risks, and the Grey In Between
Sources
[1] https://hbr.org/2013/10/the-hidden-dangers-of-playing-it-safe
[2] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[3] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[4] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[5] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[6] https://www.forbes.com/video/5193863769001/why-you-should-take-more-risks/?sh=1a7db99e1351
[8] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[10] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[11] https://hbr.org/2024/03/why-playing-it-safe-is-the-riskiest-strategic-choice?ab=HP-topics-text-28
[12] https://hbr.org/2013/10/the-hidden-dangers-of-playing-it-safe
[13] https://hbr.org/2013/10/the-hidden-dangers-of-playing-it-safe
No risk, no reward. It’s a common enough expression, albeit one generally ignored in both business and life in favour of risk-averse stability, to the detriment of both success and satisfaction.
The Strangest Secret
Earl Nightingale was an American radio personality, speaker, and author known for his motivational works. His 1956 spoken word record, The Strangest Secret, sold more than a million copies, making it the first spoken-word recording to achieve Gold Record status [1]. However, it is another of his records that is the focus of this piece [2]. In this record, on the topic of the value of risk, he argues that risk-taking is not only a profoundly necessary endeavour for anyone hoping to get ahead, but also, paradoxically, not that risky – if done right.
It’s a message as relevant today as it was then.
Defining risk
Risk is any action or decision that carries an element of uncertainty, with both potential gains and losses. In business, it encompasses everything from launching a new product in uncharted markets to making significant financial investments.
Nightingale is quick to point out that there is a big difference between taking a calculated risk and a more abstract one. The former is “the man who risks all of his time on a goal he wants to reach, on a dream in his heart, who stakes his livelihood and the livelihood of his family upon his own brains and the proper use of his time and tackles the world single-handed. Here’s the risk-taker, to whom the spoils will generally accrue.” The latter is “the impractical dreamer and stargazer.”
He posits that the vast majority of people in the world are not risk takers. According to data of the time, “98% of men in the country are looking for security in their work. That is, they’re mainly interested in losing themselves deep in the warm, nourishing viscera of some large corporation.” (It should be noted that his recording was made at a time when men made up the majority of the workforce, but that his points hold relevance for all genders, in and out of the workplace.)
While he has no problem with those who choose to prioritise security, he notes that there are many benefits afforded to the risk-taker above such people, whether that risk-taker ultimately ends up succeeding or not.
The risk-taker, crucially, must think. Meanwhile “the man with the good steady job who’s familiar with his work and surroundings can go along pretty well from day to day without doing any creative thinking at all.” Such workers, whom Nightingale refers to as the play-it-safers, don’t need to do any more than they have to do. They are masters at getting by. Steady, secure, and ultimately unchallenged.
Meanwhile, for the risk-takers, forced to spend their time thinking, other doors open. Because anyone who spends a great deal of their time thinking “is going to come up with a good idea once in a while. The law of averages is on his side.” And all it takes is one good idea to succeed.
The risk paradox
The paradox at the centre of Nightingale’s argument is that risk-taking, if done properly, in other words by dedicating oneself wholeheartedly to a craft or idea and putting the work in, is far more likely to make one successful than playing it safe. Strange as it may sound, risk-taking is not that risky.
Part of the reason risk-takers have a surprisingly strong likelihood of success is that they are a rare breed. At the time of his recording, they made up 2% of the population – “and since [the risk-taker is] generally working on an idea that will in some way serve the big 98%, the odds swing rather favourably to his side.”
The role of failure
Why is it that risk-takers are such rarities? Well, because “anytime you attempt anything in which you risk failure, you run the risk of having people laugh at you.” Nightingale gives the example of Alexander Graham Bell, who was ridiculed all across New England while trying to gain investment for his grand idea – a device that let the human voice travel down a wire. He was mocked, then mocked some more, until eventually his idea worked, at which point he went from being the town laughing stock to a seismic historical figure who expanded the scope of human communication forever.
