On Aon — Episode 98
How Leaders Stay Ahead: Balancing Risk and Strategic Choices
In this episode of On Aon, Aaron Olson, executive vice president for Aon's Enterprise Client Group and co-author of the book Strategy and Change: Finding Opportunity in Disruption Through Insight, Choice and Risk, is joined by co-authors Richard Waterer, Aon's global risk consulting leader, and Ward Ching, Aon’s managing director of global risk finance. Together, they explore what it takes for leaders to stay ahead in a world of volatility — sharing approaches to balance risk, embrace change and uncover new paths for growth and innovation.
Key takeaways: Aaron, Richard and Ward explore three key themes:
Experts in this episode:
Key moments:
(3:34) Aaron explains the concepts of insight, choice and risk — critical capabilities for navigating disruptive change that leaders and organizations will need to build.
(5:53) Ward highlights how we have moved from the information age to the digital age, where information is being curated in fundamentally new ways, which reshapes the way leaders need to think about strategic choice and disruption.
(10:20) Richard explains how risk has often been misunderstood as something to avoid when it can be seen as a driver of insight and opportunity.
Additional Resources:
Strategy and Change: Finding Opportunity in Disruption Through Insight, Choice and Risk
Findings from Aon’s Global Risk Management Survey
Soundbites
Richard Waterer:
“So the idea is simple by clearly defining how much risk an organization is willing to take. You don't just draw a line between danger and safety, you actually create a runway for innovation and growth.”
Aaron Olson:
“We have found...during times of disruptive change, insight becomes particularly important, both the use of analytics to understand and evaluate situations and the importance of addressing and considering blind spots.”
Intro:
Hello and welcome to this episode of On Aon — where we dive into some of the most pressing risk capital and human capital issues businesses around the world are facing
On today’s episode, Aon’s Aaron Olson explores how leaders can think and act more strategically in a complex and fast-moving world — issues that are examined in his new book, Strategy and Change: Finding Opportunity in Disruption Through Insight, Choice and Risk.
He’s joined by the book’s co-authors — Aon’s Richard Waterer and Ward Ching — to share practical insights and strategies that help you not only navigate, but capitalize on, today’s dynamic environment.
Aaron Olson
Hello everyone and welcome to the latest episode of On Aon. My name is Aaron Olson and I'm an Executive Vice President in Aon's Enterprise Client Group.
Today we'll be examining how business leaders can act and think more strategically in a world that's becoming increasingly complex, volatile and fast moving.
There's no denying that organizations around the world are facing an ever-changing list of disruptive events like the advancements of AI and the shifting nature of global trade and politics.
These factors are having a profound impact on how organizations grow, innovate, and strike a balance between risk and opportunity.
These are the issues we explore in a new book we just released on the topic of disruptive change. The book is called Strategy and Change, Finding Opportunity and Disruption through Insight, Choice, and Risk.
And I'm thrilled to be joined by two of my Aon colleagues and co-authors to discuss the book's main findings and share some key pieces of advice.
First up is Richard Waterer, Aon's Global Risk Consulting Leader.
Richard Waterer
Thank you Aaron, it's great to be here.
Aaron Olson
And also here today is Ward Ching, Managing Director of Global Risk Finance here at Aon.
Ward Ching
Thanks, Aaron. Hello to everybody.
Aaron Olson
Maybe we get started by discussing what prompted or inspired us to collaborate on this book. Ward, can I start with you?
Ward Ching
Sure, Aaron, thank you.
The reality is that you and BK Simerson had created a very interesting previous book on the issue of strategic thinking. And the publishers came to you and asked for an extension of the book.
In conversations, the idea was, yes, I think a new book coming out associated with strategy and thinking and this whole area of disruption was an interesting idea. And I joined primarily to focus on the issue of disruption and then the whole issue of decision-making and choice.
The issue for me was really around the question of, as we observe disruption, disruptive innovation, all of those things that are happening in the marketplace, is there something else going on here that's really important?
In the work that I was doing at the University of Southern California with a number of other research colleagues in the United States and around the world, became very clear that the way we were thinking about strategy, the way we were thinking about decision-making, and the way we were thinking about the influences on insights, on choice, and on risk management were changing rapidly.
And it was important to get a new set of thoughts out into the marketplace to stimulate a larger discussion around what we were thinking about and what others were thinking about in that space. Back to you, let's talk about framing the book. Aaron, please take us through how we put this together.
