How Do Executives Balance Innovation With Risk?

Balancing innovation with risk is a critical skill for today's executives. We've gathered insights from 27 seasoned professionals, including executive coaches and CEOs, to look at how this balance can be achieved. From embracing collaborative strategy development to seeking diverse perspectives in decision-making, these experts share their strategies for navigating the complex landscape of executive decision-making.

Embrace Collaborative Strategy Development

Embracing collaborative decision-making is a smart strategy for leaders aiming to balance innovation with risk. It's all about tapping into the collective brains of a diverse team to find the best path forward. More than just weighing pros and cons, this method brings everyone–from different backgrounds and expertise–into the heart of strategy development.

Initiating cross-functional task forces emerges as a strategic method to enhance innovation and heighten risk awareness. By uniting experts from various departments to create agile teams aimed at tackling specific challenges or seizing opportunities, organizations can tap into a wider range of insights and experiences. This diversity in thought and perspective proves invaluable in uncovering unique solutions and averting potential risks, establishing cross-functional task forces as an essential element of an overarching collaborative strategy.

By practicing inclusion, valuing every voice, and harnessing the collective creativity and insight of your team, you can navigate the complexities of modern business more effectively. It's a win-win: you gain a mix of perspectives that enrich decisions and foster a culture where every viewpoint is integral.

Anna Radulovski, Founder & CEO, WomenTech Network

Leverage Emotional Intelligence

The most important component in balancing innovation and risk in decision-making is emotional intelligence. An executive must pay attention to many factors and weigh the overall liability with the long-term benefit to the company and the ability of the company to rebound if the risk is greater than anticipated.

The executive's job is to lead a company forward in innovation, so if a leader has low emotional intelligence, fear will cripple action, or they will be impulsive in their decision-making.

An emotionally intelligent executive uses their social skills to gauge their team's readiness for change, tailoring the pace of innovation to match. They also mitigate risks by ensuring that innovations are aligned with the company's values, mission, and long-term vision. This alignment guides decision-making and helps employees, managers, and teams rally around new initiatives enthusiastically, thereby reducing resistance and enhancing execution effectiveness.

Jennifer Williams, Executive Coach & EQ Leadership Trainer, Heartmanity

Promote a Culture of Iteration

Let employees know it is okay to make a mistake, and by doing this, all team members will understand that with innovation comes both failure and success. A culture of innovation that includes the ability to iterate until a better solution is found will empower everyone, including executives.

Some of us have been in constricted, perfection-focused teams or organizations, and when the fear of making an error is the first thing one thinks of in creating a process or improving one, we tend to think smaller. Less risk, fewer incredible results.

Lori Richardson, CEO, Score More Sales

Innovation Defines Leadership

"Innovation distinguishes between a leader and a follower." – Steve Jobs.

When you decide to innovate, you are choosing to see change as the ultimate opportunity, not as a threat to what has been in the past. It is critical to understand that innovation inherently means you are risking failure; however, choosing not to innovate will guarantee your failure. One way to mitigate risk is to have your team poke holes in the concepts and work to improve the end result before launch. Ultimately, the leader will need to take the risk or risk being left behind by competition. I would always risk being ahead of a market rather than being left behind by it.

Heather Monahan, Top 50 Keynote Speaker, Author, Board Member, Former C-Suite Executive

Utilize Peer Perspectives

Innovation is crucial, but not every innovation will work. Having many perspectives can help you balance the risk. Build a diverse peer group. When you have innovative ideas, bring them to the group and ask them to consider the innovation with these questions: How will this innovation move the company forward? What are the drawbacks to this innovation? What do you see as the biggest risk? What else should I consider? This will get the conversation started, and the information you receive from all the different perspectives will help you to be better informed and mitigate the risks.

Alice Heiman, Chief Sales Energizer, Alice Heiman, LLC

Recognize Personal Biases

Self-awareness is critical in making decisions about innovation and risk. We all have our strengths and weaknesses. Some leaders are great innovators, while others are great risk assessors. Few will excel in both. Our strengths and weaknesses create biases and blind spots, impacting our ability to make balanced decisions. It's critical to know where your strengths lie and to have the courage to ask for support in weaker areas. You don't know it all, and contrary to what you might believe, you don't have to. Lean on those around you for their expertise, e.g., mentors, team members, and advisors, to explore what balancing risk and innovation might look like and the parameters within which you're willing and able to experiment. You might need to make the final decision, but you don't have to make it alone.