A more recent example would be Lin-Manuel Miranda’s now infamous appearance White House Evening of Poetry, Music, and the Spoken Word in 2009, at which he performed a song from a new musical he was writing – a historical hip-hop number about one of the US founding fathers. He was met with laughter from some of the most powerful figures in the country, including then-President Barack Obama. Hamilton went on to become an unprecedented worldwide hit and somewhere along the line the joke stopped being funny.
Fear of being ridiculed holds us back. No one wants to look stupid, so we draw within the lines, unwilling to discover what we could do with a blank page. “Millions of people laughing in derision could not hurt us an iota, but we stand in mortal terror of it,” Nightingale says. “Men and women who can prove themselves heroes in great crises tremble before derision.”
In order to succeed, one must push past the laughter, as Bell and Miranda did. They must have faith in their ability and their idea, regardless of what others think. “To be great is to be misunderstood,” Nightingale continues. “We tend to forget that the greatest people, the greatest writers, the greatest teachers were, for the most part, in violent disagreement with their times and the way things were being done.” Failure is all but guaranteed in any walk of life. Risk-takers realise there’s nothing wrong with that. They don’t take it personally and they don’t let it hold them back. Play-it-safers see failure as the end of the world, and “it has cost much…sometimes the price of a laugh has meant the slamming of a door of fame and fortune or even immortality.”
Don’t look before you leap
Nightingale rails against what he refers to as the “winner in the useless information department”, the advice to “look before you leap.” This advice, he says, “is a good recommendation for swimmers and jumpers but as far as life is concerned it’s impossible to do. We can look backward. We can see the results of our past actions and learn from them but we can’t look into the future.”
We can’t know what will happen. We can’t “look”. As such, many choose not to leap at all – and another door closes.
Nightingale states that there are two vital criteria for any “leap”. (1) It should be towards something we want with all our heart. (2) It should be in a field in which we have a good background of experience or at least in an area related to our past experience.
This correlates with his earlier assertion regarding dreamers and stargazers, and the lack of risk in risk. Risk, as he recommends it, is not risky precisely because of these determining factors. One is operating in a field in which they have a genuine understanding and they are applying themselves fully within it. He makes the comparison with a successful group of wartime pilots known as “aces”, thought of as fearless daredevils. They took enormous risks in battle but survived. But while these pilots were certainly offensive in battle, they were not reckless. Nightingale notes that, in fact, they tended to be meticulous about the state of their aircraft and their preparation. They took risks when they needed to because they thought it would give them an advantage. There is an enormous gulf between such an approach and that of a kamikaze.
When to risk?
For those fighter pilots, it was fairly obvious when risk was required: they were up in the air with enemy squadrons approaching; something had to give. In life, things tend to be less straightforward.
Let’s say you’re working a normal 9-5 while starting your own business on the side. How do you know when to commit to the new venture full-time?
Or perhaps you’re pitching a new client. You want them to work with your agency and you have a safe approach to fall back on, something tried and tested, but you also think that pitch has grown a little stale, especially for this slightly more out of the box client. You have an idea for something more left-field, more colourful, that will make you stand out from the competition, but could also make you look a fool. Which way do you go?
Nightingale’s advice for incorporating risk is as follows. “When a situation comes along that involves risk and you don’t know whether to go ahead or hold back, reassess your goals. What are you trying to accomplish? What are you working toward? Will taking this risk, if it works out successfully, help you towards your goals?” If the answer is yes, give it a go.
It could go wrong, of course. You could fail, be met with laughter and derision. But a lot of eventual success stories start that way.
More on Failure
You’re Not Perfect, So Stop Trying To Be
Bouncing Back from Professional Failure
References
[1] https://www.pr.com/article/1064
Innovation is everywhere. It always has been. From the discovery of fire through advances in weaponry, healthcare and industrialisation, humanity has always found a way to adapt to the latest grand alteration; the next big thing. Invariably, once something as profoundly groundbreaking as the aeroplane or the internet comes along, change is wrought. Old practices are overhauled, then quickly shunted into the annals of history to be either forgotten or roundly mocked – can you believe we used to…?
