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Risk management is a part of innovation


For an organization looking to introduce an Innovation Program there are two types of risk management required.  The first risk management is that the culture of an organization may not have been well managed and an individual putting forward a well thought out constructive suggestion will be forced out by the corporate culture.  This may seem incredible, but it actually happens.  I will discuss this in later posts. The second risk is one of the processes of managing ideas and creativity.


The process of innovation today requires the realization that knowledge workers deal with ideas, tools and creativity to innovate and often produce new intellectual property assets that are systems based and that the existing and traditional methods of management and control may not be able to readily cope with a new concept or process. Knowledge workers are often able to work around existing systemic controls (if they exist) to accomplish exceptional results (profits) and losses. This is why a formal evaluation process by the organization is required so that a team process is used and the risks of the change proposed can be identified, discussed and managed.


 Risk management processes that lag behind innovation can lead to disastrous results.  A classic example of this is the collapse of Barrings Bank Plc which resulted from trading in derivatives with inadequate controls.  It is for this reason that organizations developing an Innovation Program (I.P.) should think through all the issues prior to going down the path so that the I.P is holistic in its approach.  In this way participants know that in putting forward an idea that they will be supported and the team will discuss and evaluate it thoroughly.


Innovation management needs the right culture and leadership


Innovation needs the commitment of the leadership team.  An interesting example is the Innovation Services of the Australian division of Deloitte Touche Tohmatsu.  To read more about how Deloitte embedded innovation in the DNA of their Group go to http://www.deloitte.com/


Knowledge work needs to be managed


Jack Bergstrand in his book Reinvent Your Enterprise talked about the need to manage knowledge work to improve productivity.  Knowledge work improvement is based on creativity, ideas and innovation.  The writers at Wikipedia have some interesting discussion on the issues involved at http://en.wikipedia.org/wiki/Knowledge_work_productivity Here is an extract:



Managing Knowledge Work to Improve Productivity

Throughout Drucker’s life he emphasized that the next level of economic growth [6] needs to be driven by knowledge work productivity — requiring that managers simultaneously make their present Enterprise more effective, identify and realize its potential, and create a different Enterprise for a different future [20]. In so doing he suggested that business leaders needed to continually shift resources from less productive to more productive areas [21] through better knowledge work productivity and innovation.

Manual work is visible, specialized, and stable, whereas knowledge work is invisible, holistic, and ever changing. Unlike manual workers, knowledge workers use their situational knowledge to get things done in a dynamic environment. They are almost always formally educated and are called upon to run and change their functions and organizations simultaneously.

Knowledge workers acquire knowledge—through a combination of education, experience, and personal interaction—and then use that knowledge to holistically achieve organizational goals in changing environments. This work is generally much more project oriented than manual work, and Enterprise productivity improves faster when one area of knowledge can be rapidly transferred to another.

One reason that knowledge work has been difficult to manage is because of its nature to expand to fill the available time [22]. It is also commonly stymied by organizational disconnects within and across hierarchies [23][24]. To manage the invisible and elastic nature of knowledge work better, Drucker suggested that we think about it more systematically. He advised that Enterprises strive to remove unproductive work, and restructure work as part of an overall system to create a satisfied customer. In this light he suggested that knowledge be organized through teams – with clarity around who is in charge at what time, for what reason, and for how long [4][5].

To create a working system to manage knowledge work more productively it’s useful to compare and contrast Taylor’s thinking on manual work with Drucker’s on knowledge work:

Frederick Taylor on Manual Work

Peter Drucker on Knowledge Work

Define the task

Understand the task

Command and control

Give Autonomy

Strict standards

Continuous innovation

Focus on quantity

Focus on quality

Measure performance to strict standard

Continuously learn and teach

Minimize cost of workers for a task

Treat workers as an asset not a cost

Source: Reinvent Your Enterprise


The successful introduction of an Innovation Program into an organization or an industry is not easy and requires strong leadership and integrity.

In the next post I will look at the phenomenon of Group Think and innovation.


Jack Taggerty

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