[Guide] How to manage innovation risks in your company
Every innovation comes with risks. In fact, you might be faced with some of these right now, and you’re probably looking for effective ways to mitigate them.
However, you don’t have to worry because these risks do not have to hinder your innovation success forever. With the right set of actions, it is possible to manage them.
Let’s start with identifying what could’ve caused them in the first place. Then, let’s figure out how to turn these innovation risks into learning opportunities.
What actions cause innovation risks?
Sometimes, because you aspire to innovate fast, you tend to overlook certain situations that may cause innovation risks.
Some of these scenarios include:
1. Going through the innovation process without solving a problem.
Finding a problem or a situation to improve is critical in innovation. Without an issue to address, an idea will simply become a worthless product.
Hence, if you want your innovation to succeed, identify a problem and address it.
2. Skipping the problem-finding stage.
A big part of innovation involves solving problems, so when a company does not spend enough time in searching for the right problem to address, then it only makes sense that this company cannot create an effective solution for people to find value from and purchase.
3. Making a decision based on a small number of options.
Avoid limiting yourself to a few concepts.
In innovation, the more ideas you have, the better. Go for at least 300 ideas to come up with unique products, processes, services, and other core offerings.
Obtain a variety of perspectives and interact with other departments to increase diversity.
4. Developing the business case rapidly.
An innovation becomes ambiguous and unstructured when the business case is rushed. When this happens, you won’t be the finest initiatives, processes, products, projects, and modifications that might have improved your product lines and your organization in general.
5. Designing offerings that just pique people’s interests rather than meeting their needs.
When innovating, always remember to position yourself as a solution provider.
Establish the relevance of your product or service. Align your innovation to the demands of your clients and offer value to their lives by helping them in any way.
6. Excluding sponsors in the innovation process.
Engaging sponsors will benefit you with more than just finances.
You may utilize them to enhance your selling strategies and customize your business processes before introducing them to the market.
7. Concentrating solely on technology.
Innovation is not limited to the creation of breakthrough products and services like how Tesla and Netflix did.
Remember that innovation is defined as the process of developing new products, processes, concepts, services, or business models in order to provide added value to customers and the organization.
8. Delayed experimentation.
Businesses must put ideas to the test in order to improve them and create actual value.
Once you’ve structured your ideas do quick testing to integrate your discoveries and optimizations in the first few phases of product development.
This is to avoid costly changes later on in the innovation process.
How to manage innovation risks
The good thing about innovation risks is that they don’t have to be a threat forever. You can actually manage them and turn them into learning opportunities for increased innovation success.
Here are four ways to do it:
1. Examine your innovation initiatives (internally and externally)
Internal examination of innovation initiatives means determining three things:
- How you’re going to manufacture your product or service
- Whether the production methods you’ve chosen are practical and sustainable for your business
- Whether these initiatives will help you thrive and prosper economically
You can dive even further by looking at the doability, scalability, and relevance of your innovation plans in relation to organizational capabilities.
External evaluation, on the other hand, comprises researching how your innovation could spark the interest and approval of your target audience.
Extensive study and analysis are required to comprehend your clients’ wants, preferences, pain areas, expectations, and demands.
You can combine both qualitative and quantitative research to determine why these needs exist, what your past and present competitors have done and are doing to meet them, and all the difficulties that customers may face from rival brands in the market.
You can consult your team and other relevant departments participating in the project to get answers to the issues listed above.
With your team
Ask your employees’ inputs in the entire product development process so they can provide feedback on the primary risks of innovation.
Then, as the project progresses, they will have a greater awareness of the project’s requirements and will then be able to help you out in making important choices to increase your innovation success.
2. Build a sustainable innovation culture
In managing risks, building an innovation culture means being pushed, taking chances, and occasionally failing.
In order to manage innovation risks, your company’s innovation culture should involve the following:
Evaluating risk levels in the early phases of product development
Recognize and act on hazards as early as possible. Dealing with issues early on saves time and money while enhancing the project’s success.
Remember to handle the major risks first, then the lesser ones next. Larger pitfalls have a greater propensity to derail undertakings. After that, lesser concerns should be handled immediately because they can accumulate and cause derailment at some point.
Furthermore, smaller hazards add up over time. Failure to respond to them quickly may exacerbate the negative impacts of other risks, particularly if these concerns are severe.
