Dear leaders, we need to have a talk.
No, it’s not that parental talk of your youth about the potential dangers of sex, alcohol or driving. It’s not even the amalgam of talks with various bosses as you rose through the ranks about what it takes to succeed (or fail) in your job. And yet, those talks and the one we need to have now are branches of the same tree. The tree, and the talk we need to have, are about risk.
In both subtle and overt ways, risk is what leadership is all about. Its role is both threatening and lifegiving.
On the one hand, leaders must identify and mitigate the risks that could hold a team back. On the other, they must learn to calculate and calibrate the right amount of necessary risk needed to innovate or adapt. Moreover, it’s the leader’s job to create the environment in which others can individually and collectively pursue the right balance of risk that allows progress and predictability over time.
But the last few statements about risk are simply a reminder. They say nothing about what risk actually is, nor offer any clues as to how leaders should engage risk and succeed.
Those comments also leave the impression that risk consists of a series of moments or isolated problems needing temporary attention before we return to normal, rather than seeing risk for what it is: an ever-present factor in our work and lives.
Risk, and a constant awareness of its role, is central to long-term success.
Because risk is an ever-present thing, and far more nuanced than we’d like it to be, it’s critical to recalibrate our thinking around risk and leadership. We must see risk not as monolithic but as multidimensional and as a blend of the following: Material, Model, Market and Mindset.
A more fundamental view of what’s material
Think of the Material dimension of risk as concerned with those resources that are most important — or to put a finer point on it, essential, no matter what business model or market you pursue.
This is different than how we tend to think of what’s material. Most often, material means “things” that together comprise the inputs to a specific model within a specific market: raw materials, technology or capital, for example. Yet the word “material” also means “important and essential.”
What would risk look like if we homed in on this meaning? If we sorted down not to the list of inputs to our “model of the moment,” but to that which is truly essential and at the heart of an organization, its mission and its culture — in other words, its source of true power?
If we did, the upside and the overemphasized downside of risk would take on an entirely new meaning. We would shift calculations of value and cost, decision-making, even the very way we think about success. Subtle as it seems, separating out the idea of what’s essential reveals the seeds of what allows an organization to thrive in any time, conditions or pursuit.
The temporariness of what we treat as permanent: Model and Market Risk
Of the four dimensions of risk leaders should consider, two reside in the fluid middle: Models and Markets. And yet, disproportionately we ignore that fluidity.
We treat models and markets as far more permanent than they truly are. We concern ourselves unduly with threats to those models. And we allow of this to skew our view of risk in total.
Models and markets are important. Yet, despite the permanence we tend to treat them with, they are inherently temporary. This is all the more true in volatile, uncertain, complex and ambiguous (VUCA) environments such as the ones we increasingly face.
The result is that leaders too often think exclusively about risks to their model. Burrowing deeper still, they home in on risks to the material inputs to their model – the raw materials, labor and capital sense of the word. Their view of risk quickly becomes narrow and negative.
What gets lost is that simple truth that models and markets are responses to shifting conditions, and little more. Their risk is relative.
Shifting our mindset to assume risk as ever-present
Take this simple act of considering material risk not as a risk to things, but as risk linked to what is most essential. This act fundamentally opens up our view, our definitions and our ability to leverage risk in our favor.
The fact is, risk is neither good nor bad. It’s simply an environmental element that must be considered in applying and employing what’s essential.
When what’s essential drives our consideration of risk, models become what they really are: temporary responses meant to maximize the value of what’s essential. And markets are more clearly seen as fluid fusions of the environmental factors and the models that compete with one another to adapt.
Considering all of this risk, rather than a problem to be thwarted, should be seen as an essential part of the mindset of leading. Risk becomes both an opportunity and a reminder that adaptability isn’t about a singular response to a momentary problem, but a skill – indeed, a competitive advantage ongoing.
Looking back, when your parent or boss sat you down for those talks, they weren’t trying to share with you a specific fix to a singular problem in one isolated moment in time. They were giving you a lesson in perspective, suggesting a mindset for success over the long term. That’s precisely the view leaders need to take when considering how risk plays into long-term success for themselves and their organizations.
Larry Robertson is an innovation advisor who works, writes and guides at the nexus of creativity, leadership and entrepreneurship. Robertson was named a Fulbright Scholar in 2021. He’s also the author of two award-winning books: “The Language of Man. Learning to Speak Creativity” and “A Deliberate Pause: Entrepreneurship and Its Moment in Human Progress.” As founder of Lighthouse Consulting, he has for over 25 years guided entrepreneurial ventures and their leaders through growth to lasting success. His third book, “Rebel Leadership: How to Thrive in Uncertain Times,” was released June 1, 2021.