Manage Innovation Risk with a Disciplined Approach

Most senior executives recognize the importance of innovation, yet they are disappointed with the results of their innovation programs. Too many firms are risk averse, following a strategy of low-end incremental product extensions rather than investing in real breakthrough innovations.

A recent Accenture study of over 500 executives shows that 93% believe innovation is critical to the long-term success of their firms. However, a measly 18% acknowledge an effective innovation strategy is in place to achieve those goals.

Firms that follow a disciplined innovation process are likely to perform better and be more satisfied with the results of their product development programs. A formal system leads away from low-risk line extensions. Understanding markets and competitors within the context of a structured idea generation process helps firms to recognize and address developing markets in their industry.

The Accenture study identifies the following 5 key aspects of innovation systems that result in firms being more satisfied with innovation results.

 

Innovation Processes Should Focus on Speed and Flexibility

Speed to market is critical in gaining market share. Processes that allow for flexibility are better able to support timely market releases and accommodate real-time market trends.

 

Product Innovation Should be Second to Business Innovation

Consider how an innovative business model will support the product. The customer experience is as (or more) important than the product features.

 

Employ Risk Management Practices Specifically Tailored to Innovation

When you systematically understand and monitor all the variables that can impact the key outcomes, you are more likely to make the right decisions along the way (Harvard Business Review, April 2013).

 

Use Big Data and Social Media to Capture Customer Information

There is an unparalleled amount of customer information currently available to consider for the purpose of product and business innovation. Make sure your innovation process is making valuable use of this information.

 

Incorporate Frugal Innovation strategies

Frugal innovation is widely used to grow market share in developing countries, but can also be considered an entirely new “mindset” in innovation and product development. Visit the Insead School of Business website to read Frugal Innovation: A New Business Paradigm.

 

Following a disciplined strategy for innovation helps firms move away from low return incremental product improvements and toward radical business model innovations. Service model innovations can couple new product ideas with business model adaptations for breakthrough innovations.

Risk is always part of making something new, be it a product or a market. Yet, opportunities for innovation have shrunk as nearly half of firms have become more risk averse over the past three years. Smaller, safer product development efforts can leave money on the table as competitors grow market share. Instead, learning to manage risk smartly with a disciplined business approach to innovation can grow the business.

To continue the discussion about achieving your innovation goals, contact us .

 

 

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