May 4, 2016
The myth of the ‘risk averse’ culture
Risk Blind Spots in innovation
1. You avoid loss more than you seek gains
2. You value the near term more than the long term
"You overvalue what happens to you now over what happens later. For example, you will likely prefer a gift of $100 now versus $110 next week.2
If you are choosing between launching a line extension that can be in the market this quarter versus a potentially more impactful item next year, you will likely pick the product and more immediate impact for next quarter."
How to better assess risks and avoid your blind spots
Getting honest with yourself about how to assess risk equips you to make better decisions. And it helps you be a better champion for innovation. You can highlight natural biases, as well as paint a fuller picture of the opportunity.
You can turn risk from an excuse into a tool.
To assess risk more objectively in your organization, start with this approach:
- Describe the potential outcomes of doing and NOT doing something.
- Surface natural biases by outlining those outcomes across 2 axis; now-later and loss-gain (see diagram)
- Fill in gaps to make a more complete risk and opportunity picture
Download the risk assessment worksheet
Download the risk assessment worksheet to assess your own ‘risk blindspots’ and decision making.
1For more on loss versus gain, check out Prospect Theory, Tversky and Kahneman.
2For more on now versus later, check out Hyperbolic Discounting, Liabson