How An Entrepreneur Can Help Corporations Deal with Risk

Never in the history of the world has it been easier and quicker to create a disruptive product or company. A savvy corporate employee can see a trend emerging, quit their job, become an entrepreneur, quickly assemble a skilled team from around the globe, create a proof-of-concept using inexpensive tools & service providers, put the product in front of potential customers in a plethora of ways, iterate endlessly all while growing the product into a profitable company and stealing market share from their previous employer. This commonly happens in today’s marketplace, taking only weeks or months. Contrast this speed of entrepreneurial execution to the slow-to-react corporations. When you do so you can see the issue. Corporations cannot, or more accurately choose not, to move as fast as entrepreneurs for reasons of their creation. The reasons span the whole of human psychology: apathy, helplessness, politics, ego, etc…

If I had to pick the single difference in launching an innovation into the market as either an entrepreneur or working on a corporate team, it would be how each manages fear. Specifically, how much time, talent, and treasure corporate teams use to try and alleviate or at least manage fear versus how entrepreneurs embrace fear and uncertainty as part of the innovation process. Corporate executives do not like to talk directly about fear. They hide their fear in the clever term “risk mitigation.” Risk is defined as “a situation involving exposure to danger.” Fear is defined as “an unpleasant emotion caused by the threat of danger.” Fear is the emotion we feel when there is a risk. But corporate executives cannot say they are afraid. They think that would be career suicide. Instead, they use the idea of “risk mitigation” to hide their fears. They hide from their fears through a massive volume of work, aimed at uncovering the unknown. They do this in the hopes of lowering the “danger” to a more personally comfortable level.

The amount of work I have seen my executive clients ask of their junior teammates, under the auspice of “risk mitigation” is daunting. One of my clients was looking to launch a new technology that would radically change how their product would be packaged and delivered. I was working with this client as a Corporate Entrepreneur in Residence (also called an EIR). A Corporate-EIR helps executives “think and act more entrepreneurial” by bringing startup tools, techniques, and psychology into corporate teams. This client had assembled a talented team that was well funded and given ample time to execute. From my initial outside perspective, the team looked perfectly designed to produce success. Until the first meeting I attended. This team had been working for over a year trying to go from an initial idea into something tangible felt in the customer’s hands. The problem was they could not make progress.

At my first meeting, I started asking common startup questions around customer metrics.

For example, I asked, “What do your customers think about this product?”

Their response was, “We have not shown the customer yet.”

I asked, “You mean you have not shown the latest iteration to the customer?”

The team responded, “We have not shown any of the iterations to the customer.”

I responded, “You’re a year into this project. It has had numerous iterations. How are you deciding what to iterate on?”

What the team said next surprised me, “We iterate based on risk mitigation and executive feedback.”

“But you do not let the customer play with the actual built product?”

“No.”

“Why not?” I queried.

“Leadership is afraid that the customer will not like what we have built. Then this project will fail, so they asked us to risk mitigate this further.”

And there it was, “Leadership is afraid…” This team had repeatedly been asked by their executives to “mitigate risk” further and further and further. Every time the team presented to their corporate leadership, they kept getting new items back that needed to be further “risk mitigated.” For over a year this team had researched every conceivable “risk” any rational person could think of. All in an attempt to de-risk this cool and amazing new technology. Every time the team went back and showed their progress, a new set of risks was invented by their leadership. Leadership sent the team back to mitigate the new risks. I could see that this project team was demoralized. They had a great idea that was well built and solved a customer’s problem elegantly. I knew that if something did not radically change this project would limp along like a zombie project. It would never die, and worse, never make it to the customer’s hands.

So, in my first meeting, I decided to change the lexicon they were using around “risk mitigation.” Risk is a potential event that may or may not happen. Fear is the human interpretation of risk. Risk is external while fear is internal. I asked the team to no longer call it “risk mitigation” but to instead call it “fear mitigation.” I asked them to stop focusing on the external and to start focusing on the internal. I had them explain to me, based on the perceived risks that they were researching, what are the fears their leadership has on their project? This was a HUGE unlock for the team.

