How do you encourage your team to innovate and take a few risks--while not taking too many risks? This is the dilemma of many a CEO.
It's possible--but the key is teaching your employees how to be smart risk-takers by communicating specific guidelines about how to approach business risks, Forbes reports.
Here are three tips Forbes offers for how to keep your company moving in new directions in an intelligent way.
1. Establish an innovation "safe-zone."
As a first step, and to get everyone thinking creatively, clearly outline the parts of your business where there's room to experiment. At one company cited by Forbes, employees are advised to avoid risks that could negatively impact customers but embrace risks when working on solutions to problems that won't affect customers. Other helpful tips: Set parameters for how much time individual ideas get before requiring evidence of progress, and how much revenue proposed ideas would need to generate.
2. Make experiments small--and fast.
Nothing stifles new ideas like a bureaucracy with a long chain of command that needs to sign off before new projects can get off the ground. This is one of the reasons the Defense Advanced Research Projects Agency (DARPA) has just two management layers, allowing new ideas to move quickly through the organization. By the same token, ideas that turn out to be failures can take up less time and fewer resources. Another way to encourage faster and better creative thinking is to keep teams small, as smaller groups of workers can have a higher tolerance for risk when brainstorming ideas. Both DARPA and electric car innovator Tesla keep their teams small to retain an entrepreneurial mindset, Forbes reports.
3. Fund projects in phases.
One of the riskiest decisions you can make is allocating an open-ended amount of money to a new project or idea. Instead of writing a blank check, establish individual phases for every project, with additional funding coming only after ideas pass each new phase. Google, for example, works with timelines of between three and four months to test out an idea's viability. If it doesn't successfully prove itself before the end of the phase, the project is terminated.
Ultimately, the best way to foster creative thinking--and smarter risk-taking--is to set clear expectations around new ideas. Referring to innovative projects as "experiments" and "scouting missions" instead of bland "initiatives" will not only help set the tone from the beginning but also give your team a better idea of the task at hand.