Product Innovation and the Games of Uncertainty and Risk
This study investigated how risk is managed in practice at different stages of product innovation-focusing on the practice and process of translating/converting uncertainty into manageable risks. It illustrates how management of risks in innovation treats uncertainty in a restricted and limited way, tacitly accepting a sanitized discourse on risk-one that ignores broader socio-political understandings of uncertainty. In extending our understanding of the role of uncertainty in risk management, this study draws on the theories that range from sense-making to decision making, from reflecting to framing and producing norms; from cognitive-scientific theories of risk and fire-fighting to coping with anxiety. By spanning these literatures, the study advocates a third way which recognises the challenges that have to be faced in developing a broader legitimate socio-political understanding of risk and uncertainty. The outcome is a new conceptual framework for looking at risk and uncertainty in innovation which provides a basis for understanding and reflecting upon how unmanageable uncertainty translates into manageable risks, how risk is managed in practice and how it might be improved.
Despite its sometime critical edge, organisational studies frequently fails
to integrate major sociological treatments of the problematic nature of contemporary
society into their routine investigations (Clegg et al.,
2006). This study outlines how one doctoral thesis (Attar
et al., 2007), conducted between 2006 and 2009, is attempting to
use the idea of risk management in product innovation as a lever for integrating
sociological explorations of the risk society and reflexive modernisation into
This study illustrates how narrow rationalistic approaches to risk in product
innovation, what Wynne (2002) characterised as the cultural
reification of risk, fail to capture the uncertainties of product innovation
and the character of attempts to reduce the fateful (Giddens,
1999) workings of the bitch Goddess Fortuna (Machiavelli,
1979) into an acceptable management of risk. Yet, such rationalistic approaches
continue to dominate our ritualistic thought and actions concerning risk management
practices, techniques and investigations (Wynne, 2002).
The observation of the limitations and restrictions of such rationalistic approaches
to not only risk and innovation but also management and organisational dynamics
in general is far from new. From Simon and Lindblom to March and Olsen, classical
rational models of decision making have long been replaced by more realistic
views of bounded rationality and purposive muddling through (March,
1978). In studies of innovation and risk, the inherently uncertain nature
of creative improvisation (Leybourne, 2005) and mindful
sense-making (Messner et al., 2005) is widely
recognised and debated. However, what is bracketed out (Latour,
2003) by such traditional rationalistic views is not only uncertainty and
ambiguity, the bounded nature of rational approaches to risk-but also the role
of emotions (beyond bounded emotionality) (Mumby and Putnam,
1992), the intricate intertwining of sociotechnological imbroglios (Latour,
1993) and both the micro and macro political dimensions that inform and
shape rational calculation (bounded politicality). Moreover, this bracketing
out is not simply a quirk of academia but is also a central feature of modernism
and its concomitant ethos of the progressive rationalisation of the world.
What this creates is a dilemma at the heart of late modern organisations. On
the one hand, a dominant ethos of rationality informs idea of progress and how
organisations and society, innovation and risk, are effectively managed and
controlled. On the other hand, how science and technology advances, how organisations
are managed and society controlled, are all riven with uncertainty, emotionality,
politics and intrigue. Modernity creates and denies non-rationality that promotes
and informs its rationality. For critics such as Latour
(2004) and Wynne (2002), this has been an ever present tension within modernity.
For Beck et al. (1994), it is a tension that has
become particularly paramount in late modern societies, as they increasingly
become risk societies-seeking to manage and control in rational ways the problems
that their rationality creates-and spawn an increasing degree of reflexive modernisation,
as the limitations of modernisation and its rational control become apparent
The purpose of this study is to explore the dual character of risk in process
of product innovation in late modern societies. On the one hand, it examines
its existence as a phenomenon that is understood and analysed in traditional
rationalistic terms as a form of regulated uncertainty that is to be managed
and controlled through improved techniques and practices. It characterises this
as an established risk game. This view of risk is both an intellectual discourse
and an embedded cultural phenomenon and set of ritualistic activities (Power,
2007). On the other hand, it explores risk as a phenomenon that is only
partially addressed by such rationalistic forms of thought and action, which,
in somewhat clichéd terms, are part of the problem rather than the solution.
