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Making room for risk in high-performing companies

5 min read


To drive innovation, you sometimes have to “break” to achieve your breakthrough.

Tesla Motors is a perfect example of a company that disrupted its industry, despite the risks inherent in innovation. Founded in 2003 as a “boutique” automotive company, Tesla soon focused on the fringe electric car movement. When the financial crisis hit, Elon Musk came close to losing both Tesla and SpaceX. After General Motors and Chrysler went bankrupt, Musk found it almost impossible to raise another round of funding. Following the acquisition of $465 million in low-interest loans from the U.S. Department of Energy in 2009, Tesla was able to file an IPO and begin trading on the NASDAQ stock exchange.

Tesla’s subsequent efforts have been revolutionary. The company introduced a transformative driving experience to the market and continues to drive down the cost of electric cars — all under the guise of a 100-year-old mode of transport.

This type of innovation requires risk, and when growing from a startup to a stable, process-driven enterprise, the willingness to allow something to “break” is often lost.

Your company might have stormed out of the starting blocks full of vigor and a devil-may-care attitude, but to avoid falling into Doug Tatum’s “No Man’s Land,” you gave up flexibility for the sake of process stabilization. Before you knew it, efficiency became king, and strategies like Six Sigma and Lean took over.

Looking past efficiency

While your systems may now be smooth and efficient, they can hold you back from innovation opportunities that make companies stand out.

Chobani, a relative newcomer in the yogurt industry, is a prime example of differentiation through disruption. One of Chobani’s innovations is a manufacturing process that involves recycling a whey byproduct as supplemental feed for its local farms. This helps foster sustainability as part of a commitment to the environment and the communities Chobani serves.

Over time, many growing enterprises will seek to derive more value from their existing systems. This is where the process improvement journey begins. But once those processes are in place, many businesses lose room to maneuver. They might like the notion of innovation, but they don’t want the mess it can create.

Why you need breakthroughs

So, what can innovation messiness lead to?

  • Market leadership. Developing an innovative product or service can help you become the new industry standard. True innovation could even prompt the creation of an entirely new ecosystem in terms of process configuration and the customer experience.
  • Competitive advantage. Beyond the establishment of market position, innovation also empowers you to redefine the experience, attract new customers, and prevent competitors from delivering me-too products or services to market.
  • Increased knowledge. A company willing to break out or break through is actively learning about new markets and customers more rapidly and effectively than its peers. As the innovator, you create opportunities to learn, rather than only reacting to changing market conditions or copying more successful competitors.
  • Customer centricity. You will have the impetus to form a much closer relationship with customers. By actively engaging with your customers, your innovations can quickly gain marketplace acceptance. Respond to customers’ needs, and gather feedback that can stoke the fire for your next innovation.
  • Growth-engine acceleration. Breakthroughs become accelerants to growth. This translates to increased opportunities to attract and retain a more diverse customer portfolio, which enables broader market penetration and increased sales and attracts the right talent to keep your engine firing.

Handling risks

The potential problem with a flawless system is that one shortcoming can make the whole thing fall apart. Several strategies can help control risk as you allow for breaks in innovation:

  1. Portfolio diversification. Approximately 70% of an organization’s innovation resources should be dedicated to practical incremental advancements, but think in terms of a broad innovation portfolio. You can find the balance between the reliable and the unknown.
  2. Innovation network. Start with small teams dedicated to developing potential solutions to existing or predicted problems. As their impact grows, connect them to wider circles of participants.
  3. Integrated action. Make the demand for innovation part of your strategic planning and operational reality. Create resources for customer observation, solution ideation and experimentation. Give your teams the time, space and funds they need to attempt the new, wild and unique.
  4. Preventive action. Test your innovations with your audience. Make the exploration of new ideas a winning opportunity for all parties. Setting clear expectations with test customers makes the prospect of potential failure easier to manage and empowers those customers to contribute to the company’s growth. Conduct a “pre-mortem” to help you identify and address potential problems before they cause a loss.

Breakthrough innovation doesn’t have to be overwhelming, but it should be an adventure. By establishing innovation as a priority and delegating resources to it, you can regain your fire. You don’t have to risk everything to become a company that constantly explores new ideas and pushes the limits of what’s possible, but a little risk can inspire truly disruptive solutions.

Andrew (Drew) C. Marshall is the principal of Primed Associates, an innovation consultancy. He lives in central New Jersey and works with clients across the U.S. and around the world. He is a co-host of a weekly innovation-focused Twitter chat, #innochat; the founder, host, and producer of Ignite Princeton; and a contributor to the Innovation Excellence blog. He is also providing support for the implementation of the Design Thinking for Scholars model with the Network of Leadership Scholars (a networkwithin the Academy of Management).