I have been thinking a lot about risk. Basically, I tend to look at risk from two perspectives. First, I am a space researcher who builds instruments that go to places that have never been visited, or have never been explored with the kind of instrument I build. There is a lot of ambiguity and the risks for failure are real and ever-present. We spend months and years thinking about these things, quantifying them and mitigating them. Because, unlike Earth, if something does not work in space it is often lost forever – we can’t just go and fix a switch, like my most recent new car. And, if the protective cover does not open, a space instrument turns into a useless piece of junk. Second, risks are also part of any activity we do, especially activities that address a new opportunity or the deployment of a new technology. Risk and ambiguity are therefore a crucial part of entrepreneurship. So, this being considered, how do ambiguity and risk play into entrepreneurship programs, and how do they relate to my lessons learned in space science?
First and foremost, we have to embrace risk. I am a strong believer that risk is part of any worthwhile activity. This is especially true for organizations that seek to create impact by creating something new and at scale. I want organizations to think about risks and their impacts and also get a handle on their importance. It is also important to communicate risks inside and outside of the organization.
Unfortunately, NASA did a poor job communicating risk when the 1988 Challenger failed, it was a tragedy for all, but the system was well on track for its initial risk rating. As a result of the reaction of political and legal worlds, the space shuttle was grounded for many years, and the military decided against using it for the launch of classified spacecraft and thus pretty much stopped the future of this amazing machine. The examples are plenty: the moment legal departments start to lead companies is the beginning of the end. (The same may be said about universities, by the way!)
Second, I believe risks are managed by creating the right culture to manage risks. Organizations that manage risks need to have a culture of empowerment. Let me give you an example from space about that.
In 1989, Magellan went into orbit about Venus and basically developed much of the knowledge we have of that planet. It was a highly successful mission – but it almost failed. After a technician mounted one of the mission-critical sensors onto the spacecraft, he completed his shift and went home. He had a hard time falling asleep. Did he insert the sensor the right way or did he in fact accidentally turn it around and mount it backwards? The answer to this question bothered him and he finally concluded that – indeed – he had flipped it. He went back to work in the morning and announced to his team that he needed to rip away the thermal blanket and fix his mistake made yesterday. Soon, quality assurance experts came to him with paperwork and said: “Look, you signed that things are mounted well, and the quality expert signed as well – it’s all good!” But, the technician would not back off, insisting that he had made a mistake. Finally, after appealing to the leadership directly, the thermal blanket was ripped off and – sure enough – the sensor was in backwards, a possibe mission-critical failure!
Dealing with risks is a cultural value and not just a set of processes and regulations. Unfortunately, there are many examples that were opposite. After the failure of the first Challenger flight, the nation was in shock and appointed a committee that included Richard Feynman to investigate the accident. In his book, Feynman tells his story. Only after a few days of interviews, he knew what the problem was – a technician had told him that he worried, but there was no way of really making that worry known.
Risk-taking is a cultural value that requires the participation on all levels. Often, the most important information about some risks is with technicians or on the shop floor – it is not with managers and in the business suite!
So, what do we do in our entrepreneurship focused educational programs to deal with risk?
1) We actively make students aware of the important relationship between risk and reward. Risk are there to be managed, they are not a STOP sign for action.
2) We strive to make entrepreneurial ethics a part of every single student’s education. It is critical for students to understand the boundaries that come from ethics. They are often more important than risk because they create uncorrectable damage: “If you start crossing ethical boundaries, you may have quick success, but you will not have a successful entrepreneurial career,” Steve Blank told me once.
3) We create mechanisms for input, such as boards for entrepreneurial projects and startup companies. Mentors, professional advisors and peers can help identify issues and risks and also suggestions on how to mitigate those. Risks are part of the life of any entrepreneur, and many problems have been addressed before.
Taking risk and managing ambiguities is what entrepreneurs do every single day, and their organizations have to be built to reflect that. In many ways, it’s the healthy disregard for risk as a boundary to action that makes an entrepreneurial life-style worth the while – no risk, no fun! William G.T Shedd once said: “A ship is safe in a harbor, but that’s not what ships are for!”