Costs of risk.

The formula for risk analysis of innovation could be written as:

Likelihood of failure X Cost of failure.

Therefore, in a traditional hierarchical organisation,  there is an ingrained reluctance to take risks and perhaps fail because of the financial cost, whereas in an open system where there is no apparent cost of failure, the restriction of the usual organisational and transaction costs are largely absent.

This does not reduce the incidence of failure, but it removes the financial costs, leaving the personal incentive to succeed, rather than focusing attention on the financial ones.

It is the personal drive to succeed, to do something useful, that makes lives easier, richer, more fulfilling, which is the source of most really original innovations. 

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
This entry was posted in Collaboration, Innovation and tagged , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s