Boosting innovation effectiveness by embracing risk

Boost innovation effectiveness by embracing risk: creates confidence that efforts well paced and risks well managed.

Extract from Corporate Risk & Insurance:

Accenture Risk Management’s Steve Culp and Wouter Koetzier have explored the benefits of a closure connection between innovation and risk management – two concepts that they say don’t go hand-in-hand in many peoples’ minds.

Culp states that a typical start-up is viewed as the ideal environment for innovation, “with its highly independent and empowered teams, agile development, minimal controls and executives who need to gain market share and have less to lose”.

Large organisations with established risk management functions could be seen as the opposite, he said.

However, when working in harmony, the two disciplines provide opportunities that a risk-averse culture might leave behind.

“Risk management can help foster a company’s innovation agenda by revealing blind spots and areas of underinvestment that threaten the upside of a company’s future.”

The pair argues that “stage gates”, established to reduce uncertainty as risk exposure grows, focus too much on what companies are doing well today, and end up producing weak, incremental ideas that come to market slowly and lack emphasis on new areas for expansion.

Without a close connection to risk-management expertise time is wasted researching and reworking proposals, instead of gaining early insight into potential risks and boosting confidence in the idea.

Another barrier to innovation is a corporate culture that overly celebrates and rewards success, said Culp.

“In these cultures, it is rare to find someone who has been able to rise in the ranks with a failed experiment on his or her resume, even if the failure provided valuable insights about future opportunities.”

Ultimately, the pair said risk management could add a level of discipline and transparency to the innovation process, while supporting desired risk culture and appetite.

“Marrying risk management and innovation can boost innovation efforts by creating confidence that innovation bets are well-placed and that innovation risks are well-managed.”

More … http://www.insurancebusinessonline.com.au/cri/article/risk-management-innovations-best-friend-147773.aspx