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Balancing Discovery and Innovation with Affordable Loss

Author of Little Bets shares how concept can work for nonprofits

Peter Sims, author of Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, is helping others see how low-risk actions and creative methods can be used to identify possibilities that will achieve breakthrough ideas.(1)

“Little bets are concrete actions taken to discover, test, and develop ideas that are achievable and affordable,” says Sims. “In a new undertaking or new project, we often think we must have the answer before we begin. The point of little bets is that it’s very often impossible to predict what is going to work and what is not.”

Sims, a keynote speaker at the 2013 Alliance National Conference in October, explains in his book that when people realize personal and organizational creativity and innovation hinge upon taking risks, they understand they will have to take these small bets in order to discover new opportunities and possibilities.

Approach is Relevant to Nonprofits

Popular actor and comedian Chris Rock is an example of someone who routinely uses the little bets concept to achieve success. Rock tests new jokes for his standup comedy routine by repeatedly assessing and tweaking his material during 40 to 50 appearances at small comedy clubs.

This low-risk, incremental testing and improvement process also works for nonprofit, human-serving organizations because little bets are deemed achievable and affordable to the organization making the bet.

“People aren’t going to make a bet that is above their tolerance for risk. Everyone should be able to test possibilities by taking little bets in his or her own organization,” says Sims. “This could be restructuring the way you approach a meeting. It could be thinking differently about how you go about brainstorming. It could be any number of things that are within your control but tested in the form of a small bet.”

Affordable Loss Protects the Organization

Organizations that are looking to grow and improve must be open to experimentation. Yet, nonprofits do not want to put their brands, reputations, or other major assets in danger.

First, leaders must ask themselves what they can afford to lose when trying something new or innovative. After determining that factor, Sims advises leaders to embrace the concept so that they can experiment in a way that is low risk and determine, in advance of each individual experiment, the affordable loss.

Affordable loss is very important for a leader to understand when encouraging all staff to take little bets. They must acknowledge—even embrace—the fact that they are going to make mistakes if they take steps toward innovation. However, as long as these mistakes are affordable losses that do not harm the brand or the organization, staff will learn valuable lessons from their experiments and may develop new and useful approaches.

Sims offers the example of fundraising. “Maybe you want to use a small group of people to experiment with a different approach to fundraising. What are you afraid to lose? Are you afraid to look stupid in front of a group of donors who know you are experimenting and who you can trust? I would hope that you’d be willing to have that conversation with a group of people to try to advance a more innovative concept.”

While there are several examples of large bets gone wrong among for-profit companies, Sims says he has never seen a brand hurt by making a small bet.
“The whole point of a small bet is that it is an affordable loss; it’s an affordable risk. More often than not, people hurt their brands by not making enough small bets,” says Sims.

Uncertain Environments Call for Little Bets

Human-serving organizations often must adhere to many standardized processes and procedures, but operating in an especially uncertain and rapidly changing environment provides ample opportunity for little bets that can lead to positive change.

“The little bets philosophy and approach is drawn from human-centered design,” says Sims. “Human-centered design begins by asking: What are the human needs and problems we are trying to solve, and how are we trying to improve people’s lives? So once you know the end goal, you then move to how to do that most effectively.”

By taking affordable steps, an organization can test new opportunities to ensure that it continues to help solve community problems and aid the people it seeks to serve. It is a proven incremental approach to change. By beginning with small experiments, an organization can determine where areas of opportunities are going to be before shifting operations prematurely.

As Sims reminds readers in Little Bets, “No one can take their eye off their core business or responsibilities, but anyone can spend a portion of their time and energies using little bets to discover, test, and improve new ideas. In this era of ever-accelerating change, being able to create, navigate amid uncertainty, and adapt using an experimental approach will increasingly be a vital advantage. The way to begin is with little bets.”


ENDNOTES:

1. Little Bets: How Breakthrough Ideas Emerge from Small Discoveries by Peter Sims was published by Simon & Schuster July 16, 2013 (reprint edition).

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