Zeta Yarwood, Executive Coach, Founder & CEO, Career Success Resources

Implement 'Always Welcome' Communication Policy

One way an executive can balance innovation with risk in decision-making is by establishing a process to ensure diverse voices are heard and team members are seen as part of a company-wide 'always welcome and always listening' communication policy. This can be done through all cross-functional teams sharing ideas freely, conducting virtual and in-person whiteboard sessions, and offering constructive feedback to mitigate risks. You will effectively create your team's collective intelligence. This will be a powerful source to keep your ideas fresh, keep your culture in alignment with market trends, and expand your profitability.

Victoria Huff, Fractional Sales and Marketing Executive, The Happy Executive Inc.

Map Out Decision-Making Process

Visualize! Balancing innovation and risk requires mapping out the decision-making process, whether on a spreadsheet or with pen and paper. Getting clear on your goals, ideas, and intentions for the project can help solidify innovative ideas into thoughtful and precise action.

Emma Geller, Executive Function Coach, Prepped and Polished

Establish Criteria for Innovation Assessment

It is not uncommon for executives, particularly those involved in entrepreneurial ventures, to find themselves enticed by "shiny objects" and novel concepts. By laying a solid groundwork for the business through a clearly defined vision/purpose statement, core values, long-term goals, and target market, leaders possess a means to assess innovative ideas. This method of evaluation against well-established criteria serves to safeguard against investments (be it time or money) in new endeavors that could steer the organization off course. Leaning into a disciplined perspective helps to inform and weigh the risks associated with pursuing projects that might otherwise divert attention from key activities.

Nicole Spracale, COO & Integrator, Fox Fractional

Integrate Bold Leadership with Prudence

An executive can balance innovation with risk in decision-making by adopting a strategy that integrates bold leadership with prudence. Firstly, they should cultivate an environment that values creative thinking and rewards innovation, encouraging novel ideas and solutions. At the same time, they must also employ strategic thinking to evaluate the potential impacts of these innovations, considering both short-term gains and long-term sustainability. By implementing a structured yet flexible approach to risk assessment, leaders can determine which innovative ideas are worth pursuing. It's about fostering a culture where calculated risk-taking is normalized, and where the potential benefits are weighed against the risks in a collaborative and informed manner. This ensures that innovation does not come at the expense of the company's core objectives, but rather aligns with and propels the strategic vision forward.

Steven Rosen, Executive Coach, STAR Results

Foster a Culture of Experimentation

Executives frequently face the opposing forces of innovation and managing risk. How does an executive balance these two critical angles, finding the middle ground between pursuing potentially groundbreaking, profitable ideas, while also minimizing potential negative outcomes and protecting the organization's future?

I often recommend to clients that their executives begin by fostering a culture of experimentation and intrapreneurship in their teams, allowing their teams to engage in small-scale tests, fast prototyping, and minimum viable product development to assess the value and potential of a specific innovation before expending too much resource or taking too much risk.

One client created a small, scrappy innovation division, with an "advance" team conducting risk assessments, SWOT analysis, and research and creating projections to assess the potential of various ideas before other teams began their test projects. This strategy not only minimized risk but also ensured that experimental projects were aligned with organizational priorities. After every project, whether a success or a failure, there was a debrief to glean knowledge from the experiment and determine the next steps.

Susan Baroncini-Moe, Executive Coach, Baroncini-Moe Executive Coaching

Promote Psychological Safety

Create an environment that promotes psychological safety.

Innovation comes from creativity, lived experiences, and experimentation. This means executives have to create an environment where people are empowered to express their ideas and take risks without the fear of judgment or being silenced.

When looking at the four stages of psychological safety, the final stage is challenger safety, which drives your team to be more innovative and increases your company's innovation revenue. If you have people you can rely on for feedback or ideas, give them the space and resources to feel comfortable sharing their honest and authentic views.

Executives can leverage these relationships by creating open feedback loops, encouraging people to share diverse perspectives, and showing their appreciation for feedback and creativity.

A solid and honest community is the key to balancing innovation and risk in decision-making, and psychological safety ensures they contribute their best.

Latesha Byrd, CEO, Perfeqta

View Risk as Innovation Catalyst

In the dynamic world of business, innovation, and risk are inseparable companions, akin to best friends at a lively party. Embracing innovation means venturing into the unknown, inevitably accompanied by risk. However, succumbing to the fear of risk stifles progress. Just as a skilled tightrope walker maintains equilibrium amidst turbulence, adept executives navigate the complexities of risk and innovation.