The rationality, or rationalities, of late modern society generate their own
non-rationalities-and risks-and a truncated view of the nature of risk and its
control fails to capture the fundamental sources of risk or inform thought and
activities able to address the technical, economic, social and political problems
that it creates (Bauman, 2007).
As Giddens (1999) and Wynne (2002) outline, the narrow
technical approaches to managing risk in many organisations, in particular financial
institutions, (Bernstein, 1996) exists independently and
separately from the risk society literature (Beck,
1992, 1999; Beck et al.,
2003) that explores the social and political causes and consequences of
contemporary forms of risk and how we think about and manage it. What this study
seeks to do is to span these literatures by advocating a third way which recognises
the challenges that have to be faced in developing a broader legitimate socio-political
understanding of risk. It explores the role and function of the classical rationalistic
accounts of risk and prescriptions for its management in the analysis of product
innovation-characterising these as a risk game.
DEFINING RISK AND UNCERTAINTY AND INTRODUCTION TO THE APPROACH
Traditionally, the concept of risk is a statistical one and risk management in its most general sense finds its place in the practice of probabilistic reasoning. It is based on an assumption that there is or can be a clear definition of the problems, future events, alternatives, or the objects at stake. It is seen as possible to identify the likely outcomes, estimate the likelihood of their occurrence, assign probabilities and manage the selected risks.
Situations of uncertainty, however, although action is required, resist analysis
in such risk management terms (Schon, 1967). In such conditions,
the phenomenon or the situation faced-as Dewey (1938)
observes-is inherently problematic. It does not easily lend itself to precise
quantitative expression because possible outcomes or alternatives are unknown,
vaguely defined, unmeasurable or only dimly apparent at the outset (Lester
and Piore, 2004; Knight, 2006). Such situations can
be both unique and pressing; at times something needs to be done quickly without
having a clear definition of the problems because there is too much competing
information or too little to make an informed decision (Schon,
1967). In such situations, one must invent and reinvent received wisdom
about what to do given that the problems faced are multifaceted, means and ends
are fuzzy, alternatives are ill-defined, outcomes are indeterminate and the
smallest impulse may generate flaws or happy accidents which alter ones experience
of the situation and ultimately the whole course of action (Dewey,
1930; Schon, 1983). There are often mismatches between what one intends
(intention), what one can put into practice (implementation) and what emerges
and how one perceives (realisation) which block the flow of the kind of systematic
and orderly activity and rational problem-solving recommended in standard risk
management methodologies. In these situations one usually has to set and reset
the problems as well as the likely relevant scenarios again and again and only
on occasion (or as an outcome) is one able to tentatively employ a calculus
All purposive human behaviour pursues course of action based on some assessment
of the likelihood of achieving desired outcomes and avoiding undesired ones
(Kahneman and Slovic, 1982; March,
1978, 2006; Simon, 1982).
Insofar as action, decision making and practice inevitably involves a degree
of uncertainty and lack of control, such behaviours are intrinsically indeterminate,
unpredictable and at times risky i.e., there is a chance that plans will go
awry, foreseen situations will not arise and intended outcomes will either not
occur or will have unintended consequences (Beck, 1992;
Perrow, 1999; Smith, 2003). As Taylor
remarks of all practice, there is an inherent phronetic gap between what rules
prescribe and situations demand. To this degree, all of us have an understanding,
even if implicit or intuitive, of the indeterminate nature of practice. Individuals,
groups and cultures do, however, differ over what are seen as desirable and
undesirable degrees and types of risk (Douglas, 1966,
1985, 1992; Douglas
and Wildavsky, 1982; Lupton, 1999a). Despite this
diversity, a desire to avoid undesirable levels and types of risks can be regarded
as part of the human condition.
In contemporary organisations, risk management has become established as a
particular method and practice of viewing and attending to such risks (Giddens,
1999; Power, 2004). As a social and cultural phenomenon,
in itself, it assumes and prescribes particular views of the nature, forms,
degrees and methods of dealing with risky businesses. Many socio-cultural critics
of risk management condemn its approach and practice (Power,
2004; Wynne, 2002). It is criticised for employing
a restrictive cognitive-rational view of risk-ignoring the social and political
dimensions of how risk is characterised and addressed (Lupton,
1999b; Douglas, 1992). For some within this camp,
it also adopts a highly restrictive and dangerous approach to risk. It fails
to adequately investigate the social and political sources of risk and fails
to alleviate them. In a highly complex and interdependent world, risk management,
as carried out by many large organisations, ignores the unintended consequences
and so-called externalities that they create and which are extremely dangerous
for the society in which we live (Beck, 1999; Beck
et al., 2003; Wynne, 1988, 1996).