As I write this, I am sitting on my balcony in San Diego looking out at the ocean. My wife and I moved here from Colorado so she could surf every day. Her love of surfing faced a huge problem, the risk of a shark attack. Logically she knew the chance of getting attacked by a shark is negligible. She was more likely to die from a falling coconut than getting bit by a shark (this is a fact…look it up). But even with the knowledge of how unlikely she was to ever get bit by a shark, she was afraid to surf. All the shark movies and “Shark Week” on tv along with all the news reports make it seem like ANYONE who goes in the water is likely to die in a shark attack. Fear has a way of distorting potential dangers. It magnifies the danger. Fear makes facts and statistics irrelevant. “Fear is the mind-killer” (a little tip of the hat to Frank Herbert). To help my wife address her fear of sharks, I switched the conversation from the external “risk” to the internal “fear” she felt. I had her articulate her fear for me. I asked her to describe in detail what she felt when she thought of being attacked by a shark. I had her talk to me about her love of the ocean and surfing. The more she talked about how she felt and the fear she had, she began to see the risk of a shark attack as relatively small in comparison to the joy surfing would bring to her. She unlocked within her the courage to surf. My wife surfs almost every day now… sometimes twice a day. Her love of the ocean has now grown into a love of what once was her greatest “fear”, sharks.

The project team above experienced a similar unlocking. This team changed to a courage mindset. Their updates to their leadership team switched from just external facts derived from their “risk mitigation” work to also addressing the fears that corresponded to the risks. For example, take the “risk” around whether a customer will like a new product or not. Before the team would only address the “risk” by showing research, stats, focus group synopsis, etc… Now when they look at “risk mitigation” and switch it to “fear mitigation” they begin to also address the internal fear behind the risk. The fear the leadership team perceived around whether a customer would like a product or not was multifold. The executives had the fear of failure, the fear of embarrassment, the fear of damaging the brand, the fear of losing their job, and tanking the future of the company. Fear unchecked magnifies risk to the point where it becomes irrational. There was zero probability that this one project, if it failed, would do more than embarrasses a few executives. But fear is a powerful emotion. It destroys opportunities and ravages innovation. So the project team included actions to help confront and alleviate fear while also promoting courage. In regards to the above example, the team showed their research used to address the risk. They also included items that each addressed specific fear drivers and encouraged courage. Items such as tranche funding, phased rollouts, small pilots, plan B, C, D options, ways to limit exposure, and a variety of others.

During the time the project team was working to addresses the fears behind “risk mitigation”, I began talking to the leadership team directly about their risk vs. fear beliefs. I asked a blunt question, “Do you believe that you are promoting a culture of fear or culture of courage?” That question was not warmly received. I have learned that personal growth does not happen with a smile on your face. It is hard work confronting one’s fears. Especially when your fears may be tied to the future growth or demise of an established brand. So, I persisted in questioning, “Are you promoting a culture of fear or culture of courage? You’re asking for a massive amount of “risk mitigation” work to be done. Why?” I got the standard “fiduciary responsibility” and “corporate prudence” non-answers. But my job as a Corporate-EIR is to help companies think and act more entrepreneurially. So I pressed on and explained, “Risk mitigation is fear mitigation. Risk is a polite way of saying fear. In a corporate environment, the majority of your team members’ time is spent trying to search for, identify, and mitigate risk on new products. Every risk that is uncovered is then minutely examined through research, focus groups, and endless meetings. Time, talent, and treasure are thrown at each risk in abundance. All in the hopes of vanquishing it or at least mitigating it, without actual confrontation or experience of the risk in the real world. This effort to try and mitigate risk, or what I believe is fear, without actually experiencing the risk/fear, robs the product and the team of the opportunity to experience all that the confrontation of risk/fear has to teach us.”

I continued, “What is the difference between a risk and a fear? Risk is a perceived event or experiences a person, product, team, or company may face sometime in the future. Fear is the personal internalization of risk. Risk mitigation is an attempt to predict what may be a threat and pre-address it. Fear mitigation is the excessive documentation to alleviate an individual or group of individuals’ discomfort and responsibility about the potentials of risk.”

My goal then was to make my beliefs personal as many of the executives had children.

“Imagine if the same processes used in corporate environments, to mitigate risk/fear were applied to the raising of a child. Every risk that a child may face and every fear that the parents have for the child were meticulously identified, researched and mitigated. Imagine the child completely protected, wrapped in bubble wrap their whole life, and then at 18 “launched” into the real world. What would this risk/fear mitigated adult be like? Would they have the skills and character necessary to survive?”

And then I made the main point on why entrepreneurs are creating more authentic brands than corporations.

“I believe that it is through the actual confrontation of risk/fear that an individual, a team, a product, or a company develops authentic character. That character is based on courage. The only way to develop this authentic character is by creating a culture of courage and not a culture of fear.”

After my impassioned soliloquy, I was asked, “How do you create a culture of courage?”

Follow me for the sequel to this article: “How An Entrepreneur Can Help Corporations to Create Cultures of Courage”