Here is another valuable Management Tip of the Day from Harvard Business Review. To sign up for a free subscription to any/all HBR newsletters, please click here.

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Innovation requires a tolerance for risk-taking and learning from failure. Yet many companies still have risk-averse cultures. Break out of this and create an environment that is more conducive to innovation by being more explicit about what risk-taking really means:

o Define smart risk. Distinguish the areas where risk is encouraged, and where it is not. For example, you want minimal “execution risk” regarding customer commitments, but more “discovery risk” in developing new solutions to customer problems.

o Use the right words. Terms like “experiment” or “scouting mission,” as opposed to “successful vs. unsuccessful project,” signal a more open attitude toward risk.

o Establish clear phases for funding projects. Stop providing blank checks. Fund each project in clearly defined phases. If it passes one phase, give it additional funding.

Adapted from “The Reason Your Team Won’t Take Risks” by Ron Ashkenas and Lisa Bodell.

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