Risk management is thus condemned as an intellectually moribund and socially
blinkered approach to the real nature of risk.
While generally accepting this view and critique, of risk management, the intention
here is to extend this analysis in a particular direction. Using the case of
risk management in product innovation, this study aims to provide a greater
understanding of how risk is actually handled in practice as a basis for informing
and supporting a more critical and reflective risk management practice. In so
doing, it seeks to extend the discussion of what is commonly characterised as
the analysis and management of risk into a broader consideration of how practitioners
cope with and address uncertainty (Dewey, 1930; Knight, 2006; Schon, 1967). The study contends that what is commonly taken to be
risk management in large organisations is a secondary set of cultural rules,
routines and practices. It is a kind of ritual or game that is only made possible
by a prior primary process-one that converts the complexity and anxiety of uncertainty
into a boundedly manageable set of risks the uncertainty game. Insofar
as this prior uncertainty game is left unacknowledged and unnoticed, risk management
neglects a crucial component and phase of how risk is understood and handled.
It brackets out from consideration all the intellectual, social and political
factors involved in framing how risk is constructed and how restrictive risk
management practices are normalised. In viewing risk management, broadly defined,
as an intertwined set of uncertainty games and risk games, this study seeks
to provide the basis for a constructive and proactive exploration of how to
open up, intervene in and redefine the black box of risk.
This study is important, at least, for two reasons. Firstly, as acknowledged
by a number of commentators (Hoffmann and Wynne, 2002),
social analyses of risk have often focused on the downstream consequences of
already developed products and processes (MacKenzie, 1996).
This excludes more reflective questions about the dynamics and visions which
shape front-end risk management commitments. Thus the forces shaping these risk
management commitments remain as protected as ever from broader accountability.
We are, then, more concerned to open up the fuzzy front end of risk management.
Secondly, many of the critiques made of the politically dangerous and restrictive
nature of risk management by the socio-cultural critics can be understood as
a set of critical views on how the process of going from uncertainty to risk
is handled. As a result, this analysis here can help to further explore the
intertwined micro and macro forces involved in such practices, as well as provide
support for critical reflection upon and potential modification of such practices.
Thirdly, this analysis does not seek to provide a simple critique of rational
views of risk management but, rather, situate such views in a broader understanding
of both risk management practice and how it is produced by and intertwined with
what I term the uncertainty game: the processes that convert uncertainty into
risk. In so doing, this study seeks to address and explore enduring issues and
dilemmas in the handling of uncertainty and risk, as well as critically reflect
upon how these practices are handled in contemporary large organisations.
The study, of which this study is a part, involves an in depth exploration of how uncertainty and risk are handled in the fuzzy front end of product innovation in a number of inter-organisational innovation projects (Cooperative Research Centres: CRC Programme in Australia). The purpose of the present study is to provide a quick and cursory introduction to the basic framework developed to guide this study.
THE INNOVATION PROCESS AND RISK MANAGEMENT
All innovation is inherently indeterminate and unpredictable, hence risky (Bessant
and Tidd, 2009; Christensen, 1999; Smith,
1998). Yet there are multiple perspectives on the nature of product innovation
that influence how risk management is understood and prescribed (Smith,
2003). The standard view of product innovation sees it as a linear scientific-technical
process, passing through stages from invention to diffusion (Cooper,
1994; Tidd et al., 2005). From our particular
focus, on the product innovation arena, one of the most common views of this
process views innovation as a funnel, channelling initial vague and generally
formed ideas into commercial or commercialised products and processes (Schilling,
2005; Wheelwright and Clark, 1992).
My view of the innovation process is, however, a sociotechnical one (Latour,
1993) and one that is far less linear in its understanding. Rather than
viewing product innovation as a scientific-rational and economically driven
funnel, I view it more as a socio-cultural and political ribbed balloon (Fig.
