Rewards by understanding risk

“Our doubts are traitors and make us lose the good we oft might win by fearing to attempt.” William Shakespeare, Measure for Measure

As many organizations transform, the intersection of belief and demonstrable value looms over everything we do. As designers, we aim to radically collaborate with users and specific disciplines to observe and ask the right questions about our organizations we work for, our markets and reflect and identify hurdles that impede value and deter innovation. We then prototype in order to learn and by iterating become wiser, confident and more focused in order to create iconic outcomes. In what ways will this transformation expose us to risk?

When one observes, one creates a hypothesis based on an observation based on limited evidence and assumptions. A hypothesis is not an end point, but a starting point of investigation which needs to be repeatedly tested and refined to become a working theory. Theories are agreed upon explanations of how something could work and has a good probability of being proven. In the beginning hypothesis is based on many assumptions based on belief, conviction or objective knowledge. Getting from hypothesis to theory to accepted model is not a linear process and can have many risks.

What is risk? Simply put, risk balances positive possibilities against negative probabilities. We often seem to identify more clearly the potential for failure than embrace the invigorating potential for success. Some negative probabilities have a high chance of happening such as the odds that if you do X, then y has a high probability of happening whille others have negative probabilities and a low to nonexistent chance of happening. In finance, stocks are riskier than bonds, but generate higher returns over long periods. So the reward for stock ownership is that an investor will enjoy higher financial returns, but there may be short term volatile cycles and higher risk. In the age of nautical exploration in the 1500s, merchants and ship owners wanted to defray the high level of probability of risk and the first organized insurance business was founded in 1688 at Lloyd’s Coffee Shop in London to underwrite risk. Risk is also linked to game theory where two players compete and both bring to the table a series of strategies to use against one another that could secure a level of utility that either player wants to achieve. Each player also brings their beliefs, convictions and experiences to improvise with game strategies which may tip the balance of who will win.

There are flavors of risk which fall either as a risk due to progressing towards one goal, or risk due to resistance keep things as they are. Progressive risks are due to new exposures that need to be addressed if one meets the overall goal. A new product may have a series of new metaphors, but the progressive risk is that there may be new infrastructure (needed) to support it that is currently not present. Conservative risks are due to existing beliefs and the status quo that is not ready for the outcomes or benefit of a goal. So a new product may have new capabilities and metaphors and the market is not ready for it yet. Abraham Lincoln in short 1862 Annual Message to Congress stated “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise – with the occasion. As our case is new, so we must think anew, and act anew.” This is where belief and convictions collide.

So risk is contextual to the area of endeavor and the goal. Depending on the level of risk and reward, someone may respond to risk through fear and retreat, or through curiosity and acceptance and try to understand and mitigate exposure. Risk is also associated with failure, which is linked to omission, shortcoming, and not meeting one’s purpose. As we have heard, Agile culture embraces fail early and fast culture which views failure as a learning curve to understand what doesn’t work, isolating it and iterating until a team gets the result it wants.

To innovate and to create meaningful change interrupts the status quo. In Mandarin, the symbol for risk is a combination of danger (crisis) and opportunity. Opportunity is associated with exploration where all an individual or company may have is a hypothesis and bits of experience that they project toward a desired outcome. Some people are more motivated by the promise of opportunity and have a much higher willingness to deal with ambiguity and unknowns. Others want the desired outcome, but are not willing to accept the same ambiguities and unknowns. Human nature tends to remember losses (the downside of risk) more than gains (the upside of risk) – so many people tend to be risk averse – even if there is a positive outcome.

Design is associated with exploration and creation of reinvigorated or new typologies that improve and benefit markets and users. The art of design is understanding the articulated needs of what stakeholders say they want and balancing them with the unarticulated needs based on what a stakeholders environment and behavior predicts they need. Predict is the operative word, and depending on these variables can expose a designer – or a team to levels of risk.

Some common types of risk :
– people to people (distrust or power plays)
– people to skills (lack of skills)
– people to values (lack of values or shared culture)
– people to process (too many protocols)
– people to time (lack of urgency or the ability to act in time)
– where the new meets established processes, procedures and protocols (we don’t do it that way)
– missing market cycles (too early or late)

Google X, the incubator for Alphabet, Inc. views itself as a “moonshot factory” tackling big problems, but have the skills to operationalize a desired outcome. As you can imagine in new territories the risks can seem very high. However, as a culture Google X views risk as a welcome factor where teams get stronger by testing their abilities to overcome risk at every turn. They are not afraid to keep investing as long as the goal is valid and can be achieved and then scaled. If a goal cannot be achieved, they are not afraid to shut a project down and even pay teams thenm shut them down. For most of us, we are not working on moonshot projects (even though they may feel like one), but are working on much more defined problems with more focused and understandable outcomes.

For simple problems where incremental change occurs, the future seems easy to understand. Yet, for more complex problems with many interdependencies and unknowns, the act of designing can easily fall apart. When designing the “new”, there is little precedent and many evolving opportunities, unknowns, and constraints. John Chris Jones, the British industrial designer who wrote the book Design Methods in 1970 saw the challenge of design:

“The act of designing is difficult because designers are given problems to solve by using current information to predict a future state that will not come about unless their predictions are correct.”

Creativity by its very nature has risk when looking at the world differently and proposing a typology that has possible social, political and economic ramifications. Some of the ramifications are purposefully addressed in our design responses, and others are unintended consequences of how other’s react to the projected future benefits and behaviors that do not exist in the present. All you may have is a hypothesis and bits of experience and you are projecting on a future you want to achieve before you start your journey. This is the difference between being alone as an explorer and having a group of people that act as checks and balances to your mental model of the journey. Triangulation of evaluating risk between offering management, design and engineering and agreeing on how to reduce exposure is important to develop options.

There is risk that we know at the outset of a journey. There are also risks that uncover themselves over the course of a journey and need to be addressed in real time. Over the course of a project, there are risks around timelines, resources, milestones and informed assumptions based on direct experience or research provided by offering managers or design research. Some common risks are the complexity of IBM solutions, the ramp up period for the team to really understand the current state of a solution, that research data can overwhelm a team, and that certain assumptions about markets, users and behaviors may not be validated.

Depending on what the risk is and the ability to understand it, a explorer can fall into what is called “magical thinking” or creating a causal relationship between actions and events not justified by reason and observation – which can border on fallacy. Then there are risks over the course of the journey that the explorer does not even sense and/or comprehend – which can be the most dangerous. Depending on the protocols and culture of an organization to mitigate risk, delays in decision making can increase risk as teams are only so autonomous to make decisions that have business, process and technological ramifications.

What can you and your team do to recognize or address risk? Design Thinking and Agile both have specific practices that can help people be more successful in overcoming unwanted exposure. The most important practice is creating a social contract with a team where everyone defines trust, respect, openness, courage and empathy. These attributes can be used to help teams identify and discuss risk in a safe and supportive team environment. Another practice is to use an assumptions matrix where a team rates project assumptions as either “certain” or “uncertain” and rating them as either high or low risk. This helps align a team on how to validate uncertain and high risk assumptions through research.

So embrace being an explorer and collaborator. Multiple viewpoints can help provide checks and balances to individual perceptions toward risk and vette the level of risk to determine if it is core or peripheral to the goal at hand. Stay curious, rigorous and gain the rewards of both the journey and the outcome.

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Published by
11 months ago