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May 1, 2007
Cutter Summit 2007 – Rob Charette on Risk
Rob Charette is going into an area that most people might not think about when they think of risk (which usually evokes feelings of worry). The UPSIDE of risk. It will be interesting to hear how he frames this conversation. Most people when they think about risk fathom the downside.
Images that follow are photos of a hurricane, then a view above the clouds from the cockpit of an airplane. Rob is using a success case study of Rockwell Collins Avionics (disclosure: Rockwell had been a longtime client of QSM in the 1990s, using the SLIM suite of software estimation and measurement tools). Rockwell designs and builds commercial aircraft flight navigation and control systems for Boeing and Airbus.
Radar and the challenge of steering around thunderstorms is the metaphor right now, and he’s talking about how aircraft navigation and radar deals successfully with weather related risk for aircraft. We are moving into how aircraft displays deal with risk, and conveying that information to the pilot, reducing the three fundamental elements of pilot risk: Lack of Information, Lack of Control, and Lack of Time. These are designed to solve the problem of “pilot situational awareness.” The goal: “Don’t hurt people, don’t hurt the airplane, and provide passenger comfort."
Now Rob is blending the theme of innovation (and subsequent profit) with risk. I think he’s going to show how companies can creatively tackle risk in an innovative way. If they succeed, they will be at a competitive advantage and grow market share because they are positioned to deal with risks if they manifest, compared to companies that do not manage risk well and passively roll the dice on whether something bad will happen. (I think of Russian roulette.)
Rob is saying that you can be a great innovator, but it doesn’t matter if nobody buys what you’re innovating. He’s citing thinkers like Adam Smith, J.B. Bay, Ludwig von Mises, Joseph Schumpeter, Frank Knight, Peter Drucker, and Milton Friedman on various adages on innovation and entrepreneurship. It’s an interesting blending and connecting the ideas.
(Speaking of innovation, did you know that the iPod was originally released in 2001? It’s dominance of the marketplace came as a result of a series of small innovations in succession. If I’m correct, I would guess that the real explosion came when iTunes software was released for the Windows platform in 2003. At the time, over 1 million downloads occurred in the first 3.5 days. iTunes then sold over a billion songs in the three years that followed. Not bad - $1 billion in songs, in less than 3 years. Add the revenue from over 100 million iPods having been sold since its introduction. Who would have thought that iTunes would be the killer app to drive Apple’s iPod success?)
Now comes the panel discussion, with Lou Mazzuchelli (Cutter), Maria Pardee (BT Global), and Bart Perkins (Cutter) in addition to Rob Charette. Tom DeMarco is setting the stage. Tom says that Rob has laid down a wonderful metaphor that Rockwell Collins is a quintessential practitioner of risk management, and is an industry leader when it comes to innovation in the avionics sector (this is a good thing – remember: they build systems that fly airplanes.)
Lou starts out by saying that if you’re immersed in any kind of crisis within your company (your “hair is on fire”), then innovation is out the door. You have to deal with the fire first, before you can imagine doing any innovating. I am mindful of a corporate equivalent to Abraham Maslow’s Hierarchy of Needs - that few people self-actualize (innovate their lives) if they’re struggling to meet basic needs like food, water, and air.)
[My sense is that companies are continuously in some state of panic fire drill in this time-driven Internet-speed economy.]
Maria Pardee describes the challenges that BT faced on innovation and the risk for the company, during a time of a shrinking market. The transformation of the company occurred by turning it into a consumer oriented brand, in the face of the risk of them going out of business. This is an interesting linking of the topic of risk with innovation. She is describing how the company opened up its network to create new technologies, using open-source strategies and other execution ideas.
I am struck that as she talks about BT protecting the relationship of trust with its customers, that we’re talking about several ways of using the word “risk.” Risk of security of their telecom network, risk re: the relationship with its customers, security risks with regard to opening up it’s network to innovators who they needed to develop solutions, and the like.
I guess you can talk about risk when it comes to taking a risk on - ANYTHING. In that way, it is a universal topic. You can take risks and risk bad things happening, or you can take risks to avoid the risk of bad things happening. You can innovate to try and avoid negative consequences, or you can push the envelop and engage in risky behavior, where bad things might happen if you do it recklessly.
Take your pick on how you want to talk about this. If I were a panelist, how I’d start a dialog on this might be a function of my most recent experiences, and it could go anywhere, which can be good since the topic offers such flexibility. However, because of this, the panel might find it tricky to find convergence. It promises to be a pretty heterogeneous conversation.
Rob is launching into an interesting posit - to innovate you have to change the staus quo. Changing the staus quo is HARD; it feels very risky to make a strategic change, and do something different. In many cultures, it gets quashed which is what Lou is saying, and he goes back to the Apple story. Apple was brought back from the brink, and it took these risks during a time when it looked like the train was going off a bridge. Change usually doesn't happen when things are comfy cozy; they usually happen when things are at the brink.
Fear is a great motivator. I am conscious of the notion that people and companies are often motivated in either one of two ways: one - chasing the angels, or two (more commonly), running from the demons. My sense is that when you're operating out of fear, fight or flight responses are typically in play. In this state of mind, people can be incredibly focused, but at the same time, judgment is often compromised. (See my post on "Worrying About the Wrong Things")
Posted by Mike at May 1, 2007 12:32 PM
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