The ribbed balloon model is intended to provide a three-dimensional view of
innovation as a socio-technical practice (Badham, 2005)
that draws on and integrates the work of authors such as Schon
(1967), Van de Ven et al. (1999), Bucciarelli
(1994), Law and Callon (1992) and Wotherspoon
(2001). These authors all converge when they assemble their argument to
talk about the sociopolitical, messy and unpredictable nature of technological
innovation. Bucciarelli (1994) and Schon
(1963), in particular, provide a detailed argument on the indeterminate
zones of practice; Law and Callon (1992) Van
de Ven et al. (1999) integrate this with a broad socio-political
processual view of the unpredictability and messy indeterminate nature of the
Hence, according to the ribbed balloon model, the corporate product innovation
is a messy and uncertain process that proceeds iteratively through a series
of ideal type phases, from a pre-project fuzzy front-end, through the rite of
passage of project approval, before branching out into the project development
phase. The process, then, provisionally concludes with the second rite of passage-the
decision to adopt or commercialise. At this point, if the innovation is approved
and launched it enters the third phase of implementation and/or diffusion, which
itself can be seen as culminating in a final decision point of evaluation of
success, before proceeding further. The central theme of this model is the notion
that innovation is shaped by technical, economic and sociopolitical constructs
in an iterative phased process characterised by ongoing uncertainty, anxiety
While this process may appear to be linear or rational, it is not inevitably
or rigidly linear as it may involve iterations, reversals, setbacks, discontinuity
and deceptions, repetitions and cycles. In other words, these phases and passage
points do not represent a sequence of linear stages and gates through which
all the product sub-components must pass in unison (Wotherspoon,
2001). Nor do they represent predictive factors through which the final
shape of a product may be foretold. Rather, they represent change in social
and technical interaction around product sub-components and its web of moves
as means and ends evolve over time. The process is, also, no simple sequence
of moving from more to less uncertainty or concreteness. Finally, it is a process
driven by sociological, technical and political dynamics.
innovation as a socio-technical conversion process: a ribbed balloon
The concept of the ribbed balloon has been introduced in order to capture both
the flexibility and the 'lumpy' nature of the innovation process, something
not fully captured by the funnel metaphor. In addition, there is always the
possibility that innovation does not proceed down the defined path to a successful
conclusion. If this is the case, the balloon bursts. While allowing for this
possibility of bursting, the ribbed balloon metaphor remains valuable for practitioners
as it provides the necessary guidance for the practice of forcing innovation
towards a desirable outcome. Therefore, the purpose of this model/metaphor is
to generate a more creative, sociopolitically informed, yet pragmatic and outcome-focused
approach to the practice of innovation. This image is also grounded in what
Schon characterised at various times as the artistic approach to practice.
The purpose here is not to simply argue that the ribbed balloon model/metaphor
is correct but, rather, that it plays a generative and projective role as a
creative, elastic metaphor capable of throwing new and important light on how
innovation might occur and can be influenced in practice.
In this process, risk management-either broadly or narrowly conceived-can occur at or in all of these different stages, be intertwined with each other and take multiple interlinked technical and social forms. Both innovation and risk management are, in short, complex and messy socio-technical processes-and their understanding is inevitably premised on this point.
THE UNCERTAINTY GAME AND THE RISK GAME
What is commonly taken to be risk management is what, in this study, is characterised
as the downstream activities of the routines, rituals and practices of the risk
game. This game is premised on the assumption that it is possible to quantify
risk, examine measurable outcomes, plan contingencies etc. It usually does not
allow for or accept the existence of uncertainty that cannot be fully calculated,
judgements and evaluations influenced by socio-cultural and political factors
etc (Lupton, 1999b). As a result, it operates, in effect,
with material that, I argue, has already been constituted-by a prior uncertainty
game-as well as ignoring the social dimension of and uncertainties within its
What is meant by the uncertainty game is the set of routines, rituals and practices
that are involved in identifying and converting uncertainty into risk as part
of an innovation process that seeks to address and handle such uncertainty.
