Innovation is a proactive approach to business and design that aims to make significant improvements, rather than simply making incremental changes. This often requires taking bold, ambitious risks in order to achieve significant improvements or breakthroughs. Innovation is a key component of many successful businesses, as it allows them to stay ahead of the competition and continuously improve their products and services.
Why Manage Innovation Risk?
It is a common misconception that risk taking and risk management are incompatible. In reality, risk takers often rely on risk management strategies to minimize unnecessary risks and maximize the chances of success. For example, extreme sports enthusiasts may use knowledge, preparation, equipment, and training to reduce the risks associated with their activities.
Innovation often requires taking calculated risks, as it involves experimenting with new ideas and venturing into unknown territory. However, effective risk management can help innovation succeed by minimizing unnecessary risks and enabling businesses to focus on intelligent risks that have the potential to drive significant improvements. In this way, risk management can enable innovation to push the boundaries and achieve breakthroughs while minimizing the chances of failure.
Early Phase Innovation
Early phase innovation risk is typically handled by designing experiments to fail quickly, cheaply and safely. At this stage, risk management is a lightweight review of experiments to identify reputational, operational, financial, health & safety and environmental risks.
Late Phase Innovation
Late phase innovation risks typically require the due diligence of a full risk management process of identifying, assessing and treating risks. Common treatments include avoiding, transferring, sharing, mitigating or accepting risk. Innovation risk management often requires careful consideration of the precautionary principle.