Aaron Olson
Thanks, Ward. I do think that really captures the challenges that we saw organizations and leaders facing today. And as you know, we combined in some work that I had a chance to do at Northwestern University, really over the last 20 years with a colleague of mine there, BK Simerson, with your work at USC on disruption and Richard's expertise on risk consulting.
And we combined these around what we now think of as three capabilities that become critical when navigating disruptive change. You mentioned them, I'm just going to cite them again. Insight, choice, and risk.
We think of these as capabilities, capabilities that an organization needs to have, capabilities that a leader needs to have — capabilities that we actually identified and covered in our first book called Leading with Strategic Thinking a decade ago — but which we now realize are even more important because the fact that we're facing more disruption more often and the volatility and change that our organizations are seeing really puts a premium on these three capabilities.
So why don't we start with the first one, insight, which I'll describe.
We think of insight as essentially pattern recognition, or you can think about it perhaps as the competency of systems thinking. And there's a long history to the capability of recognizing patterns in systems. We do that every day.
But again, it becomes more important in times of disruption because the chances are you're going to miss something, you're going to encounter blind spots because our assumptions or our biases actually point us to certain types of data and actually typically encourage us to discourage or ignore other types of information.
That's a risk when it comes to disruptive change because you're more likely to encounter unexpected or different challenges than you are in the normal course of business.
We look at this then through the lens of data. How can we actually bring analytics to insight? AI is increasingly giving us the ability to do that. We also look at that as how do you actually better understand those blind spots. And we use case studies to look at those.
One case study that I'll highlight is the changes that have come with ride sharing. And we're all familiar now today about how Uber, Lyft, and their competitors have actually revolutionized how we access ad hoc transportation.
In the book, we highlight how this is actually something that was driven by technology, but also driven by the blind spots of traditional competitors. Think taxi cabs and providers who operated within a well-defined industry, but one which ultimately was disrupted.
One contributor to that was the blind spot of assuming that regulatory structures actually define the basis of competition. And what we saw was the willingness of new entrants to come in and actually recreate the service which ultimately led to redefining the regulatory structures around it.
And so we highlight regulation as one key area that you need to pay attention to, particularly as it relates to assumptions that business and business leaders can have, but which sometimes themselves can be tested and challenged. So that's a bit about insight. maybe you could talk to us about our second key capability, choice.
Ward Ching
Thanks, Aaron. I'm going to refer to something in the book. So, for those of you that can get a hold of the book, I would encourage you to get to page 18 as soon as you can. Because sitting behind what we're talking about in the area of choice is really a new dynamic in the overall disruptive innovation marketplace.
We have moved from the industrial age through the information age into what is now called the digital age. And I might even argue it's the post-digital age — where a whole series of issues associated with automation, efficiency, effectiveness, and innovation are drawn out on a very compelling map.
One of the things that you should be very clear on here is that your choices are being managed differently now than they were before. When we started thinking about this book, one of the things we clearly looked at, what were the sources of disruption? Now, disruption has been around forever.
It's in our society, it's in our geopolitics, it's in our economics, it's part of where we've been and it's always been there. But today, disruption and disruptive innovation is in a hyper-fast environment. Information is being curated in a very different sort of way.
The way we make decisions is being shaped by the technologies and the data sitting around us, sometimes for the good, sometimes for the bad. But for strategic decision makers, the normal process that you went through in pattern recognition, problem definition, options development, options optimization, doing the math around the trade-offs and then making a decision is obsolete.
You need to think differently and more quickly about how you make choices. What we did was developed a Choice Dynamic. In that Choice Dynamic, we talked about the choice, how do you develop choice? How do you do problem definition? How do you recognize the issues that are out there that need to be separated from ordinary run-of-the-mill sorts of issues to strategic decisions?
Then we looked at the choice evaluation process. Here, we introduce a number of elements coming from game theory, coming from decision analysis, where we're talking about rationality, we're talking about irrationality, we're talking about how this disruptive innovation environment, because of its speed, and because of the data that's being introduced, are requiring you to think differently about how you problem define, how you analyze work to be done, and how you have to move more quickly in terms of decision and choice.