The risk game is established once these conversions have already been undertaken,
once unpredictable and anxious uncertainty has been converted into quantifiable
and manageable risk by the prior socio-cultural game or set of practices. It
is a process of moving from what Schon (1967) described
as the language of invention to the language of investment, with the former
grappling with what various theorists of risk-from Knight to Wynne-regard as
a frequently unacknowledged yet crucial dimension of risk management: addressing
basic and enduring uncertainty. We also use the term risk regulation here in
order to cover the activities involved in both the uncertainty game and the
risk game i.e., conversion and translation of uncertainty into risk. Risk regulation,
therefore, is an inherently socio-political process of converting unmanageable
and often anxiety inducing uncertainty into manageable risk, through the iterations
of uncertainty and risk games. It must be re-emphasised, however, that this
does not involve a real reduction of uncertainty-in the sense that it has been
technically brought about or objectively reduced. It is, rather, a process of
selective inattention (Sullivan, 1965) to fundamental
and enduring uncertainties and a political sociotechnical focusing and channelling
of attention and productive effort inevitably involved in all attempts to make
A key component of this model concerns the nature and characteristics of the
uncertainty and risk games-games which are characterised not by the rational
strategic logic of the chess game but the context based situational logics of
Wittgenstein (1953) language games. These are the games,
as characterised by Clegg and MacIntyre as the type of game in which not only
is pawn to king 4 replied to by a knight turning into a queen, but a chess move
is responded to by a lob over the net.
As outlined here, the purpose of the uncertainty game, like the risk game,
is to provide symbolic forms (Douglas and Wildavsky, 1982),
rituals (Wynne, 1982), disciplines (Goffman,
1961), norms (Clegg et al., 2006) and in short
valid bases of concerted action (Vlaar et al., 2007).
The rules of the game, like the rules of all social games, are multiple, fluid,
contentious and shifting. Also, the way such rules are followed is a contextual,
meaning driven and complex practical process. If such conditions are taken into
account, however, then it is useful and meaningful to try and identify-as Bourdieu
(1977) does in his discussion of fields of practice-what the general rules
of the game look like.
The rules that have been identified are drawn from a specific source. They
are what are described as the types of behaviours, actions, practices, routines
or rituals identified by broader approaches to risk as those involved in the
handling of fundamental and basic uncertainties and insecurities in the broadly
defined risk management process (Lupton, 1999a, b).
As can be seen, the characters of these rules are not specific to the area of
managing risk. In many ways, they represent a risk version of general views
of the nature of sensemaking (Weick, 2000), the operation
of bounded rationality (Simon, 1982), the dynamics of
social and technological framing (Bijker, 1995; Koestler,
1964; Schon and Rein, 1995) and the nature of reflective
practice (Schon, 1983, 1987). Insofar
as each of these perspectives identifies uncertainty and the handling of uncertainty,
as a key component of social and organisational life, they can be seen as useful
contributors to an understanding of the uncertainty game.
I have encapsulated and presented academic reflection on such matters as a
set of rules in order to assist academic understanding and, ultimately, as an
aid for reflective practice. These are, however, presented more in the form
of an inevitably schematic map (Fig. 2, 3)
rather than an inclusive description and are intended, at present, as themes
and hypotheses to be further analysed, explored and detailed through empirical
game and risk game
uncertainty to risk in the innovation process
THE UNCERTAINTY GAME
Rule 1 reflection: Knowing in action, reflection in action and reflection
on action: At the heart of attempting to handle uncertainty in a deliberate
manner is a process of reflection on knowing-in-action i.e., those coping with
uncertainty in practice will be addressing and resolving actual and possible
uncertainties as part of their actions and decisions-although this may be done
implicitly as tacit awareness in knowing-in-action (Schon,
1983). Reflection-in-action involves a standing back, within action and
reflecting on the ideas and assumptions, to then be quickly addressed and resolved
in the action process (Schon, 1983, 1987).
Reflection-on-action involves a more distanced, retrospective look at the assumptions
and issues and may also involve reflection on reflection-in-action, both in
terms of the validity of decisions made and the adequacy of the process (Arendt,
1971; Dewey, 1933, 1938). What
sparks off and inspires reflection, the source of the surprises that make this
happen, may be many.
