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Managing Risk And Innovation

Risk is inherent in innovation. It should not be denied or avoided. Indeed the innovation process could be viewed as a series of activities designed to assimilate information, linked by decision points at which management have to either increase their stake or abandon the project. However, although risk management is intrinsic to innovation, it is seldom explicit.  This study examined the attitudes towards innovation and risk management in a number of companies.

There is little evidence of organizations taking an explicit systemic view of risk in innovation projects. The study developed a combined innovation and risk management model providing a framework that diverse companies can appreciate. It highlights the possibilities of better integration and offers a basis for discussing the most appropriate form of risk management in different innovation based industries. Innovation projects are distinguished by the high rate of failure and the need to encourage creativity: a dramatic attrition is expected with a large number of ideas resulting in just a few successful products. The possibility of abandoning a project is ever present and inherent in the management of the innovation process. Risk is a major feature in innovation projects but the focus is resolving technical problems rather than considering project risk management in a systematic manner. There appears to be significant scope for more use of project risk analysis and management, with a greater emphasis on learning from previous projects. However, risk management has to be deployed selectively. In particular there is concern that excessive risk management in the early stages could stifle the creativity that is critical to innovation.

Publications

Bowers J, Khorakian A (2012). Managing Risk in Innovation Projects, in Contemporary Perspectives on Technological Innovation, Management and Policy, Volume 2, pp.373-400 edited by Bing Ran, Information Age Publishing Inc.

For further information please contact John Bowers.

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