Strategic Risk Assessment–2/6

2010-07-22 / How to do Risk Assessment / 0 Comments

This is a revised series on the risk manager’s role in achieving strategic resilience. I discussed in part 1 risk methodologies, and establishing context in terms of companies’ mission statements. In this post I address the remaining parts of Strategic Identity: Special Relationship and Values, Unique Assets and Competencies, and process for Innovation.

Stakeholders and Organizational Values Special Relationship signifies a particular stakeholder or client group that your mission may serve and that therefore is part of the organization’s identity. It refers to the history and unique sorts of connections your organization has with regard to this group. The Vision statement will illustrate the desired future state of this group; i.e., its anticipated evolution. Values may be less familiar as defining elements of an enterprise. They give character and humanity to the organization, and define how it wishes to engage with the world. Values can take the form of ethical or professional standards, or business rules and operating guidelines, whether required by statute or not. While treated as platitudes, the enactment of values affects the quality of the organization’s contribution to the world. The point in planning is to consider how how values contribute to the organization’s reputation, and how they constitute a source of economic worth.

Competencies and Process of Innovation
Unique Assets and Competencies will be: 1. concrete, like a certain technologies and associated equipment and infrastructure; 2. less tangible, such as skill sets and intellectual capital; 3. abstract, such as the configuration of the business model or place in a supply chain that gives competitive advantage. Some of these might be so unique and deeply ingrained that they define the character of the firm itself.

Finally, process of  innovation is not a fringe activity, but a core competency. It signifies organizational vitality, as these quotes indicate:

“…management innovation has created the most enduring source of competitive advantage.” ~ Gary Hamel

“The ability to learn faster than your competitors may be the only sustainable competitive advantage.” ~ Peter Senge

What the Capacity for Innovation requires is the subject of the online course Creating Value: Risk Manager as Innovator. We suggest that the risk manager is in a good position to facilitate the systematic identification of opportunities to acquire new income streams, and develop new practices and business models. This is now a virtual necessity. This model of Strategic Identity, which started in the last post with Mission and Vision, might help you to differentiate and better articulate the characteristic elements of your organization. You don’t have to use all parts of the model. Notice that they consist of both content (assets, knowledge) and process – particularly, innovative capacity which signifies adaptability and flexibility. While all parts of the strategic identity are subject to change, the idea is to set out the relatively stable basis of the firm. The reason for doing so is to give a frame of reference for the wider purpose of this series of posts: to integrate risk assessment and strategic planning. The next post will address environmental scan.

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Leadership in International Business Innovation

2010-06-15 / Management Innovation / 0 Comments

International business managers, when thinking about funding innovation, can use generally observed principles to assist creative efforts in their firms.

International business sustainability, ethics and other challenges of globalization are going to require innovative methods, and there is no reason why IB managers and risk professionals, who are specialists in opportunity, cannot facilitate the process.

I created an online course Creating Value: Risk Manager as Innovator, launched November 2009, in response to the economic climate, with the mission of encouraging risk managers to take up the leadership of the process for innovation. I was interested to see that a scholarly paper published that same month reached similar conclusions: “Examining the Leaders of Creative Efforts: What Do They Do, and What Do They Think About?” (about 6000-word length), an award-winner by Byrne, Mumford, Barrett and Vessey, in the journal Creativity and Innovation Management. I do not think this article was intended to present original research – it is a useful literature review. Here’s a synopsis, with commentary.

First, the authors recognize the imperative in today’s environment for “innovative products and services”, and cite prior research finding that “participatory leadership” and “supportive supervision” are conducive to innovative results. They refer to a taxonomy of behaviours for innovation leadership, including “intellectual stimulation” and “organizing feedback.” Creative people show consistently a high degree of achievement motivation and indeed, a certain psychological profile.

The authors discuss the innovation process, which I summarize roughly in this diagram:

 

They go on to cover nuances of the innovation process: a favourable work atmosphere; environmental scan; alignment of the work with the organization’s goals; funding innovation efforts; as well as feedback and critique – applied constructively and at the right time.

An interesting point: they cite prior work (see their reference to Curral et al. 2001) establishing that “for optimal results, a creative team should consist of about five to seven individuals”. I’ve often thought six to eight persons is the ideal for a facilitated session: fewer means insufficient diversity of views; more means you change the group dynamics and cut off participation.

According to their findings, the leader of innovation should have “technical skill or expertise” in order to:

  • represent the creative team;
  • communicate with them;
  • assess their needs;
  • mentor those less experienced;
  • select appropriate projects;
  • evaluate proposed ideas;
  • give feedback.

I wonder whether, by “technical expertise”, they mean within the domain of the innovation work itself. I would think not – rather, it is a multi-disciplinary background, facilitation skills and, as they say, creative problem solving abilities, that allow the innovation leader to be effective.

I was a little surprised that innovation, in their discussion, seems to be oriented solely towards products and services. Other targets for innovation – and more relevant ones, arguably – should be systematically investigated, such as business models, administrative or technical processes, interactions with stakeholders, and customer experiences. I propose a  model incorporating a) targets of innovation; b) innovation methods; and c) a series of levels of benefit, from mere compliance to improving industry practice and effecting wider social change.

The authors acknowledge risk and uncertainty in the innovation process, which in a sense makes it the natural domain of risk managers – not excessively risk-averse managers, but rather risk-optimizing individuals who feel the need to expand their role of risk facilitation to help create new sources of value.

Finally, the authors address “fielding” (pilot trials) and “plan execution”. I think it’s necessary to make full use of the principles of program implementation and change management to ensure that your innovation pilot – whether a new product or service combination, management practice, workflow, process or business model – has the best chances for success.

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