Working with other business units, persons, and entities to identify all sorts of risks that may arise throughout the innovation process
Addressing them as a group increases a company’s creativity and problem-solving capacities. This motivates innovation teams to create solutions to current challenges.
Moreover, with collaboration, you can obtain different information, knowledge, and skills through gathering insights from both within and outside of your project team. Concepts are turned into viable methods as a result, and effective breakthroughs are achieved gradually over time.
Through collaboration, both the overall efficacy of a project is increased and the time taken to complete it is shortened.
Facing innovation risks as a unified organization
Whatever your innovation team’s goals are, make sure they align with the risk tolerance of your stakeholders so you can take the necessary measures to put your ideas into action.
When discussing these things, don’t forget to practice inclusivity in creating and executing your innovation plans. This is an effective way to promote teamwork despite differences in views and expertise.
From the top management to the last person in the organizational structure, everyone should cultivate and maintain an innovative mindset and attitude, which means that despite innovation risks, everyone in the company sees every innovation roadblock as an opportunity for progress.
3. Build in a rhythm to evaluate and improve with all stakeholders
Developing an innovation rhythm focuses on generating enthusiasm for confronting innovation challenges and risks.
This innovation rhythm also sets a consistent cycle for ideation and testing in response to executive-identified issues. Creating an innovation rhythm gives a consistent paradigm for carrying out innovation.
To establish a great innovation rhythm, apply the following tips:
Involve your executives early in your innovation process
While the rank-and-file employees provide the impetus for fresh ideas, financing and prioritization are up to the top management. Consult your executives at the start of each innovation cycle to identify the primary difficulties they are experiencing.
Request assistance from your executives and other sponsors/budget holders in understanding your organization’s top challenges.
Consider the company’s major difficulties as a chance to take risks with a united approach.
Since your executives have discussed their most significant problems with you, take this chance to collaborate with your innovation team and other stakeholders.
Address those issues as opportunities for the brand to collectively gather ideas on creating value for all those who would benefit from the solution that the company can create in response to these problems.
In addition, you can reframe these issues into customer-centered statements to enhance organizational processes and overall business health.
Hold open ideation meetings to tap into your whole company’s ingenuity.
Begin by distributing the challenges listed on tip #2 to several teams so that they may begin thinking of solutions.
There are several open ideation and crowdsourcing innovation systems available that allow you to set challenges and allow individuals throughout your business to submit ideas in response.
You can use collaboration and idea management software to make this process easy for you. Whatever method you choose to gather ideas, you should open it up and let people brainstorm for a few weeks to a month.
Run a design sprint to encourage quick experimentation.
Unfortunately, many innovative leaders skip this stage.
However, it is critical for verifying ideas and delivering high-impact ideas back to executives at the conclusion of the innovation rhythm cycle.
In this final stage, you must assess all of the ideas that emerged through open ideation and select the top two or three that have the greatest promise. Then, have separate teams execute a design sprint.
Design sprints allow teams to swiftly generate ideas, solutions, or challenges. By the conclusion of the sprint, teams can create rudimentary low-fidelity prototypes to verify their concepts, which allows you to return to your leadership with several high-impact options that you found.
Rules to manage innovation risks
Managers must dedicate appropriate time and attention to building and upgrading their decision model for evaluating their particular inventions in order to successfully manage innovation risk.
In this regard, here are five rules for managing innovation risks:
- Make use of a model to determine risks and returns. Find a model that takes into consideration a variety of elements that may alter risk and performance profiles. Discuss it with the project team members to properly examine the effects of different options.
- Understand that every model has limitations. All innovation models have limitations, so choose one that aligns with your business and benefits it the most.
- Always prepare for unknown variables. Limitations could come with unknown variables ahead. Study your entire innovation process thoroughly to prepare for it.
- Get a better understanding of your target audience. Don’t forget to consider those who will use your innovation. Study their behavior to understand what works for them.
- Check your innovation framework. Select an innovation framework that will enhance the user application of your innovation.
Choose your own innovation risks
You can’t avoid innovation risks, but with a thorough study of your innovation initiatives, you can choose which risks are worth pursuing innovation success.
By default, innovation is a dangerous endeavor that necessitates striving to comprehend the unknown.
Acknowledging this truth and having a risk-mitigation strategy in place is crucial to being a successful inventor.
Brainstorm with your team today and select which initiatives to go for. Read on our 10 tips for organizing successful innovation campaigns to get started and check out our innovation ebook.