Rethinking Risk in the 21st Century

Human-Centered Design Thinking Instills Organizational Competency for Greater Risk Mitigation. By Kel Davison, Intersection-Inc., Growth Strategist

“It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” - Warren Buffet

A Human-Centered Design (HCD) mindset and tools equip organizations to face a challenging economy with greater insights and confidence. Risk mitigation, among other benefits, is inherent to Human-Centered Design.

The heightened interest in Human-Centered Design today is no coincidence. Changing consumer preferences, expectations and social connectivity have given the public an unprecedented voice and powerful political leverage. This has prompted business executives to start listening more to the needs and feedback of key stakeholders. Human-Centered Design (also called Design Thinking), was popularized outside the design industry through over the past decade through the publication of various articles published in top business journals, like the Harvard Business Review’s, Design Thinking Comes of Age (Kolko, 2015).

Human-Centered Design is a methodology of creative thinking and problem-solving that uses an empathic lens to better understand end-user motivations and needs; shifting conventional product or service development practices from a focus on resources and competition to emotional drivers of behavior. Emotions are powerful. According to a recent report published by Forrester Research on the impact of emotions on business, “This is not a touchy-feely consideration about delighting customers as a matter of altruism: Emotion continues to be the most potent driver for growth. This is, at its heart, crass and clear financial risk” (Forrester Research, 2018).

Empathic work requires close connections to key stakeholders. HCD activities include quantitative and qualitative research, prototyping, and user-testing research before a product or service is launched into market. A continuous feedback loop is put in place, giving business leaders a clearer message of where to invest, what is working, what is not, and the ability to more accurately anticipate changing behaviors in the market. The approach is highly-collaborative. Practiced to its fullest capacity, HCD breaks down silos, enriches conversations, and reduces risk.

HCD's operational facilitation complements other organizational priorities, such as Marketing, Human Resources, Operations, and Innovation. The diversity of HCD tools allows their application to existing functions and enriches competencies across organizational disciplines. For organizations, adopting HCD is not only about delivering and measuring the best possible product or service, but how an organization will show up and survive in an increasingly demanding global economy.

Political Risk and People

In a recently published book titled, Political Risk, How Businesses and Organizations Can Anticipate Global Insecurity by Condoleezza Rice and Amy B. Zegart, the authors discuss emerging political risk in the 21st century; describing in detail a set of past and modern risk generators that contribute to an unprecedented level of institutional financial and operational exposure.

“Increasingly, political actions are happening everywhere – inside homes, on the streets, and in the cloud; in chat rooms, dorm rooms, and boardrooms; in neighborhood bars and summit sidebars” (Rice & Zegart, 2018).

Political risk in today’s economy extends beyond the domain of politicians, military, and government agencies, and into the less containable hands of local businesses and communities. Instantaneous social connectivity allows consumers to alert a global audience of experience failures or unethical behavior associated with an organization. The political threat compounds as individual voices morph into virtual crowds, and crowds into social movements that can unexpectedly jeopardize and organization’s reputation and financial stability.

Sea World’s recent exposure by Gabriela Copperthwaite, a mom who, concerned after the death of a trainer, produced a documentary on Sea World’s treatment of killer whales. Gabriela‘s story got the attention of celebrities and sponsors. Through sharing her amateur film with total budget of $76,000, she effectively reduced Sea World’s stock price from $38.92 before the film was released to $15.55 just after. Sea World has still not fully recovered from the backlash (Rice & Zegart, 2018).

The story of unexpected exposure is increasingly common. Other companies who suffered through similar scenarios include, United Airlines, Facebook, Target, Starbucks, and Sony. Understanding the vulnerabilities in a business model, supply chain or geopolitical relations grows urgent as the threat and impact of their disruption becomes more likely. Paying close attention to human interactions and utilizing creative problem-solving in this climate is not a trend, but a business necessity. Ten specific categories of political risk are presented in the book: geopolitics, internal conflict, laws, regulations and policies, breaches of contract, corruption, extraterritorial reach, natural resource manipulations, social activism, terrorism and cyber threats. As the book points out, "The probability of one of these risks happening in isolation to an organization is low, but the cumulative risk of one of them happening at some point in time is high” (Rice & Zegart, 2018). Rice and Zegart offer a framework of questions and recommendations to help companies analyze and decrease their risk exposure. Many of the recommendations, or best practices, are intrinsically embedded in design-driven organizations. Table A. illustrates the priority alignment between the risk management framework presented in Political Risk, and essential tools curated by The Design Academy used in Human-Centered Design. To learn more about the tools visit The Design Academy.

How Human-Centered Design Mitigates Risk

Mitigating risk, according to Rice and Zegart, starts with creating a deeper awareness of potential threats, understanding stakeholder behaviors, identifying where weak points exist and using imagination to think boldly about possibilities. How better to do that than to be continuously tapped in to your stakeholder needs and behaviors? HCD methodology promotes getting to the ‘right’ problem with phrases like, “What if?” or “How might we?” HCD tools encourage stakeholders to think creatively and openly about possibilities. Strategic filters gauge the viability of ideas and direct companies down an intentional path. Table A illustrates the inherent relationship between risk mitigating solutions and HCD practices. The Design Academy HCD Essentials Toolkit is applied to each area of the risk management framework presented in the book. Table A. below details how each risk analysis approach can benefit by incorporating a corresponding HCD tool from The Design Academy HCD Essentials Toolkit. The similarity between the two suggest that where HCD is an active contributor to an organization's strategy, the internal competencies needed for 21st century risk mitigation are built-in and accessible.

Both HCD and risk management work hand-in-hand. Risk management acts as an organization’s proverbial brakes, cautioning and alerting to potential threats based on patterns of the past. HCD tools enhance the risk management function by expanding the analysis and research focus to evolving stakeholder behaviors, needs and motivations. Together they allow an organization to innovate and move forward with greater confidence and cultivate a broader and deeper intelligence of market and ROI influencing factors.

Conclusion

Human-Centered Design practice and theory has gained traction among for-profits and nonprofits, as both look for new ways to connect, compete, and innovate in an increasingly complex economy. While professionals still work hard to formulate a measurement of Human-Centered Design’s exact ROI, less tracked advantages deserve credit, like risks mitigated and dollars saved when ‘bad’ ideas are avoided. The high-definition lens HCD provides into stakeholder behaviors and the constant feedback element positions organizations to be proactively agile and better prepared for change. The ROI of a design-driven organization goes far beyond a financial quote or a single or set of metrics. The associated mindset that supports Human-Centered Design advocacy postures an organization to fearlessly face its future.

References: The Design Academy (2018). www.TheDeisgnAcademy.com Forrester Research (2018). The Missing Human Connection. A Story of Financial Risk. Forrester, Inc. Retrieved from website: https://go.forrester.com/cx-human-connection/. Kolko, J. (2015). Design Thinking Comes of Age. Retrieved from https://hbr.org/2015/09/design-thinking-comesof-age?utm_campaign Rice, C., & Zegart, A. B. (2018). Political risk: How businesses and organizations can anticipate global insecurity. New York, NY: Twelve, Hachette Book Group.