Assessing and developing risk management strategies is par for the course for project managers. Here's how to mitigate risk while keeping creativity and innovation alive.
Customers are the ultimate recipients of the risks or rewards of projects. Even though project teams bear the responsibility of project risks, the final outcome is borne by the customer. Reducing the risks that pose a threat to deliverables is critical; however, there's also a need to allow creativity and innovation the chance to take root.
This article discusses factors that impact innovation as well as some strategies to help project teams mitigate risks, yet still maintain the creativity to meet the customer's vision. Behind the reward of innovation lies innovation risk. Steven Minsky and Paul Walker discuss innovation vs. negligence in Risk Management Magazine. They bring to light these key points:
- Innovation, by definition, introduces risk, in fact, about half of the Fortune 100 have identified innovation as one of their key risks.
- If companies don't integrate regular enterprise risk management activities (ERM) into their innovation process, the results can often be counterproductive
- Enterprise value that can be lost through an ill-conceived move can exceed the operational costs of the mistake many times over.
According to Minsky and Walker, ERM isn't a barrier to innovation: "In fact, it simultaneously mitigates risk and supports the innovation process. But multiple factors have raised the bar for board-level enterprise risk management responsibilities," they wrote in the article.
SEE: How to build a successful project manager career (free PDF) (TechRepublic)
SEE: Project Management in Marketing (TechRepublic Academy)
Innovate with direction
"You can't truly innovate if you don't understand and survey your customers. Without the right customer data (or any customer data), you're innovating without direction, or worse yet, innovating under your own direction. Even your assessment of project risks will be faulty," said Alan Garcia, founder and CEO of Agreeable Research.
Understanding what drives customer decisions on risk and reward provides the link in knowing how to help them with mitigating risks while enabling innovation. Your customers need to reduce or remove risks that might lurk behind the scenes, but may still want to innovate and grow their business. The trouble is finding the right balance between the two and finding ways to understand how their products or services might impact their customers.
"When project teams take the time to effectively survey their customers and collect the right information, they gain a strong understanding of customer needs to guide their innovation. But even more importantly, the teams establish a rationale behind their efforts to innovate. This ensures greater buy-in around investments in innovation, and the best chances for success with the customer," Garcia said.
Garcia shared an example of this scenario from his work with a company looking to find ways to convert members to paid subscribers: "The company was focused on developing new services to entice free members to purchase. However, after surveying their audience, the company found out that conversions had less to do with relevant options, and more to do with the free members' awareness of the offers at all. This insight saved the company time and expense in developing new offerings, and instead allowed the project team to innovate around driving greater awareness for paid subscriptions."
Encourage teams to embrace innovation
Not everyone agrees on how to manage risk and promote innovation; in the Harvard Business Review, Sara Critchfield shares "How to Push Your Team to Take Risks and Experiment." She says "most managers I know want their employees to be curious and experimental, to take the initiative and develop new products and solutions. But, as it turns out, managers also like to micromanage and control outcomes through safe, predictable processes. As a result, managers end up stifling the very experimentation they want to foster." Critchfield further adds when it comes to remaining innovative in her experience, "the only way to encourage a team to be more innovative is to shift from a static, "best practices" mentality to a dynamic, "laboratory" mentality and to make each team member, not the manager, responsible for the results. Critchfield believes to accomplish this; managers can do four things:
- foster an environment of divergent thinking
- ensure everyone is responsible for their own tests
- normalize failure
- avoid using testing and data to create best practices
It also may be worth noting the lack of innovation, inaction or stagnation can greatly increase the chances of developing additional unforeseen risks. Avoiding risk and managing risk are two entirely different things; avoiding risk at all cost can stifle creativity and lead to unnecessary problems. Carefully managing risk while still fostering innovation can open the doors to new opportunities.Also see:
- How to understand your risk tolerance, and why that's important (TechRepublic)
- USCIS CIO shares two tips on encouraging innovation and experimentation (TechRepublic)
- Why innovation labs fail and how to make them succeed (ZDNet)
- How to manage your IT team through company transitions (Tech Pro Research)