Innovation Risk: How to Make Smarter Decisions

Innovation risk 240x180By Robert Carhart Merton for Harvard Business Review

New products and services are created to enable people to do tasks better than they previously could, or to do things that they couldn’t before. But innovations also carry risks. Just how risky an innovation proves to be depends in great measure on the choices people make in using it.

Ask yourself this: If you had to drive from Boston to New York in a snowstorm, would you feel safer in a car with four-wheel drive or two-wheel drive? Chances are, you’d choose four-wheel drive. But if you were to look at accident statistics, you’d find that the advent of four-wheel drive hasn’t done much to lower the rate of passenger accidents per passenger mile on snowy days. That might lead you to conclude that the innovation hasn’t made driving in the snow any safer.

Of course, what has happened is not that the innovation has failed to make us safer but that people have changed their driving habits because they feel safer. More people are venturing out in the snow than used to be the case, and they are probably driving less carefully as well. If you and everyone else were to drive to New York at the same speed and in the same numbers as you did before, four-wheel drive would indeed make you a lot safer. But if you and everyone else were to drive a lot faster, you’d face the same amount of risk you’ve always had in a snowstorm. In essence, you’re making a choice (consciously or unconsciously) between lowering your risk and improving your performance.

If the riskiness of an innovation depends on the choices people make, it follows that the more informed and conscious their choices are, the lower the risk will be. Read more >

Picture: Harvard Business Review ©