[Extract from “Risky Strategy” to be published 2016]
One of our respondents told us that the reason for the success of a major global product launch was the presence of a combination of ‘elephants’ and ‘tigers’ in the launch team. This technical product needed to be developed quickly but also reliably, to seize an important opportunity in a fast growing consumer electronics market. This respondent described these two types of individuals involved in the launch process as follows:
Elephants are methodical and analytical, have good memories, build momentum, but tend to be slow and grey. These are the formal risk workers who assessed risk using objective, quantifiable and evidence-based outputs. Often working in response to regulation (compliance, governance, legal, industry standardisation), their focus was on high visual sharpness, accuracy and timeliness in an attempt to reduce subjectivity.
Tigers are colourful, fast, intuitive and brave, but if you have too many, you have chaos. They are the informal risk workers. The emphasis was on breadth, was multi-dimensional, making use of wide channels of information, employing intangible and subjective processes. Informal risk workers used peripheral vision to scan the environment and to provide space for generating hypotheses. Sometimes referred to as instinct, gut feel or common sense, this requires an inherent ability to consider what is at stake by looking for threat or identifying opportunity. There is no single focus of informal risk; three dimensional, entrepreneurial, holistic and peripheral vision are the words we heard managers use when describing how informal risk perceivers scan their environment.
As we reviewed the responses from our leaders as to how they tended to work with risk, it became clear to us that there were broadly two ways. There was a formal way, which was all about analysis, risk assessment, and processes and models. These were designed to work out what kinds of risks were likely to happen, when based on some kind of evidence, and what we can do to reduce the likelihood of a harmful outcome.
The second way was the informal , intuitive way. These leaders are aware of risk being around them daily, and that many of the decisions that they make daily have a distinct risk element to them. And the decisions they made would be based on some kind of judgements about that risk, with very little overt evidence.
It struck us that the elephant and tiger picture language that our respondent used to illustrate this particular case was a great way of describing these two modes for working with risk. The elephants are the ones who work with risk in a formal analytical way, and the tigers are the ones who work with risk in an informal, intuitive way.
We had the sense that while circumstances may well dictate in which of these two modes risk thinking is most comfortable, it seemed clear that some people prefer the formal, elephant approach, and believe that is the only way to think about risk. In fact, going back to our debate around Knightian definition, they would probably say if you can’t deal with risk in this way, then it’s not risk, it’s uncertainty – and that’s something different altogether.
Others people prefer a more informal, intuitive way of thinking about risk. They may also call it uncertainty. But they say things like; “I feel comfortable taking the risk” … or “for me, the risk is acceptable”. It’s a personal assessment, with no overt data. In fact, I would say that it’s this personal fingerprint on the assessment of risk that is a defining characteristic of leadership.