3 Steps to Manage Innovation Risk
When launching a new product or service, your business cannot afford to ignore innovation risk. Learn how to control it effectively with help from KICKBOX’s innovative tools.
Innovation is the driving force behind the introduction of new products and services. When having your Eureka moment, it’s only natural that you will focus on the proposed benefits. As a business owner, though, it’s equally crucial to consider the role of innovation risk and how it can be successfully managed.
Overcoming the associated risks will form a key feature of any successful innovation management process. Here’s how to do it effectively.
What is Innovation Risk?
Innovation risk is ultimately linked to the probability of unwanted or unfavorable outcomes happening. This could be attributed to the failure of an initial concept or a specific iteration of a product falling flat.
Statistics show that 11 out of 12 startups fail. Therefore, accepting the inevitability of innovation risk is a crucial first step to managing it. Risks come from many sources, but can be primarily attributed to three main areas:
- Operational risk - this covers elements needed to turn ideas into a reality. Materials, budgets, and manufacturing issues can all fall into this category.
- Commercial risk - this covers issues linked to capital and cash flows, which could include the risk of defaulted payments or other buyer-related issues, and this can have the knock-on effect of damaging brand image and credibility.
- Financial risk - this covers the threat of the innovation failing to generate a profit or cause monetary problems linked to debt incurred during the process.
KICKBOX is a solution based on a proven methodology that can help you understand the innovation risk during the planning phases, as Siemens Energy did before launching innovations in the US and European markets.
The ABCs of How to Manage Innovation Risk
Innovation risk sounds very daunting, not least because the chances of failure are high. However, with the right strategy in place, it is possible to work the odds in your favor. Focusing on three main areas will instantly point you in the right direction.
As stated, 92% of startups fail, and so the A (acceptance) has been outlined above. Now, let’s look at the B and C.
Innovation is about ideas, and you can’t expect the first one to hit a home run. At least not without making a range of tweaks. It is said that you need 300 ideas to succeed. Even if the figure is lower, taking the time to support an adaptive culture where people feel psychologically safe to mention ideas is crucial.
In fact, going so far as to encourage mistakes and promoting an error culture, enables people to push their limits, learn and grow, and ultimately become more innovative. When people are comfortable with failure, innovation risk can be identified far earlier in the process. Whether that means abandoning an idea or working on it, the results for your business will be far better.
Finally, managing innovation risk relies heavily on clear communication. KICKBOX’s cloud-based innovation tools, for example, will naturally support internal collaboration that can prevent issues like experimenting too late or focusing on ideas that gain curiosity rather than conversions. More importantly, though, it can facilitate external feedback from potential customers.
A huge 65% of high-growth companies collaborate with customers in the early phases. It makes sense too, given that a lack of client interest is one of the key metrics of innovation risk. It can also be useful to connect with stakeholders and other experts who can guide you towards minimized risks.
The final word
As a business owner, you must realize that innovation risk cannot be eliminated – nor is risk and failure necessarily negative. In fact, facing up to risk is crucial for long-term success and business growth. However, you can ensure that its impact helps you rather than hurts you by keeping the ABCs of innovation risk in mind. When done well, the road ahead should be a whole lot smoother.