Rule 2 coping: Controlling complexity, coping with anxiety: While uncertainty
is ever-present in human existence, it is a continuing source of worry and anxiety
(Dewey, 1930). As individuals, groups and organisations,
we seek to relieve ourselves of this anxiety by, in some way, controlling experienced
uncertainties (Sullivan, 1965). In many cases, however,
the fear and anxiety generated by uncertainty pushes people and organisations
into a managerial command and control mindset more appropriate for simple rather
than complex situations. As outlined by complexity and chaos theories, it is
possible to adopt a weaker idea of controlling, involving identifying and using
patterns in the chaos to guide action in complex environments or within complex
systems (Stacey, 2002). It is a strategy that is mindful
of uncertainty and complexity, generates rich pictures, adopts an experimental
attitude and so on. However, such an approach is at odds with knee jerk, what
Beck terms reflex, individual and organisational responses to the threat of
complexity and uncertainty. A common response, that occurs, at more superficial
and deeper levels, is to practice what Sullivan (1965)
describes as selective inattention i.e., to ignore, avoid or repress evidence
or awareness of uncertainty. As argued by many observers, from Knights classic
studies of uncertainty in economic life to Staceys application of chaos theory
to strategic leadership, an ability to cope with the anxiety of uncertainty
and respond proactively and creatively, is a key leadership capability, mindset
or behavioural repertoire.
Rule 3 framing: Unframing and reframing: In the face of uncertainty
and complexity, actors are inevitably selective in the information that they
receive and pay attention to, the criteria and values that they consider and
apply and the bases upon which they make their judgements. The processes through
which such selection occurs are variously studied, amongst others, by analysts
of metaphor (Schon, 1963; Cassirer,
1953), language (Wittgenstein, 1953), scientific paradigms
(Kuhn, 1996) and Gestalt psychology. In its political form,
it is the topic of ideology-critique and the documentation of governmentality
and the forces of knowledge-power and the discursive practices that they embody
and create. A recognition of complexity and these processes of selectivity,
lies at the heart of Weicks injunction for managers to complicate themselves
and the description that Weick and Sutcliffe (2001) provide
the rich pictures collected by high-reliability organisations and their mindful
inhabitants. In prescriptive advice attached to such perspectives, actors are
encouraged to be aware of and reflective about the metaphors, paradigms and
perspectives that frame their thought and, through such awareness, explore the
possibility of alternative frames (Koestler, 1964) and
orientations. In its social and political forms, such advice involves consideration
of the kinds of practice fields, reflective spaces, or regions of open and undistorted
communication that could be created to achieve such ends.
The appeals for initial unframing are, consequently, accompanied by advice
about reframing situations and events (Schon and Rein, 1995).
At the heart of numerous explorations of creativity lies an appeal for more
open, reflective and multi-dimensional thinking, informed by conscious recognition
of the limited constraints that we inevitably impose on our perception of complex
situations and reflection on how we might generate and apply multiple frames
to break out of restrictive forms of thought and practice that bracket out so
much information and so many avenues for action.
Rule 4 decision-making: Consolidation, bounded rationality and choice:
It is one thing to reframe a situation, another to estimate the consequences
regarding the preferences, deciding what to do about it. It has been the province
of decision making theory following the classic contributions of Simon
(1982), to explore how decisions are and can be made in situations of inevitably
bounded rationality. As for March (2006), decision making
in a state of bounded rationality inevitably involves a guess about uncertain
future consequences in regard to preferences. In terms of prescriptive responses
to such situations, two types of recommendations have been provided. Firstly,
advocacy of the kind of experimental, open, hypothesis-testing ethos promoted
by Popper (2002) in his revisionist model of science and
advocacy of liberal piecemeal social engineering. It is this kind of ethos that
has been taken up by policy analysts such as Lindblom (1979)
in their advocacy of disjointed incrementalism and strategy analysts such as
Quinn (1980) in their recommendations for logical incrementalism.
Secondly, more radical, open and creative approaches to dealing with the non-rationality
of real-world decision making in organisations is what March
(2006) advocates as a technology of foolishness.
In the specific area of risk analysis, Knight addresses a number of these issues in his recommendation for achieving consolidation through objective and subjective probability in regard to the uncertainty surrounding situations.
