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This Is What Happens When You Don’t Take Risks

Back of businessman getting lost in a mazeBack of businessman getting lost in a maze

The Leadership Insider network is an online community where the most thoughtful and influential people in business contribute answers to timely questions about careers and leadership. Today’s answer to the question: How do you encourage creative thinking within your organization? is written by Arthur Pinheiro Machado, CEO of Americas Trading Group.

To understand how to encourage creative thinking, you must first understand three characteristics inherent to large companies:

Retaining the status quo
While many may strive for innovation and dynamism, most big companies are, ultimately, conservative. They become focused on keeping their current level of revenues, maintaining the status quo, and avoiding tampering with their own products. These companies tend to implement metrics and organize processes to become more efficient, which can turn them into bureaucratic mammoths. Therefore, most companies are — or will become — incrementalist, and any new product or project is a satellite orbiting around the company’s flagship product or family of products. The main goal, instead of innovation, becomes organization and operational efficiency.

This was my own experience, in practical terms, from my time spent as head of the middle office — units covering products, channels, projects and processes — at one of Brazil’s largest brokerage firms, which was subsequently sold to a major Brazilian bank for more than $500 million. Although the firm was once one of Brazil’s most innovative players in its line of business and a benchmark for various institutions, it was transformed into a straight-laced business lacking vitality due to the fear of its volume revenues declining.

Creativity is limited
Another factor that tends to limit creativity is the attitude shown by middle managers. In theory, a middle manager is expected to act as a filter, separating good ideas from bad ones and reporting back to their superiors. Ideally, middle managers should be promoting innovation and new business to upper management while steering the direction of their own departments in line with the company’s overall strategy.

See also: This Is How to Fail Your Way to Success

Unfortunately, that is not what actually happens. Control structures and personal interests combine with office politics and a natural tendency toward conservative decision-making evolves, causing managers to avoid being risk-takers. Nobody wants to stir a revolution; the aim is steady evolution. Due to these systemic structures, managers become mediators for internal conflicts who are more focused on everyday concerns than creating new products.

Disconnect starts at the top
As companies consolidate more positions, many top managers will end up being detached from routine business. Instead of looking at their company from the outside, they narrow their thinking to management numbers and results alone. This can lead to a lack of understanding about ongoing social and cultural changes, leading them to gradually become out-of-touch. Most company executives don’t see beyond the facts submitted by managers, and they can lose their grip on the day-to-day operations and challenges of the business.

So how can we fight against these tendencies and encourage creative thinking, without losing efficiency?

Challenge the status quo
Light bulbs were not invented by improving candles. While a company has to prioritize maintaining its systems and enhancing its products, this is not true innovation. Fostering innovation means creating an open environment in which people may challenge, criticize, and even destroy products or practices that have previously been praised. At ATG, all of our monthly board meetings deal with a specific topic or question, such as “How can we create a competitive product or service in our market?” or “What does the next generation look like for our markets?”

Remove the hierarchy
The rhizome is an epistemological model adapted from botany by French philosophers Gilles Deleuze and Félix Guatari. In this model, the components do not necessarily follow a previously designed hierarchy and are not grounded in a root-like structure. Each branch is independent and free to decide how to grow, unlike a hierarchical structure in which decisions influence and affect people from the top down. Of course, any changes that affect a rhizome may interfere with the structure as a whole, but rhizome structures are almost autonomous.

In a similar vein, a linguistic analysis of two German words reveals the difference between mandated vs. independent execution. There are two ways of translating the word ‘mission’ into German, Befehl and Auftrag. The former means issuing detailed orders to be fulfilled exactly as given. The latter imparts an overall idea or spirit and execution goes ahead independently. Innovative companies should be structured as rhizomes and embody the spirit of Auftrag.

Shape new markets
The best way to retain an innovative spirit is to have proactive management and prioritize developing new markets. A tendency to reject the status quo will always lead to more liberalism. One must be wary of attempts to create regulatory or protectionist barriers that restrict innovation. Ultimately, if you don’t make your own product obsolete, somebody else will.