Yes, innovation’s worth the risk

“If it ain’t broke, don’t fix it.” It’s a sentiment closely tied to concepts of stability and a frustratingly effective barrier to innovation. Why risk throwing the baby out with the bathwater by trying something that could endanger the status quo? The trouble is, stability itself was debunked as a concept long ago by economist Joseph Schumpeter and others. “Capitalism … is by nature a form or method of economic change and not only never is but never can be stationary,” Schumpeter wrote in Capitalism, Socialism and Democracy. “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates.” Creative destruction, a term Schumpeter popularised, describes the waves of growth, decay and rebirth that drive innovation in the capitalist system. Seven decades on, many leaders are still loathe to nominate innovation as a core business activity despite evidence those waves are coming at ever-faster intervals. Tim Kastelle, an innovation researcher at the University of Queensland, believes many use risk as a justification. “But is innovation really so risky?” Kastelle asks. “Yes, a new idea might not work. But in many cases, not innovating is even riskier.” In their book, Breaking Away, co-authors Jane Stevenson and Bilal Kaafarani explore the link between innovation, leadership and culture, and the risk tolerance required to catalyse and embed innovation activity. Their research led them to distil innovation activity into four major types: transformational, category, marketplace, and operational. Not surprisingly, transformational is the most challenging and therefore carries the greatest risk.  “Transformational innovation … also has the highest worth,” Stevenson and Kaafarani say. “Because it’s perceived to be risky, many companies are leading with marketplace or operational innovation. You do need those, but in reality the economy needs more than just that. We need to be developing something for our children and grandchildren.”  Their key message: “Don’t let your innovation investment and culture fall prey to the short-term mindset.”

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