Five Ways to Reduce Innovation Risk
Posted by Joe Antle on August 15, 2020 3:05 PM EDT
Taking a cue from the risk management industry and the principles of reducing risk that underlie....
...the insurance underwriting science, I thought it might be useful to suggest ways to reduce the risks that are associated with the application of innovation within organizations and across communities. Certainly, there is always risk in applying innovation in organizations and across local communities, regions and states. The risk of applying innovation is even greater in the healthcare industries and among employer health benefits programs and community-wide healthy living initiatives.
As is sometimes the case in trying to apply principles from one context (ie: insurance underwriting) to another context (applied innovation management) there is a high degree that the theory won't hold. However, it all begins with a hypothesis and a theory relevant to that hypothesis, so reader be forewarned.....this concept is primarily a work in progress!
Five Strategic Approaches to Reduce Innovation Risk:
1. Avoid risk entirely by not applying innovation at all-don't lead
2. Leap headling into a bold, innovation that could be game changing-lead
3. Take small steps with a bold innovation, pilot projects-lead carefully
4. Use a hybrid approach, lead but start with small test projects-hybrid
5. Outsource or buy the innovation once it works-follow
So, we know that a key reason largely successful leading organizations don't succeed or adopt innovation is due to those organizations having very advanced management systems which serve as deterrents to risk and risky ideas formulation and implementation. We know that instinctively as a key paradox or dilemma for innovation within large successful organizations. And we know it from the vast research that many have done on successful models of innovation, lead in part by Dr. Clayton Christensen's expansive work with the theory of "disruptive" innovation, which many now call "market-creating" innovation. So, this suggests that leading organizations will tend to apply approach #1, followed by approach #5 above.
Many visionary organizations who have successful models but may not be the true incumbent leaders in their category will tend to apply approach #3 above, perhaps followed by approach #4, then approach #5. In these organizations, the model is less likely to use #2 because a bold leap will put in jeopardy the core business strategies that are working. And it is even worse when the core strategies are not working, but once did. In this scenario, it can be likely that the communication of a bold strategy leap and multiple small pilot projects get crushed by the management paradigm of reducing operations risk and wasted human, financial and resource capital.
Approach #5 tends to be the one that many large organizations take-but it can be very expensive and if done too late, can result in collapse of the incumbent, once highly successful organization's market leadership and even financial future.
So, the best approach may be #4, the hybrid approach of #2 combined with #3. But for this approach to succeed there has to be significant thought given to organizational design, flexible operations management principles, appropriate pilot project design and financial management focus.
The question then is how does this concept work its way into the world of making communities healthier, happier, more prosperous and more civically engaged? And a follow-on question might be how does collective impact as a concept applied to healthy living, recovery and prosperity be properly structured?
Worth thinking about...?