Where does risk fit within innovation?

The risk is part of innovation, but you can manage parts of these risks.

Not so many people like innovation, because innovation stands for risk, and that is associated with trouble. Innovation is only attractive to the ones who spend their whole life thinking and building creative stuff. A rarer skill is being able to interpret that creative idea into a marketable innovation. Where does risk fit within innovation, and how can the business manage innovation portfolio with calculated risks?

With innovative leadership, creativity is a skill can be taught and can be learned. You want people to be able to and dare to take risks. It is important to create a safe environment within the group and/or organization which encourages people to come forward with new ideas. It both encourages success and also failures (when tried their best), but discourages inaction. Next to that, it can help to allocate time for all employees to spend on their ideas. And have a clear strategy which is communicated well with employees. All in all, it takes the acceptance of a certain amount of risk (also define what this risk is) and to manage this. It is indeed crucial for the manager or entrepreneur etc to give employees time to consider and develop their ideas and to be encouraged to openly explain and discuss them. People need to be allowed to experiment in promising areas of inquiry in a way that is not constrained by a fixed objective to produce a set outcome- that is simply because there is a great deal of uncertainty involved in the process of innovation, but that uncertainty frequently has a positive side. It is certainly the case that many innovations have been produced unexpectedly as a result of experimentation which had a completely different initial purpose. 

Innovation by its inherent nature comes with a risk. The failure is of crucial importance in the process of achieving innovation: as so many of history's greatest thinkers have identified, people learn far deeper and more enduring lessons from significant failures than from anything else. These lessons will increase the effectiveness of your next innovation strategy and therefore probably increase your chances of meeting your objectives on your next attempt. Hence, the best judgment, a qualitative approach is given for risk and innovation. The challenge is having a framework that allows you to say when to quit or simply 'can do it ' for a while. The best framework is that good because of underlying data... there lies the quandary because innovation may not have the data to back it up! 

The risk is part of innovation, but you can manage parts of these risks. Though for innovation, it can be better not to define the budget too narrowly as with regular projects. Depends on many factors, since part of innovation is not knowing how and for what you will use the budget; and some innovation needs to be fed with resources while others get better by 'starving' them. If we recognize the risk we take is less painful when we fail. Knowing when to give up/stop is a key skill. The societal culture of "don’t give up and fail not an option" really do fight the attitude needed to innovate.

From a financial management perspective, consider what capital you are prepared to risk in making the innovation- never let this be so much that losing it will cripple your business it cannot obtain the funding to continue to move towards fulfilling its core mission. That is your budget for the project- do not exceed that budget under any circumstances. Then design a strategy to achieve the innovation that can be adapted quickly and at low cost to unpredictable changes in the environment- a flexible strategy. 

Innovation is risky by its nature, the effective leadership, risk-tolerance culture, and well-established framework, etc are all crucial to improving the success rate of innovation and learning valuable lessons from the calculated failures.

Posted in: GRC,Innovation