And yet, to trudge through the mastheads, web blurbs or corporate video montages of almost any organisation today is to see and hear the word innovation endlessly. It’s wielded freely and often vaguely, to the extent that its meaning is diluted if not lost entirely. You’d be forgiven for thinking, given its overwhelming prevalence, that innovation itself was a 21st century innovation. Some of the companies claiming to be innovators are indeed just that – Apple can justly lay claim to having changed the way the majority of people operate in their day-to-day lives. Others simply know how to cash in on a buzzword when they see it.
But what actually is innovation? What does it offer businesses? How should it be used? What are risks and tradeoffs of pursuing the oft-discussed “innovation mindset”, and can they be side-stepped?
What is innovation?
Innovation is a bit of a catch-all term, but generally it just means finding a better way of doing things. That doesn’t necessarily mean inventing something new, though that is of course included. Innovation is just as much about fostering improvements to existing processes and ideas as it is about designing some groundbreaking new product.
When Alexander Bell first communicated with someone on the other end of the phone line, that was an innovation. When industries moved in their droves from the traditional in-office 9-5 to a hybrid working system just a few years ago, that was an innovation too, albeit one forced by global circumstances. It can be too easy to believe (the self-promotion of self-proclaimed) innovators and think that innovation must be cut-throat: the death of the old way; the birth of the new. In practice, things are rarely so straightforward. Which is a helpful reminder of what innovation is not.
Innovation ≠ disruption
Innovation and disruption have come to be seen as one in the same. This is understandable as some innovations are disruptive. Naturally, the more disruptive the innovation is, the more coverage it will receive, thus developing an associative bond between the two in the mind of the public. Uber and Amazon would be prime examples of disruptive innovators. Almost overnight, industries that we took for granted were irrevocably changed. Many taxi drivers, as well as booksellers both commercial and independent, lost their livelihoods. Similarly streaming’s impact on the entertainment industry has seen a total upheaval in how multi-billion dollar organisations now operate, whether that was Netflix’s obliteration of Blockbuster or Napster and its contemporaries’ shake-up of the music industry that paved the way for Spotify’s ascendency.
But there exists a far more gentle (and far more prevalent) form of innovation; W. Chan Kim and Renée Mauborgne, authors of Beyond Disruption: Innovate and Achieve Growth Without Displacing Industries, Companies, or Jobs, call this “non-disruptive creation” [1].
Non-disruptive creation is defined as a means by which new industries, new jobs, and profitable growth come into being without destroying existing companies or jobs [2]. The obvious benefit of such forms of innovation are that they can “foster economic growth in a way that enables business and society to thrive together” [3]. Chan Kim and Mauborgne are swift to differentiate between this non-disruptive creation and disrupting, noting that, “Disruption imposes a clear trade-off between winners and losers…That’s because the leap in consumer surplus provided by the disrupter can nearly wipe out the existing industry and its incumbent players” [4].
Non-disruptive creation, on the other hand, “provides no evident losers and only minimal painful adjustment costs,” while having “a positive impact on growth and jobs” [5]. They cite Kickstarter as a good example of non-disruptive creation. The users were able to fund projects that otherwise would have struggled to accumulate backing; they could choose which projects they wanted to give their money to, as well as how much and how often, and artists on the site were able to realise their dream projects. No livelihoods were displaced. Everyone emerged a winner.
Chan Kim and Mauborgne argue that there is an increased demand from the public for capitalism to give back to society, rather than simply chasing the profit-at-all-costs ideology first theorised by Nobel Prize-winning economist Milton Friedman [6]. Non-disruptive creation, they say, is in-step with such demands.
Social defence
Whether an innovation is disruptive or not, it is still at the mercy of social defence. For innovators, social defence is the great nemesis, stifling their dogged pursuit of progress at every turn. As a definition, social defence is the – quite natural, and often unconscious – attempt to preserve the more traditional aspects of an organisation [7]. Essentially, the “legacy structures, strategies, or cultures that make leaders feel proud and their followers feel safe” [8].
To the innovator, such blockades to all things new and shiny can be sources of great frustration. They argue that change is on its way, if not already here, and that attempts to slow its approach are as futile as they are jurassic. But it’s easy to understand why legacy employees at a large and successful company would be reluctant to rock the boat. The old approach has carried them to such heights; it looks a dangerous game to turn around and bite the hand that has fed them so well. After all, new is not a synonym of better.