So the choice conversation and how you do things within the organization are going to be fundamentally different. As we were working through the materials, we did develop a series of cases. And the one in the area of choice, has to do with a new organization called Coalition. Coalition is a newly developed technology company that also happens to be a cyber insurance company.
And what they've done has been to look carefully at the insurance industry and made choices around how they were going to perform differently in that space using data and analytics and advanced AI in how they go about offering new insurance coverages.
To put not to find a point on it, their leadership comes back with data is the fuel, AI is the match. And what we're saying in terms of choice is that your data is really important. In the past, you thought you curated your data with your biases and influences in place. Today, the data that you're receiving and using for choices is being curated by a larger ecosystem.
Be aware of that because it does introduce additional bias, additional perspective, and it introduces this whole notion of risk in a more dynamic sort of way.
So, I'm going to throw it back to Aaron to talk a little bit more about that and then let's roll it over to Richard to really explore the issue of risk.
Aaron Olson
Thanks, Ward. I love that example, so I appreciate you sharing it. I do think that we're starting to describe here a bit how insight needs to create opportunities to see businesses in new ways.
That introduces choices, including new choices, to think about and organize businesses and their value propositions.
Richard, could I ask you to then elaborate on our third capability, risk?
Richard Waterer
Thanks, Aaron. Yeah, and for years, risk got, I think, a little bit misrepresented in firms. It was often seen as something to avoid or, at best, to cautiously tiptoe around. And in our chapter on risk, we introduce an integrated model that throws that old thinking out of the window and asks, what if risk appetite isn't just about keeping out of trouble, but is actually a driver of insight and opportunity for change?
So, at its heart, our integrated model puts risk appetite front and centre, not as a static number or a regulatory checkbox, but as a living, breathing part of strategy and leadership.
So the idea is simple by clearly defining how much risk an organisation is willing to take. You don't just draw a line between danger and safety, you actually create a runway for innovation and growth. So it's about shifting the conversation from what should we avoid to what level of risk do we need to succeed?
Now in the book, we use a case study of a company whose risk appetite statement basically said, we have zero appetite for late, over-budget or low-quality, high-priority projects. Now this sounds great, but if you think about it, does this mean they'll never green light a project unless it's risk free? In the real world, there'll be almost none. So the opportunity here is to recast risk appetite. So it's tuned to success, not just avoidance.
So, leaders can place their bets knowing which risks they're prepared to take on different products and markets.
Now, what sets our integrated model apart is its practical whole-cycle approach. So like the book actually, it's built on three key lenses, insight choice, and in this case, execution.
So, from an insight perspective, organizations boost their insights by scanning the horizon, identifying emerging risks and opportunities, holding Black Swan workshops to challenge assumptions and feeding that intelligence into strategic conversations.
Next comes the choices that are informed by rich risk assessments and scenario-modeling. So these are tools that are helping leaders around the world to weigh options and decide where to take calculated bets.
And finally, the execution lens ensures rigorous risk monitoring and controls. So adapting dynamically when things change and critically risk appetite isn't an annual exercise that's stuck in a drawer. It's an explicit shared perspective among decision makers that guides every step.
So feedback, for example, from incidents or breaches constantly sharpens future actions and strategy. Now, when risk appetite and this integrated model work together, risk can become a strategic asset. So not just a hazard to be fenced off. And it's how organizations can be bold and adaptable responding quickly to disruption and turning uncertainty into opportunity.
Aaron Olson
Thanks, Richard. I think those are some really practical ideas.
And that completes our overview of insight, choice, and risk.
So to recap, I would just highlight what we have found is during times of disruptive change, insight becomes particularly important, both the use of analytics to understand and evaluate situations and the importance of addressing and considering blind spots. Choice becomes more important because of the importance of choices as you navigate disruptive change, including how new choices might change and introduce different aspects of what we're called the choice dynamic.
And then finally, Richard, you explained how risk needs to be thought of as both a business consideration when it comes to execution, but also as a source of potential opportunity and the way you can look at that through the lens of risk appetite.
I just want to thank you for the collaboration and for the chance to share some of those insights today.
That wraps up our show. Thank you for listening. Strategy and Change is available wherever you buy books. And don't forget that you can find more about how Aon can help your organization make better decisions in an era of disruptive change by visiting Aon.com. In the coming months, we'll have more episodes on risk and human capital topics. Until next time, thank you and goodbye.
Outro
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