Executives must view risk not as a hindrance but as a catalyst for innovation. Innovation itself can mitigate risk by diversifying product lines or exploring new markets. Cultivating a culture that encourages calculated risks and embraces failures as learning opportunities is crucial.

In essence, walking the tightrope of innovation and risk is about embracing the synergy between the two. It's in the daring leaps that true greatness is achieved.

David Alto, Job Coach, AltoAdvance LLC

Conduct Thorough Due Diligence

Innovation requires risk, and risk requires decisions to be made. But, to make those decisions confidently, it first requires due diligence to consider all of the opportunities, implications, and risks involved.

Leaders need to evaluate the due diligence process being used to ensure it is thorough and exhaustive, with nothing being overlooked or any shortcuts taken.

Sure, it could slow the process, which many see as confusing, complex, and drawn out, yet the reward and ROI on the back end is minimized risk, more effective and easier decision-making, and the final innovation that could take a business to the next level.

There's always risk with innovation, even that of not making a decision, which could be more costly and put the business at even greater risk.

Put the time, resources, and investment into the due diligence upfront, and the decision-making will flow more easily.

Bernadette Boas, Executive Coach, Trainer, and Speaker, Ball of Fire Coaching

Adopt a Test-and-Learn Strategy

As an executive, effectively balancing innovation and risk in decision-making is crucial. One approach to achieve this is by adopting a test-and-learn strategy. This method involves experimentation and iteration to mitigate risk while fostering innovation. It entails implementing pilot programs, prototypes, or small-scale trials to evaluate new ideas before full-scale implementation.

By proactively gathering real-world feedback and data at an early stage, organizations can pinpoint potential challenges and refine their approach. This process minimizes the likelihood of costly failures while amplifying the impact of innovative initiatives.

Critical to this strategy is the careful selection of ideas for piloting or prototyping. Aligning with the company's short- and long-term goals and core values helps prioritize projects or ideas. This ensures that innovations support company growth objectives and cultivate a vibrant organizational culture.

Kelly White, CEO, KellyRaeWhite.com

Align Team with Vision

Keep your team aligned. One of the most significant risks when innovating is that your team won't understand your direction, resulting in activities that are at odds with your vision. Take the time to walk your team through your thought process, answer their questions, and be willing to hear feedback. Then, make sure that your team not only understands the desired outcomes but also knows, tactically, how to take those crucial first steps.

Erica McCurdy, Managing Member, McCurdy Solutions Group LLC

Clarify and Define Risks

To balance innovation with risk in decision-making, it's important first to clarify what you consider a "risk." What assets or advantages do you feel you must protect?

With that decided, you can have more freedom to make bold choices with huge innovative upside, but with little danger of unmanageable risk.

Kasey Jones, Founder and CEO, A Better Jones

Perform Risk-Benefit Analysis

The lifeblood for the long-term success of most businesses is innovation. Every innovation should be evaluated through a risk-benefit analysis. That risk-benefit analysis is a form of calculated decision-making that can be approached in a systematic way: with innovations promising greater benefits potentially justifying more risk. Ultimately, once this evaluation based on objective factors has been played out, the executive must apply instincts, knowledge, and experience and commit to the decision.

Melanie Borden, Founder & CEO, The Borden Group

Prioritize People-Centered Decision-Making

One effective approach for executives to navigate the delicate balance between innovation and risk in decision-making is to embrace the idea that "safety is the enemy of success." This is, however, not an invitation to reckless risk-taking. It merely underscores the necessity of taking calculated risks to drive innovation and achieve breakthroughs. Executives must recognize that decisions involving people require careful consideration as they are inherently sensitive and can have significant implications. Thorough risk assessment is imperative in such cases.

Integrating creative thinking and scenario exploration into decision-making processes allows executives to assess various possibilities and probabilities while fostering innovation.

By prioritizing both risk-taking and people-centered decision-making, executives can strike a balance that fuels innovation while minimizing potential negative consequences for their organization and all individuals involved or affected by the new direction.

Regina Huber, Transformational Leadership Coach, Speaker, Author, CEO, Transform Your Performance

Consider Cost of Inaction

So many times we, as executives, are so focused on the pros and cons of taking a particular action that we forget to calculate the cost of inaction. In both my career and with my clients, I've found that making the 'missed opportunity' a part of the core analysis from the beginning saves both time and money, and it ensures everyone is considering the full picture.

