Apple has successfully moved from producing computers to selling game-changing cellphones, tablets and ways of buying music. Here CEO Tim Cook demonstrates the Apple Watch at a presentation last year. Picture: GETTY IMAGES
Apple has successfully moved from producing computers to selling game-changing cellphones, tablets and ways of buying music. Here CEO Tim Cook demonstrates the Apple Watch at a presentation last year. Picture: GETTY IMAGES

Risk aversion often gets in the way of being open to trying new ways of doing things and opening ourselves up to innovation and entrepreneurial mindsets.

We stop at the mental ideation stage and prevent ourselves from following through with it - because our own mind tends to overemphasise the unpredictable downside risk over the unlimited upside that could follow.

We are witnessing an increasing risk-aversion mentality in South Africa, informed not just by our conservative natures, but also the economic and political climate, which is fuelling uncertainty.

These high risk-aversion levels can cripple innovation and entrepreneurship, the very engines on which economies rely to ensure growth.

Instead of calling it a day when our mind starts fixating on the risks, what if we start being proactive about reducing the downside risks that lead to this exaggerated risk-averse mentality in the first place?

For example, when a big business decides to invest in innovations, it limits the downside risk by deploying a ton of research into the establishment of these innovations. It ensures that the innovations build on existing internal expertise. It also leverages the strength of the brand to achieve success.

This is why an innovative company like Apple has successfully launched products in different market categories: computers, cellphones, music players, tablets, TVs and watches. Who knows what is next? It has been successful at tapping into the unlimited potential of its innovations while limiting the downside risk by leveraging its brand, research and proven expertise.

As individuals and companies operating at a far smaller scale, we can learn a big lesson about adopting the same approach to how we think about innovation.

Instead of giving up during ideation stages, we should focus on limiting the perceived downside risk that is preventing us from getting to the next step.

People face different levels of risks, and some of the choices we have already made about our lives and careers contribute significantly towards reducing these.

Education and work experience are one way of reducing risk. I often come across well-educated, highly experienced individuals who have an excellent idea of a business innovation, often in their area of expertise, but stop themselves for fear of the unpredictable downside risks involved.

They do not account for the fact that the downside risk is reduced when you have the research, expertise and your track record behind it.

We exaggerate the downside risk to match that of an individual who has no experience of or education on the topic.

They have far less to fall back on should the innovation fail. Their experience will come from the trial-and-error process.

As a result, experienced individuals would rather keep their cushy office jobs and fancy job titles, instead of taking the risk of starting an innovation unit within the company; or venturing off to do their own thing. They miss the argument that staying in a supposedly safe job environment has limited upside. After all, you can only go so far in a standard role, which has an unlimited downside since that job could end any day.

This point was illustrated by Jeff Haden, an expert on innovation and a contributing editor at Inc, who consolidated the statistics on how the rich have been able to unlock huge amounts of wealth by keeping away from what is perceived as safe.

He concluded that it is those who try the unconventional who succeed at tapping into unlimited upside potential.

It is a no-brainer that venturing off into the innovative space has a far higher upside than staying within the standard. Those with the experience and expertise have a significantly smaller downside risk.

Once we wake up to the reality that we can limit the downside, I hope we'll see more entrepreneurs. The upside is unlimited - especially when the innovation becomes a game-changer. But we will never get there if all we focus on is the high risk.

Sikhakhane is a global speaker and business strategist on leadership, entrepreneurship and doing business in Africa, with an MBA from Stanford University

Please sign in or register to comment.