When you were a kid, your mother probably told you not to do certain things because they were too dangerous. And that was a reasonable response if you were five years old and wanted to jump off the roof to see if you could fly.

But that sort of all-or-nothing approach is too simplistic for business leaders trying to find the innovation sweet spot between reticence and recklessly throwing caution to the wind. That’s because either extreme can lead to disaster.

History provides great examples. At one end of the spectrum, there’s Kodak. The film photography giant could have been the pioneer that disrupted the industry with digital photography technology. Instead, Kodak chose to play it safe and didn’t pursue the new technology, and digital photography eventually became its undoing.

At the other end of the spectrum, you have examples like Microsoft Bob. Bob was a user-friendly interface for Windows, but Microsoft launched it before most home computers had the power to run it (something the company should have known). That turned out to be a fatal miscalculation that led to Bob’s demise after only one year on the market.

One company backed away from risk. The other embraced it a little too enthusiastically and failed to recognize what should have been an obvious constraint.

You could argue, of course, that neither company could have predicted the future. But that’s not quite true. Futurist Daniel Burrus is known for encouraging companies to mitigate the risks inherent in innovation by first identifying what he calls “hard trends” and “soft trends.” Hard trends are things that, based on hard data and projections, will definitely happen. In other words, for better or worse, hard trends point toward a future that cannot be changed. Soft trends, on the other hand, are things that look likely, but are still open to influence from various factors.

Opportunity and Risk in the Digital World

Many businesses see the digital world as the last frontier: a great unknown bursting with both risk and opportunity. Burrus’s approach, however, can help identify some of those unknowns by pinpointing which parts of the future we can be right about. In turn, this allows the business to see disruptions before they take place and inform strategies based on select certainties.

The key to framing digital opportunity and risk for an organization is to appropriately identify those things that are hard trends — those that are based on measurable, tangible and fully predictable facts, events or objects. Those hard trends ought to be the basis for a digital strategy that can be realized and balanced with risks presented by the soft trends. Soft trends for the business are those projections that are based on metrics or some type of indicator that gives the appearance of being predictable, but in reality — or in the future — may not be. In other words, soft trends appear to be things occurring on a trajectory, but they can (and likely will) evolve in the future and therefore ought not to be incorporated into the business strategy with certainty.

Let’s look at examples of both hard and soft trends, according to Burrus.

Digital Hard Trends

There are a few things we know for sure, because they’re based on hard data and are projected to occur because there is so much momentum in areas such as society, financial systems, politics or governing mechanisms that they will not be reversed. Here are some examples:

  • The rate of technological advancement will continue to increase.
  • It will become increasingly difficult to opt out of participating in the digital realm.
  • Cyberattacks will continue to increase in both number and ingenuity.
  • Digital regulation will continue to increase.

In other words, these are realities that your business faces, and they are here to stay.

Learning Opportunities

Digital Soft Trends

On the other hand, we have soft trends, which are projected to occur based on tangible or predictable facts but are not guaranteed and thus they might develop in the digital sphere — or they might not. They include examples such as these:

  • There will be a greater reliance on cryptocurrency.
  • Mobile and voice will overtake personal computers.
  • Big data and artificial intelligence will pave the way for greater personalization.

The process of identifying both the hard and soft trends relevant to your business, and weighing them against your company’s tolerance for risk, provides the framework for creating digital policies that maximize opportunity while minimizing risk.

The Case for Digital Policies

Digital policies empower you to be innovative without being reckless by starting with what you know — hard trends — and adding in high-potential soft trends until you reach your level of maximum risk tolerance. You may, for example, choose to prioritize regulatory compliance (since increased regulation is practically a certainty), put a greater emphasis on mobile and voice search, and take a wait-and-see approach to cryptocurrency. Those decisions define the borders of your playing field. Within that field, you’re free to innovate.

Think of it along the lines of sending your kids out to play in the backyard. The constraint of being confined to the yard immediately eliminates some risks: They know they can’t ride their bikes in the street or dive into your vacationing neighbor’s pool. But they also know that, within the confines of the backyard, they can let their imaginations and creativity run wild. They can even come up with ridiculous games with rules no one else would ever understand. As long as they’re in the backyard, they already have permission.

In business, just as in the backyard, the constraints themselves are the source of freedom. It may seem counterintuitive, but let’s think of it in the context of creating a new digital presence. On Monday, you tell your digital team to create an experience that will delight customers of your specialty chocolate company, but they must follow organizational policy in the following areas:

  1. Branding: The company logo and colors must be used as stated in the corporate brand guide. The tone and voice of content used must also align to the company tone and voice per the editorial style guide.
  2. Privacy and data collection: If information is collected, the user must give explicit consent and the data collected must be used only for legitimate reasons — to, for example, deliver a product or service that the user expects. It is not to be shared with third parties or used for unsolicited marketing.
  3. Accessibility: All users should have equal access to information and functionality. They must avoid barriers that prevent access and interaction by people with disabilities (e.g., sight, hearing, mobility, etc.).
  4. Localization: Content must be adapted to the local language and culture of the target market.

Based on these requirements, the team members understand their limitations but they are also free to create something that is unique, even extremely innovative. For example, they might create a chocoholics mobile application that — based on inputs such as location, the strength with which the user is gripping his or her device, the user’s typing speed and pattern of mobile application use — identifies the user’s mood and suggests the best choice of chocolate for that moment. They could take it a step further and have the application identify the nearest location that sells the chocolate or, with a single touch of a button, have the chocolate delivered to the user within 45 minutes, regardless of metropolitan location. The mobile application could also use a new scent-based mobile add-on to release the scent of cocoa to users who need chocolate — though their waistlines wouldn’t benefit from it!

Set Constraints, Then Unleash Creativity

One of the biggest obstacles to innovation, especially in the digital realm, is that would-be innovators tend to do so much rework, asking the same, “Can we do this?” questions that have been asked and answered dozens of times. They also tend to box themselves in for fear of violating unknown restrictions, or of going “too far.” Comprehensive digital policies let businesses skip that repetitive groundwork, unleash creativity and give them a significant head start down the road to innovation.

What about your company? Is your aversion to risk leaving you stuck in the middle of the pack, jockeying for position with your competitors? If so, I urge you to consider how you could lay the groundwork for breakthrough innovation by developing digital policies that free employees to innovate within the guidelines those policies provide.

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