Innovation risks

Drucker‘s Landmarks of Tomorrow lists clearly 3 risks that arise out of innovation is comprehensive and can orient towards tasks and outcomes around innovation quickly. Even if outcomes are a function of many variables and ambiguous,(an excuse that innovation managers typically ride on to retain jobs/titles while not really “tasking”) you still have to act. That said  “tasking” / task orientation is necessary and not arbitrary or ambiguous in any enterprise. That’s a post for another day. So these tasks arise after the enterprise decides to reduce its first risk in innovation.

1. Risk of Exposure. Exposure risk is an inaction risk, while remaining very successful in the chosen market, this risk makes the whole business irrelevant as newer models and innovations take over existing customers and create new ones. I visualize this risk on a slider bar, where there is a NO on the left end and an YES commitment on the right. Depending on the level of YES, time and resource availability is determined for innovation.

Risk of Exposure Slider bar

This YES commitment (on the risk of exposure) does not mitigate but lead to the next, new set of risks below. In any case this risk cannot be avoided. You can see examples today in education like the massive open online courses offered by Coursera and the likes while the incumbent i.e. every higher education player could have very well acted earlier or the popular digital photography disruption misses by Kodak.

Risk of failure in developing the innovation When I heard Ravi Venkatesan at the recent Zinnov Confluence, he mentioned “skunkworks are interesting to see in labs, but unless the whole organization aligns to an innovation, there is really no chance”. I believe that, by organization he would mean the “tasks” on business processes starting from budgeting, development, sales/marketing, service, legal etc. that are specialized and entrenched across departments, but need to come together. Successful businesses ideally should not delay capex investments into innovation, and commit to experimenting the next set of revenue drivers. Experiments could be for example

  • small like skunkworks or community driven developments internally
  • taking ownership in companies that are doing the development

Still the structure has to commit itself to this developmental action and evaluate all along even if it means changing directions many times mid way to make sure the next risk of failure is covered. With the crowd sourcing possibility on almost anything this risk has greatly reduced, this as a model has been operational across many platforms like kickstarter (for investments), or ninesigma (for effort).

Risk of failure of the innovation itself

This is the biggest of all risks and can be really dramatic, and we know many stories like these in recent times. What Drucker calls here as ‘responsibility for the consequences’ of the failure itself, while constantly acting for the opportunity. It is no more a chance but choice and choosing to resolve contradictions between the global versus local, profit versus free, etc and thus becoming a value decision in itself. Most of us are aware of the commercial failure of much touted innovations like Segway and others.

Risks in Innovation


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