Playing It Safe

Shelton Stringer asks whether risk aversion is stifling innovation in project development.

“Risk-aversion can be very costly for project development. To play it safe is not the entrepreneurial spirit that built this great nation”
-Shelton Stringer

The United States leads in technology innovation. However, risk aversion seems to be increasingly prevalent in today's business culture. Is this aversion to risk suppressing innovations that could result in significant savings in project development?

Are we satisfied with the status quo? What are the costs of playing it safe with "tried and true" technologies and methods? Project investors and owners stand to benefit the most from innovations and can best assume the risks innovation entails. However, some have the attitude "not on my project" or "I am not going to be the guinea pig." But are the existing technologies that much safer? How can innovations that are perceived as  unproven be assessed and compared to current methods? At what point is an innovation accepted as proven?

Engineering in its truest form is the art and science of using materials in an efficient fashion to serve an intended function in an acceptably safe manner. Inefficient designs use more material than needed to meet the intended function in an abundantly safe manner. Such designs are a waste of valuable resources.

For example, in the case of foundations for wind turbines, the commonly accepted "tried and true" foundation is a 'gravity spread' footing that uses the weight of concrete to counter the over-turning forces. This is a waste of concrete and steel, as there other innovative designs that are smarter and which employ far less materials.

Engineered structures are presumed to be designed as "fail safe". But what actually does "fail safe" mean? As in all endeavours, engineered structures have some inherent risk, however small. Through building codes and community-accepted practices we define safety and risk. Even "fail safe" structures have some small, quantifiable, statistical risk of failure, either catastrophic (to be avoided) or performance (not functioning as intended). Risk due to performance failures can be managed if the intended function can be restored through corrective action. If the cost of the correction is small in comparison to the savings in using the innovation, accepting some risk of performance failure will save the project money.

Innovation in structural design begins with a fundamental understanding of the physical laws affecting a design and material properties, with the goal of crafting a structure to serve its intended purpose in a more efficient manner. Prototypes and instrumentation can test new designs to assess their performance and make adjustments as needed. Over time, this fine-tuning process leads to a reduction in risk through improved design. Ultimately, this transition turns an "innovation" into a widely accepted construction
technique.

Implementing an innovative design on a commercial scale takes guts. The desire to avoid risk can result in innovation being suppressed by a lower tier of decision makers if they bear the risks but do not receive the benefits. For instance, a contractor may reject an innovation that saves material costs if the contractor's profit is based in part on mark-up of materials consumed for the project, or if they would bear the cost for anything going wrong.

The stakeholder is the appropriate person to decide when to use an innovation, even for something as rudimentary as foundations. An astute stakeholder will compare the risk associated with a new design against the benefit to be gained and make an informed business decision whether to use the innovation or not. Such risk assessment should include identifying what could go wrong, its likelihood, how to mitigate that risk, the costs of restoring functionality if something does go wrong, and comparing those risks to the benefit gained.

One who merely plays it safe avoids both the risk of the unknown and the benefit of innovation. Such risk aversion can be very costly for project development. To play it safe is not the entrepreneurial spirit that built this great nation.

Shelton Stringer is president of Earth Systems Global, Inc. He is a licensed geotechnical engineer, professional geologist, and engineering geologist in the state of California and professional civil engineer licensed in several states and has a specialty practice in design of wind turbine foundations.