It’s A Whole Lot Easier To Take Risk When You Have Nothing To Lose!

I was at a meeting last week of large enterprise innovation leaders.  We meet a few times a year and discuss the issues we face in trying to accelerate innovation at our respective companies.  What always amazes me is that whether you make rocket ships, toothpaste, drugs or even provide professional services, the core issues of innovation remain the same.  We all face similar issues around adoption of new innovations, getting management to understand the nature of breakthrough innovations, dealing with the resistance of existing business units to new ideas.  During this meeting one of the members made an interesting presentation about the history of a new innovation they were introducing into the market.

The product they were discussing was clearly a breakthrough and potentially even disruptive innovation.  It had been under development for a number of years and was now in customer trials.  One of the most interesting aspects of the presentation was how the innovation team found that the finance and legal functions were among the most resistant to the new product.  Each group was concerned about the risks this new product would create for the firm.

Finance kept insisting on seeing sales projections showing rapid growth to a very large sales volume.  Unfortunately like many disruptive products, it was very difficult for the team to commit to sales volumes since they had only some preliminary ideas on who would use the product.  Although they had a clear initial target market who was very excited about the product, the team believed that they were introducing an entirely new capability to the market which would be very attractive to a much broader market. The problem was that until the product was established, it would be difficult to these new customers to figure out how to use it.

The legal department kept worrying that if something went wrong the firm’s brand would be damaged.  Although the product had been extensively tested, the potential for problems still remained.  Meeting after meeting was spent in trying to convince the attorneys that although problems could occur the team had plans in place to mitigate any problem as it arose.

The company making the presentation was founded about 30 years ago by a small group of entrepreneurs who ended up disrupting an established industry.  The story about the company’s founding has been widely documented involving a few people with a completely radical idea of how to provide an important service.  The company started in the proverbial small warehouse with the initial few employees working around a single table that first night.  From that humble beginning the company has grown to a global enterprise whose name is a household name.  Employees retell the story with pride, proud to be part of such an amazing success.

I found myself wondering what had happened to the spirit of the original founders and how had a company founded on a disruption become so resistant to innovation?  Where’s the original founder?  He was clearly a risk taker, so how did he allow his company to become so conservative?  How had the conservative forces gained so much power in such an innovative company?  If a company as innovative as this was now resistant to new innovations, was there hope for the rest of us?  What had changed from that night 30 years ago to today?

After thinking about it, I realized that a lot had changed.  There only a handful employees when the company was founded and possibly even fewer customers.  If things went horribly wrong the worst that would have happened is a few customers would be unhappy and five or ten people would have to find a new job.  The risks have risen considerably over the past thirty years.  There was now a lot more to lose.  Today the company has over 200,000 employees and tens of thousands of customers.  It is publically traded with a market capitalization of over $50 billion.

This insight has given me a new perspective on risk and company maturity.  It may not be that companies grow less interested in new ideas as they mature, it may merely be that they have more to protect.  The CEO of this company is probably no less interested in disruptive ideas today than he was 30 years ago.  He just doesn’t have the luxury of having just a little to lose.

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7 Responses to It’s A Whole Lot Easier To Take Risk When You Have Nothing To Lose!

  1. Marisa Walls says:

    I liked your blog. I agree taking risks when we have little to loose is easy to do! Wanted to share the following quote from Charles Darwin: “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.” I believe this is the reason why that same company you mention in the blog was able to found a thriving company based on that same very disruption, in the beginning. According to Clayton Christensen’s book The Innovator’s Dilemma, When New Technologies Cause great Firms to Fail, three things are at risk: quality, safety, and program execution. I agree those with nothing to loose will risk more and thus, cause great Firms to fail – I love the quote:
    Charles Darwin: “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.”
    Great blog!

  2. Hedi Regaya says:

    Very good article, the conclusion is logical.
    But this kind of companies could create smaller ones (parents) for instance by encouraging their employees starting their own businesses and trying to create disruptive innovations this way; result would be: less to lose to take more risk.

  3. Fascinating article and incredibly true for any field; have seen this myself over various companies. This article neatly sums up the growth in almost any bleeding edge field, where either you are cutting edge, or left bleeding…

  4. The path is not scale anymore it is focus. The need of the large company is to reduce the risk by spinning out and managing each of the growing large opportunites as seperate entities. Cisco has been good at that. The CEO can create greater wealth for the shareholders by realizing the opportunities but in a more controlled way, with the golden eggs distributed across different baskets to hatch and grow in their unique ways!

  5. This is true and far more obvious to serial entrepreneurs, for what appear to be obvious reasons, particularly for those of us attempting to sell products and/or services, partner, and improve upon corp innovation. One would think then that with so much to lose that crisis prevention would be a higher priority, but the holistic systems necessary for either seem beyond the grasp of most– it is apparently perceived to be safer to accept systemic risk, as case after case has demonstrated.

  6. ideasmile says:

    Very nicely balanced article.
    Disruptive innovation culture is not easy to imbibe. Fear of failure keep keep people away from trying new things and taking risks, especially when you have accomplished certain level and people look at you as “Successful”. This is specifically difficult when companies have to meet shareholder’s expectations.. can’t afford to take “Risk”. Having that said, companies like “Google” empowers employees to take risks, try new things and rollout as <a href ="http://www.ideasmile.com/ideasmileblog/2010/10/its-not-buggy-its-in-beta.html&quot; title="beta". Its a culture of disruptive innovation.

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