Risk Intelligence and the Resilient Company

Learned a lot lending an editorial hand here:

MIT Sloan Management Review, June 13, 2023

by Ananya Sheth and Joseph V. Sinfield

Simon Prades

Building the resilience of large, complex enterprises is critical in today’s uncertain and interconnected world. At a time when a container ship grounded in the Suez Canal can bottle up 12% of the world’s trade, or a virus can disrupt the global flow of commodities, components, and talent, a corporation’s ability to quickly adapt in the face of unfolding events is essential to its survival and prosperity.

Business resilience is a dynamic property that is retrospectively measured by the stability and longevity of corporate value across changing contexts. In real time, it manifests in an enterprise’s timely adaptation to both immediate and gradual changes in the business environment.

Our work, which employs a complex adaptive systems view of businesses, shows that resilience derives from three fundamental adaptive capacities: sensing and monitoring, to recognize emerging changes in the business environment; business model portfolio development, to build and test capabilities across operating contexts; and fundamental capability development, to drive growth with longevity and avoid corporate stall. Moreover, each of these capacities hinges on the development of a capability for risk intelligence.

We define risk intelligence as the honed ability to rigorously interpret risks and the consequences or opportunities they pose for a company. It allows leaders to see through environmental complexity and systematically identify, categorize, and interpret risks. This enables them to look beyond known risk factors and intentionally explore yet-to-be-known risks, thereby embracing rather than avoiding uncertainty. Importantly, risk intelligence brings recognition that individual risks or the forms in which they manifest matter far less than the often-shared consequences they have on a company’s value exchange system — that is, the manner in which it manages, identifies, creates, conveys, delivers, captures, protects, and sustains value. And finally, it provides leaders with a network view of risks that enables more effective allocation of risk mitigation resources by illuminating not just the direct consequences of risks but the manner in which they could cascade across the company’s value exchange system. In this article, we break down risk intelligence into actionable elements that leaders can pursue to help toughen their organizations for the long term. Read the rest here.

How to move the needle on innovation

strategy+business, June 5, 2023

by Theodore Kinni


Illustration by Luis Alvarez

As CEOs continue to call employees back to the office, their rationales often include remote work’s deleterious effects on innovation. There is some basis for these claims: a recent study found that the number of email exchanges between research units at MIT dropped by 38% during the pandemic lockdown. Its authors equated email volume with the weak ties that are crucial to the diffusion of information and ideas in networks, and thus concluded from the drop in traffic that remote work hinders innovation. But no matter how much weight you assign this finding, it’s a stretch to peg the success—or failure—of a company’s innovation efforts to the number of rears in seats.

The truth is innovation in large companies is a perennial challenge for leaders, no matter where employees are working. The late Clayton Christensen and other researchers detailed the obstacles to innovation that arise when industry-leading companies confront disruptive technologies. Large companies also struggle to transform innovation investments into financial results: in 2018, consultants from Strategy&, PwC’s global consulting business, examined 15 years of data drawn from the firm’s Global Innovation 1000 research—an annual analysis of the 1,000 publicly held companies that spend the most on R&D—and concluded, “There is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance.”

So how can leaders move the innovation needle in big companies? I turned to Lorraine Marchand for answers. Marchand served in a variety of executive and board positions, including a former stint as general manager of the life sciences division of IBM’s Watson Health (now Merative), before writing The Innovation Mindset: Eight Essential Steps to Transform Any Industry — a practical guide to building innovation prowess across an organization — and founding her own innovation consultancy.

Here is her list of ways to make your company more innovative. Read the rest here.