That said, change is inevitable, and there are plenty of examples of companies who fell by the wayside because they failed to see it coming, or outright ignored warnings it was on its way. Reactions of major industry players to large-scale innovations have been compared to that of grief, with denial and defensiveness featuring heavily [9].
The music industry’s reaction to the initial emergence of MP3 and streaming is a prime example. Unsure how to fold this game-changing new technology into its existing offer (or at least how to do so and still reap the major profits they were raking in at the time), they went on the offensive, suing the free streamers into oblivion. They won in court, but as Justin Timberlake’s smug grin tells you in The Social Network [10] (where he plays Napster founder Sean Parker), the major labels emerged from the affair as anything but winners. “You wanna buy a Tower Records, Eduardo?” Timberlake smirks, like the fourth horseman of the old industry’s apocalypse.
How should businesses approach innovation?
Writing in Harvard Business Review, Gianpiero Petriglieri, associate professor of organisational behaviour at INSEAD, argues that, “Leadership, at its core, is an argument with tradition. As a leader, you are always relating to a tradition that you are trying to preserve, expand, or change. That means, as a priority, that you must care about the tradition. Or, more precisely, you must care about what the tradition is trying to accomplish” [11]. This is where those desperate to innovate at all costs can go wrong. They see change itself as the destination, not the means by which they’re getting there.
Still, an openness to change is vital. This is at the core of the fabled “innovation mindset”. That mindset can be established in-house or it can be forced upon businesses by external circumstances. The Covid pandemic was a clear example of this. Workplace practices were altered almost overnight; overlong vaccination protocols were streamlined – only possible because the whole world was in step, a rare instance that likely won’t roll around again any time soon.
Susan Rienow, Country President of Pfizer UK, wrote as much in the New Statesman, saying of the incredible innovations and the speed with which they were introduced [12]:
…these kinds of breakthroughs don’t happen by chance. It takes the right environment, support and conditions for science and innovation to thrive. It is not just about expertise; it’s about mind-set and how we come together in pursuit of a shared mission. This mission-led approach and entrepreneurial spirit, coupled with collective and powerful collaboration, helped us achieve what had previously been unthinkable. This shouldn’t begin and end with Covid-19.
Risk vs return
The key, as is often the case, is balance. Genuine openness to change paired with an understanding of what your business is and why – as well as what would happen to it were that to alter. And it’s not solely about whether the business itself is fine to change. Equally important are the circumstances around the business, and its users.
All innovations change the trade-off between risk and return, and “many of the risks associated with an innovation stem not from the innovation itself but from the infrastructure into which it is introduced” [13]. What ardent innovators can miss is that the rate of innovation is often so high that it becomes counterintuitive to invoking systemic change – companies cannot restructure according to each new innovation because by the time they’ve done so the next innovation will have emerged to displace the one they’ve just changed to accommodate. Innovations can possess the most hurrysome of expiration dates – store in the fridge and use within 24hrs of opening, etc. – and so the urgency to adjust with haste feels palpable to the innovation driver. But if you were told the best way to store a bottle that’s soon to go off is to buy a new fridge, well, you can understand the reluctance. Especially when the next bottle is just a day away.
Which innovations are worth adopting or adapting for is a difficult call. Some will alter life as we know it forever; others will fade faster than last summer’s T-shirt tan. To an extent, it’s a gut call and a leap of faith. One that if you get right, can pay huge dividends. Approach with cautious openness, and do not fear the inevitable overhauls. Business, after all, is no more or less predictable or ephemeral than life itself.
References
[1] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[2] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[3] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[4] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[5] https://hbr.org/2023/05/innovation-doesnt-have-to-be-disruptive?ab=hero-main-text
[5] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[7] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[8] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[9] https://www.ericsson.com/en/blog/2018/5/5-key-steps-to-creating-an-innovation-mindset
[10] APA. Fincher, D. (2010). The Social Network. Columbia Pictures.
[11] https://hbr.org/2023/04/driving-organizational-change-without-abandoning-tradition
[13] https://hbr.org/2013/04/innovation-risk-how-to-make-smarter-decisions
