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Innovation Risk Management

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization. 

By Kevin P. Riley
March 9, 2019

We are seeing greater pressure on public sectors across the globe to innovate. Here in Australia, the Australian government report, Australia 2030: Prosperity Through Innovation, provides a plan for Australia to thrive in the global innovation race. This report states the imperative that government becomes a catalyst for innovation and be recognized as a global leader in innovative service delivery.

The report recommends Australian governments use their collective strategic market position to promote innovation by:

  • Collaborating between governments to achieve a flexible regulatory environment that supports innovation.
  • Encouraging investors to pursue opportunities that generate both financial and social returns.
  • Accelerating the access and usefulness of open data.
  • Using government procurement as a strategic lever to stimulate national innovation.
  • Using process redesign and digital technology to improve service delivery.

Yet while we see the very clear direction being set for government to innovate, we also know that public sector organizations frequently demonstrate a culture of risk aversion. This can be due to elected leaders’ expressions that failure will not be tolerated. It could also be a result of public responses to failed efforts at innovation.

This was highlighted in a PA Times column by Keith Reester, Innovation is Driven by Failure.

So how do we meet these twin challenges? One way might be to be very deliberative in thinking differently when addressing innovation risk management. This will require us to distinguish our approach to risk management in a “business as usual” model from our approach to risk management that we take when actively pursuing innovation.

One solution to this challenge is having a different state of mind when engaging with innovation risk management.

Traditional mindset to risk management

Our traditional mindset of thinking about risk management could be described as industrial age thinking. In that mode, our mindset is focused on responding to the fear of failure. As a result, we address risk management by:

  • Reducing the likelihood and consequence of the fear of failure by implementing controls.
  • Eliminating mistakes from ever occurring by over engineering processes and not varying from proven approaches.
  • Needing to know the answers to every possible question before we proceed to the next step.

The outcome of this approach is that we create a culture that prevents the exploration and implementation of creative ideas to solving problems. We effectively drive creative ideas or innovation out of our mind, our language and our actions.

This might be fine for recurring business as usual models of operation, where change is not anticipated or even required.

A connected eco-system mindset to risk management

If we consider that we all work within a connected ecosystem, where we work in networks both within our organisation, and with external stakeholders, then we can look to apply connected age thinking to risk management. In doing so we will want to change our mindset, our language and our actions so that we:

  • Connect, enable and care about the needs and expectation of key stakeholders across our ecosystem to become deliberately focused on how we work together to achieve the purpose of the innovation.
  • Try new or alternative approaches right across our ecosystem so that we can be open to learn what alternatives might work best and identify what alternatives are unlikely to be successful before we commit to them.
  • Listen and learn from the other members of our ecosystem, because in pursuing innovation, by definition, none of us have all the answers.

The outcome of adopting a connected ecosystem approach to thinking about innovation risk management recognises that innovation risk management is dominated by shared risks. Where shared risks exist, controls are typically not as effective in mitigating risks. As a response we need to enhance the level of leadership and communication to effectively assess and respond to risks. This will require more dynamic and active risk management techniques.

Creating a culture of innovative risk taking

Being able to identify and bring emerging risk issues to the attention of senior management will require public sector employees to feel safe in doing so. The culture that supports innovative risk taking will typically demonstrate:

  • It is safe to ask questions, no matter what your level of seniority.
  • It is safe to not know the answer to a question, as long as you are committed to finding the answer.
  • Absolute clarity on the priority outcomes or purpose to be achieved through the innovative approach.
  • Respectful open, honest communication and behaviours, with an openness to hearing about bad news quickly.

Innovation is hard. It is harder when concerns about the use of taxpayer money are justifiable and expected. There will be times when innovative approaches will be discarded because they prove not to be efficient or effective.

However, unless we explore innovative opportunities in public service delivery, we will not fulfill the needs and expectations of our communities. Being open to innovative risk management requires us to deliberatively think differently. The innovative solutions we seek are best designed through connected ecosystems. By focusing on the connected ecosystem, we are in a much better placed to address the shared risks that typically exist in pursuing innovation.

Author:Kevin P Riley is the Managing Partner of GPA Partners, a Canberra based firm advising on governance, performance and accountability matters. Kevin was born in Warwick, R.I. and continues to follow U.S. governance arrangements closely. Kevin is a Fellow with both CAANZ and CPA Australia and is a Qualified Accountant with the UK based CIPFA. Kevin is a National Councillor of the Institute of Public Administration Australia Inc. Kevin can be contacted by email at [email protected].

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