Rule 5 producing: Diffusion and implementation: Finally, once reflection has been sparked, anxiety reduced to satisfied bounds, unframing and reframing occurred and decision making carried out, decisions still remain to be implemented. As is the case with the other rules, both technical and social factors need to be enrolled in order to bring about the planned effects. It is this need to mobilise sociotechnical powers in order to get things done, that underlie the focus of actor-network theories upon processes of translation and enrolment, the concentration of cultural theories upon the active application of blame and taboos and governmentality theories on the use of normalisation and other techniques of monitoring and control to create responsible subjects and provide them and other authorities with the detailed measures and measurements essential to controlling things, actions, events and populations.
All of these rules are descriptions and associated prescriptions, about how we think and act in situations of uncertainty and also, how we manage to cope with and channel this uncertainty into another kind of game-the game of detailed calculative action planning that is the main topic of most analyses of risk management. It is, however, the prior uncertainty game that transforms a buzzing, complex and unmanageable reality into something with a relatively ordered character, with boundaries, trends and probabilities. Insofar as risk analysis operates on the risk game produced by the prior workings of the uncertainty game, it fails to grasp the complex dynamics of how individuals, organisations and society construct risk-and then work elaborately on their already elaborated constructions. Insofar as it succeeds in capturing the ideas, patterns and practices of the uncertainty game, however, it can provide the basis for a more in depth and realistic analysis of how risk is actually dealt with. As we shall see, many of the critiques of the limited cognitive-rational views of risk are based on a recognition of the cultural and political nature and dynamics of the uncertainty game and the form that it takes in modern societies. Rather than simply condemning restrictive risk analysis for its ignorance and pointing to the crucial issues in the uncertainty game that they ignore and the benefits of a more sociological, cultural or radical analysis that captures these elements, our approach here aims to do more. The recognition of the uncertainty game does not provide any simple solutions but, what it does do, is to integrate the insights of these various critics in a way that they can be incorporated into a more reflective. It further tends to open a comprehensive view of what occurs and what should occur, in addressing uncertainty and risk. In this sense, it provides the basis for exploring and reflecting upon an uncertainty game that many ignore-yet does so in a way that recognises, rather than avoids or restricts, the fundamental challenges that this imposes.
THE RISK GAME
At the core of the risk game is the risk management process (PMI,
2004), a systematic approach to making rational choices in which the actor
seeks to master identified risks. Most of the literature on innovation project
risk management suggests this kind of process. The approach in this study differs,
however, in two ways: firstly, it adds a new step to the whole process. The
new step is re-action, including response to the effects of initial actions-responses
that may result in further iterative risk identification or open up fundamental
uncertainties and insecurities that throw the project back into the uncertainty
game; secondly, the process, as played out in practice, is inevitably more contingent,
contextual and situational than the rational models understand or prescribe.
Moreover, it is inevitably circumscribed by and interacts with, ongoing operations
(albeit to varying degrees) of the uncertainty game. The view of the risk game
presented here is not as detailed as the analysis of the uncertainty game, which
is a more prominent focus of this study. It is, however, presented in the form
of the four rules drawn from four step consecutive process of the rational models:
(1) identification, (2) analysis, (3) action and (4) reaction in regard to risks
are taken place.
Rule 1 identification: This step seeks to delineate the possible sources of risk; in so doing it focuses on where to look for likely sources of negative outcomes (e.g., in the market, in the business macro environment, in the innovation process, in the actions of competitors, etc.). Identifying is essentially an, inevitably bracketed, brainstorming process by which actors uncover any risks that could potentially afflict the innovation process. Depending on the nature of the project, a variety of thought starters can prompt risk discovery, yet it remains framed and channelled by the boundaries set by the initial uncertainty game.
Rule 2 analysis: Questions are generated and answered about which risks should we pay attention to, i.e., of all possible risks that we can identify which ones should we address in formulating a plan of action? Conventionally, risks are assessed in terms of probability of occurrence and likely severity if realised (i.e., likely size of impact). On the basis of such an assessment, risks can be ranked in terms of priority for action. As a result the objective of risk analysis is to estimate the likelihood of the risk and its overall magnitude. In common sense, this step forms the basis for determining how serious the identified risks are with the aim of prioritising them. And prioritising the risks is done according to the time and resources available, hence some difficult decisions must be made here.
