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When panic has an upside: Changes in consumers’ perception of risk can drive innovation.

August 11, 2020

Toronto – What do COVID-19, malfunctioning airplanes and CT scanner mishaps have in common?

All three have led to human suffering and heightened perceptions of risk. But they have prompted rich opportunities for innovation too.

New research from professors at the University of Toronto’s Rotman School of Management and Harvard Business School concludes that jumps in consumers’ sense of risk can spur companies to develop new technologies that enhance safety an and lead to fresh market directions.

The study looked at what happened after reports in 2009 that a Los Angeles hospital had delivered eight times the radiation needed for a computed tomography (CT) scan procedure to more than 200 patients. Some experienced hair loss.

A subsequent investigation found the problem had occurred in other jurisdictions too but was due to a technician error and not inherent faults with the machines. Nevertheless, patients and their doctors became more sensitized to the potential risks of CT technology. The study found a decline in the use of high radiation procedures in the aftermath.

Along with that, patents more than doubled for radiation diagnostic devices that highlighted radiation control features designed to alleviate patient risk. There was also a 30 percent rise in applications for similar devices to the US Food and Drug Administration.

“There were all sorts of innovations,” says Alberto Galasso, a professor of strategic management at the Rotman School and the Rotman Chair in Life Sciences Commercialization, who co-wrote the paper with Hong Luo of Harvard Business School. “Some were really simple changes -- like changing the software to make it harder to change the settings – but also more radical innovations such as an alternative way of constructing the image using significantly less radiation.”

The shift was made possible by consumers’ willingness to pay more for safer technology because of their heightened concern, the study points out. For example, hospitals increased their CT equipment upgrades and replacements after the over-radiation incidents became public.

Large companies were more likely to take on more radical innovations than small companies and moved faster and more intensively with their changes.

Innovation is less likely to happen though if there is a safer alternate technology that consumers can turn to instead, the paper said, such as opting for non-nuclear forms of energy after a reactor accident. It can also be suppressed by the threat of government, legal or political intervention, such as a complete ban on the technology.

The current COVID-19 pandemic represents a similar innovation opportunity, says Prof. Galasso. A simple trip to the grocery store is now regarded as a much riskier activity than it used to be, leading to the installation of plexiglass barriers, low-contact digital technologies and a rethink about store layouts. The push to experiment may even prompt innovations that go beyond reducing virus transmission, such as improvements to online shopping.

“It’s a really bad time and people are losing jobs,” acknowledges Prof. Galasso. “But it’s likely that some of these technologies are going to stay.”

The study is forthcoming in Management Science.

The Rotman School of Management is part of the University of Toronto, a global centre of research and teaching excellence at the heart of Canada’s commercial capital. Rotman is a catalyst for transformative learning, insights and public engagement, bringing together diverse views and initiatives around a defining purpose: to create value for business and society. For more information, visit 


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Ken McGuffin
Manager, Media Relations
Rotman School of Management
University of Toronto