The other crucial factor is to make sure the right people are in the room to advise or collaborate with you. So many times, executives are fairly far down a path before realizing they were either misinformed or uninformed at the very beginning because those with the most awareness and/or expertise were either filtered out or never given an opportunity to contribute.

Julie Dalton, Executive Coach

Encourage Strategic Trial-and-Error

Executives can balance innovation with risk in decision-making by fostering a culture of strategic trial-and-error. Encouraging their teams to pilot new ideas on a small scale before full implementation will allow room for risk assessment without significant organizational exposure. Promoting a culture where failures are viewed as learning opportunities rather than setbacks can mitigate the fear of risk as well. Providing clear guidance on acceptable risk levels and ensuring teams have all the tools, support, and resources to manage risks effectively creates this balance. Regular feedback can help executives stay informed about the progress of innovative initiatives and make adjustments as needed to minimize potential negative impacts.

Rebecca Goldsberry, Elite Sales & Leadership Coach, Southwestern Consulting

Cultivate a Growth Mindset

Executives balance innovation with risk by embracing a growth mindset, where challenges are viewed as opportunities to learn and grow. They understand that innovation requires stepping out of their comfort zones, and they mitigate risks by fostering a culture of trust and rapid learning. This involves creating a safe space for trying new ideas, where failures are not seen as setbacks but as necessary steps in creating the next disruptive idea for an industry. Executives who are able to master this balance set new benchmarks for innovation and unprecedented growth.

Alex Wisch, Executive and Peak Performance Coach, Wisch Coaching

Train in Pattern Recognition

First, balancing innovation risk is decision-making. Innovation is not creation, but actually adaptation—adapting a successful process or solution from one domain to another. A critical part of my coaching is training in pattern recognition and anticipation and extrapolating it to the real world. Initially developed for the DoD, this is what provides the executive with the ability to innovate without risk.

John Kennedy, Neuroplastician, The Kennedy Method

Practice Present-Minded Leadership

Being present and fully aware is one of the most powerful things leaders can do consistently to balance innovation with risk. This ensures the most effective decision-making, communication, and overall impact on business outcomes because there will be crystal-clear clarity on when and how to calibrate along the way towards desired outcomes and goals. This kind of ability to be agile and influential toward the success you want to see is invaluable, but it is a skill you can hone.

Marian Astor Hunt, High Performance Coach, Mpowered

Quantify Potential Consequences

Look into the future and work backwards. As executives evaluate the inevitable risks that come with innovation, it is essential to play out the likely downstream consequences. Quantify both the potential upside and downside. Predict how competitors will respond. What will customers be most attracted to? Least attracted to? And, of great importance, do this with your full team. Get out of the vacuum and use your team as an asset to test each innovation for weakness, making the risk more easily managed.

David Gunn, Founder & President, The David Gunn Group

Prepare a Comprehensive Analysis

Companies must continually push the boundaries of the status quo and leverage innovation to remain competitive. However, increasing innovation brings inherent risks that must be managed to ensure the business isn't negatively impacted. The following is a coaching client example with an executive that shows what helped him balance innovation with risk and build self-trust in his decision-making.

The executive asked their team to pull together the following six items for each innovation idea that was under consideration: what is known currently, what is unknown, and what assumptions will be used to move forward. Next, identify what the risks are, quantify the risks, and include a risk mitigation plan if needed. After a review of this information with his team, he made the final decision to move forward on the options that provided the best return on investment with minimal risk and offered the greatest positive impact on company growth.

Susan M. Barber, President, Susan M Barber Coaching & Consulting, LLC

Seek Diverse Perspectives in Decision-Making

An executive's process of decision-making can either be a catalyst or an impediment for innovation and growth. A major risk in decision-making, for even the most seasoned executives, is the danger of experience and familiarity. More experience increases the filter of seeing subjective patterns based on the past and associating those patterns with the novelty of the present, often unknowingly disregarding information that may run counter to those initial conclusions.

To mitigate the risk of subconscious filtering and, at times, overreliance on past experiences, executives will need to be acutely aware of this thought process and proactively seek out information and perspectives from a myriad of sources. Executives who partner with a variety of stakeholders to obtain a broader range of input, work to diversify their data sources, and are willing to listen and integrate the perspectives of others will more effectively mitigate risk in their decision-making.

Christie Berger, Executive Leadership Coach, CB Consulting