Rule 3 action: This involves the formulation of a risk management strategy. Four possible courses of action can be drawn on when addressing identified risks: (a) accept the risk and live with it (e.g., because the probability of occurrence or the likely impact is very low); (b) accept the risk but monitor the situation so that the acceptance decision can be re-visited if necessary (e.g., due to a change in circumstances which alters the probability of occurrence and/or likely size of impact); (c) take action to mitigate the impact if the risk is realised (e.g., take out insurance or otherwise pass on the risk to another party, reduce dependence on the risk-prone element of action, establish parallel activities, etc.) and (d) take action to minimise or prevent the risk from being realised (e.g., remove a risk-prone element in the plan of action).
Rule 4 re-action: In spite of careful identification, analysis and detailed
action the practice of risk under the pressure of uncertainty not only proves
difficult to follow (Repenning, 2001) but also insufficient
to avoid or identify all potential threats and crises that might threaten the
project performance. Therefore, the capability to be reactive to emergent risks
and crises is required. This I term reaction-which includes all those reflective,
firefighting (Bohn, 2000) and mindful (Weick
and Sutcliffe, 2001) activities involved in monitoring, intervening in and
reassessing how well the risk management strategy is doing. This may involve
organisations in an ongoing fashion seeking to make sense of events, anticipating
problems in advance and responding promptly to undesirable events in a flexible
rather than rigid way. And when things do go wrong, this may involve applying
more or less standardised solutions, identifying and empowering those with the
expertise to contain or minimise the risk of the situation and rely upon organisational
resilience to bounce back quickly after emergence of an error. Or create surprises,
controversies and political confrontations surrounding the explicit resurgence
of a more fundamental uncertainty game.
As Schon (1967) has argued, contemporary organisations are not designed for uncertainty, where there are no clear ends and where it is not clear what to try to control and organise. So while they cannot deal effectively with situations of uncertainty, organisations are able to identify, analyse, evaluate and manage risks. Accordingly the innovative work of organisations consists of framing, packaging and translating uncertainty at various stages of innovation into something manageable, thereby converting it into manageable risk. This study explores this phenomenon while seeks to address the inadequacy of existing theories of risk management for dealing with the uncertainty of innovation as well. It is, however, a preliminary research which tries to introduce and institutionalise a new conceptual framework for looking at risk management in innovation.
The primary purpose of the framework is to integrate the insights of the broader and more critical social and political perspectives on risk management with those of the narrower and more restricted cognitive-science views, in such a way that they provide a basis for understanding and reflecting upon how risk is managed in practice and how it might be improved.
In so doing, the intertwining of the uncertainty and risk games reflects and,
hopefully, further illuminates some of the themes addressed by such literatures
as those on risk as fire-fighting, accident analysis and prevention and mindfulness
in high-reliability systems. The uncertainty game addresses many of the dimensions
of fire-fighting as well as normal accidents and complex sensemaking existing
in complex systems. However, as many prescriptive risk management theories advocate,
more manageable risk games are established by channelling these uncertainties
into more programmed forms of institutionalised mindfulness, situational organisational
design and failure mode and effectiveness analyses. These translations or conversions
are examples of the intertwining of the uncertainty and risk games in the broader
regulation of risk.
To put it another way, risk management and dealing with uncertainty are, by and large, parallel universes with their own solar systems, time zones and laws of gravity. Yet organisations make an effort to convert uncertainty into frameworks of risk when facing problematic situations. The process of converting uncertainty into risk is at the heart of dealing with problematic situations which are indeterminate, unpredictable and ambiguous.
The identification of uncertainty and risk games provides us with the foundations necessary to explore the practice of converting uncertainty to risk in product innovation in more detail. It allows the analysis to address all the issues raised by broader and more critical theories of risk in a pragmatically focused analysis of how actors deal with issues of risk and uncertainty in practice.
As indicated earlier, this framework is preliminary and suggestive in character and requires further elaboration, support, data collection and testing and illustration before it can in any way be regarded as sufficiently well-clarified or authoritative. I have, however, elaborated it here in order to stimulate discussion and receive feedback on an ongoing research initiative.
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