Risk Taking for the Enterprise

Russell Snyder, P.E.

ASQ World Conference May 2017

Learning Objectives
In this session you will:
Become familiar with identifying overly risk averse
behavior
Learn to take care when implementing risk
assessments that eliminate informed judgment
from decision making
Understand how to implement Risk Based
Thinking to consider opportunity
Develop a tool for evaluating opportunity vs. risk
Learn to lead culture change
Background
The WiFi/BT business @ Intel has survived
and become a model for competing in
commodity markets under the Intel umbrella.
This is a story of changing the culture from
dutiful compliance to accepting informed risk
while maintaining Intels customer quality
standard and becoming a thriving business.
Balancing Risk & Opportunity

Creativity Conformance
Are We Only Considering Risk?
ISO 9001:2015 6.1.2:

The organization shall plan actions to

address these risks and opportunities
Actions taken to address risks and
opportunities shall be proportionate to
the potential impact on the conformity of
products and services.
Are We Only Considering Risk?
ISO 9001:2015 6.1.2:

Note 1: Options to address risk include

avoiding risk, taking risk in order to
pursue an opportunity, eliminating the risk
source, changing the likelihood or
consequences, or retaining risk by
informed decision.
Are We Only Considering Risk?
ISO 9001:2015 6.1.2:

Note 2: Opportunities can lead to the adoption

of new practices, launching new products,
opening new markets, addressing new
customers, building partnerships, using new
technology and other desirable and viable
possibilities to address the organizations
or its customers needs.
Are We Only Considering Risk?
Actions that only consider risk
Not meeting audit or specification
requirements
Component specs generated jointly with
the best suppliers
Supply base uses only a small number of
suppliers for all technologies one stop
shop
When Supplier Selection
Process Limits Opportunity
Quality & technology criteria can dominate
supplier selection conversations
Renders cost & commercial opportunities
unavailable
Specs born of perfection for every
customer
The most picky customers determine our
specification
The best suppliers help us achieve tight
specs
When Supplier Selection
Process Limits Opportunity
Printed circuit board (PCB) suppliers were
selected based on ability to meet low tech
needs to highly technical/complex PCBs
As products integrated & PCBs became simple
2 & 4 layer PTH technology, new supplier
options increased
Only the best supplier thinking, tight
specifications & audit criteria prevented moving
to lower cost opportunities & replacement of
incumbents
How Do We Evaluate Opportunity?
Most Risk Based Thinking articles focus on
risk mitigation
We have gotten very good at identifying risks and
eliminating them without sufficient consideration
of the opportunity cost of accepting the risk
To evaluate Opportunity vs Risk we need to
consider both
ROI doesnt consider risk
Risk assessment or FMEA doesnt consider
opportunity

One stakeholder can eliminate an

opportunity!
The Disruptive Supplier

Christensen & Raynor, The Innovators Solution, 2003.

In Disruptive Circumstances when the race is to

commercialize a simpler, more convenient product that sells
for less money then the entrants are likely to defeat
the incumbents This is the phenomenon that so
frequently defeats successful companies
The Disruptive Supplier

Christensen & Raynor, The Innovators Solution, 2003.

When the functionality and reliability of a

product become good enough, the basis
of competition changes
The Sourcers Dilemma: When Should
We Move to a New Supply Base?

When do The Next Anyone

capabilities & Low Cost Can Do It

High
GEO Wins High
ability to provide Capability

the performance Low Cost

Many
Suppliers
that customers GEOs Win High

Quality
Capability
can utilize meet Innovation
the minimum GEOs Win
Low
requirements by Low
Capability
Few
sophisticated Suppliers

corporations? Low
Commoditization
High
Process to Evaluate Opportunity
Opportunity Priority Number (OPN)
Similar to risk priority number (RPN) used
in failure modes effects analysis (FMEA)
Measure of success that allows
comparison of opportunity vs. risk
Helps to answer questions such as should
we consider a disruptive supplier?
Process to Evaluate Opportunity
S O E R
Quality Potential Potential
E Potential Causes C Escape Risk S P
Dilemma Failure Mode Failure Effects
V C C N
Supplier is
Not a Greater Dimensional Supplier has Lower Mostly Factory Issue
2 10 3 60
Roadmap Variation Tolerances Tech Equipment not Customer issue
Supplier

Significance
How will the customer What is probablility

Reaction
Potential D O
Potential react if detected? ( 1 of customer
Opportunity E P
Opportunity = Return, 10 = Don't detection? (1=High,
Effect T N
Care) 10 = Low)

Lower Price To
Customer will expect
Customer and
$$$ 9 similar quality to 8 Medium 5 360
Become More
existing supplier
Competitive
The 0.28% Risk Mitigation
Problem: Tires blowing out in the wilds of
Alaska in the 1930s
Solution created:
The curb test to drive over a 4 inch curb at
normal speeds
A spec that required tires to be fat and pillowy
with small wheels that applied to all vehicles
Result:
Disallowed low profile tires with big wheels
Severely limited designers to uncool wheels &
tires
Are Risk Mitigation Strategies Creating a
Competitive Disadvantage for You?
Lutz, Car Guys vs. Bean Counters , 2011
Formulaic Risk Mitigation Rules
Quality management systems drive suppliers to be like
their customer through score-carding & auditing
Rigid defect per million (DPM) & samples size rules for
test case removal when no-one looks at the customer
defect data stream
Supplier audit/selection criteria & risk assessments
Is there an analogous opportunities assessment?
Culture of mitigate all risks
Individuals conditioned to not ask for judgment calls
Punishment is issued for mistakes when risk taking has
occurred
Role of the Informed Skeptic

Shah, Horne & Capella, HBR, April 2012.

Challenge rote & formulaic analysis

Add judgment to data
Provide a refreshing perspective
Create alternative solutions
Overestimating Risk
Not knowing what customers need
Writing specs tighter than needed by the
system
Assuming all defect per million (DPM)
measures are equal & high risk
Overly concerned with being too perfect
leading to over rejection
High risk items get management visibility &
reward for mitigation
Culture Change:
Balance Risk & Opportunity
Seek opportunity
Reward risks that achieve the opportunity
Believe that perfect is the enemy of good
Embrace acceptable variation instead of
eliminating it
Use judgment when the rules/formulas do not
achieve the opportunity
Embrace that its safe to be unsafe!
ISO 9001:2015 & the
OPPORTUNITY to Change
For sophisticated corporations:
Evaluate your culture of risk
Look where unquestioning empiricists are
driving extreme risk mitigation
For start-up/emerging corporations:
Reign in visceral decision making
Add process to manage your risk
Take-aways
Through this session, you should have:
Become familiar with identifying overly risk averse
behavior
Learned to take care when implementing risk
assessments that eliminate judgment from
decision making
Understand how to implement Risk Based
Thinking to consider opportunity
Developed a tool for evaluating opportunity vs.
risk
Learned to lead culture change
 Questions?
Russell Snyder, P.E. Phone: (503) 964-9557 Email:
Russell.l.snyder@intel.com