Fallacy #1 – Risk Drives Reward

Years of sloppy thinking have left a residue that is potentially harmful to our efforts to deliver organic growth from innovation. A fallacy is an argument that uses poor reasoning. Fallacious arguments are not necessarily untrue, but when unchallenged and unproven they can lead others to make bad decisions. There are a number of fallacies that pervade the general dialog about innovation. Some of them are untrue, others present false choices that can lead people astray.

One of my favorites is that the way to get more reward is to take more risk. This position suffers from weak inference and insufficient evidence. Risk and reward are not perfectly correlated in all cases.  The ideal project has tremendous reward with little risk. There are many ways to mitigate risk in an innovation initiative, but more simply, not all innovations stem from high risk projects that need to be mitigated in the first place. There are plenty of ideas with sound business cases that no one has to stake their career on.

Yes, there are many cases where a breakthrough will require substantial investment and launching anything new comes with a certain amount of risk, however, the two variables are not perfectly correlated and increasing risk is not a requirement for increased rewards from innovation. The best business concepts are those with risk profiles that are disproportionately small relative to their potential reward.

Let’s tighten up our thinking about innovation and challenge the prevailing wisdom. Fallacious thinking can get us into trouble.