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Embracing Risk To Grow--A Must Read For All CEOs.

Posted by: Bruce Nussbaum on May 16, 2007

Diego Rodriguez and Ryan Jacoby have written an insightful piece on risk for one of my favorite magazines, Rotman Magazine, from Roger Martin’s Rotman School of Management, and we are running most of it on the Innovation & Design channel. They describe how designers approach risk very differently from the way business people approach risk. Different in a better way.

Here is the heart of their wonderful argument. Anyone involved in innovation and design needs to understand this:

Risk, to business people, is something to be avoided. It’s an assessment of the downside of taking an action. It’s bad. In B-School, you are taught to break down a problem (everything is a “problem”) into its parts, and solve them. Wrestle them to the ground.

Risk to a designer, is “a measure of the upside” of taking an action. It’s an opportunity. It’s good. In D-School, you see risks as options to be embraced, pondered, analyzed, and—above all—chosen. You like risk because it gives you options you can choose from.

Designers like risk because they learn from them. They learn from failure and mistakes.

And—this is really important here—designers like risk because their process actually mitigates risk. Let me repeat—the design process cuts risk. When you do design (or innovation—whatever you want to call it), you use ethnography, prototyping and story-telling to develop a product/service/experience. These processes actually reduce risk.

This is a fact that most CEOs simply do not get. It is far riskier to come up with a new technology in the labs, make it into a product and then throw it at consumers than it is to first start with your consumers to find out what they really need and want (the essence of design).

If you don’t get Rotman Magazine, you should. In fact, get all the back issues. This current issue on Risk is just brilliant.

Reader Comments

Chris Conley

May 17, 2007 5:43 AM

Well, the semester is out and I just finished the Gravity Free conference in Chicago so I'm getting back into the blog-o-sphere before ID's Strategy Conference. Loving your posts, Bruce! At Gravity Free, a number of the presenters talked about designers being bigger risk takers than business people as well. I agree that designers better understand learning from failure and that a good innovation process reduces risk. However, I don't buy the notion that designers are bigger risk takers. Actually one could argue that designers simply ask their clients to take risks on them and their work. Few designers put their own capital at risk. I would also argue few understand the notion of investment and return which is how risk is manifest and monetized in business. Designers mostly have a cost mindset just like most business managers. An investment mindset is something that needs to be taught and is part of a innovation toolkit. Until designers put up their own capital (and not just the proverbial sweat equity) and take real equity positions in ventures, the risk is truly being born by someone else.

Jonah Houston

May 19, 2007 4:04 AM

Isn't the desire to decouple financial risk from the decision making process one of the reasons that big companies hire small design firms?
Isn't that part of the value-proposition that "going outside" for innovation is supposed to bring?
I agree that it's useful for designers to have some business acumen so that solutions are economically feasible, but making design firms but skin in the game (who are often too small to afford to do much anyway) seems like more of a distraction than a way of getting better solutions.

samson john

June 1, 2007 6:19 PM

some risk could be so costly, it could terminate job, life,good business relationship and all the likes;i begin to wonder in this perspective how risk can be an advantage.Risk should be anticipated and minimised to forestall unusual negative experience.john samson

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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