Sorting Out Risk In Innovation

For innovation to happen, people have to actually set about doing things in new ways - and this involves a certain amount of risk taking. It's what successful entrepreneurs are lauded and rewarded for. However in a corporate environment - can it be that the whole risk industry which has pervaded many aspects of life today, is affecting our ability to innovate?

Is it the case that changes such as the higher profile that health and safety policy now receives, and focus of such policy on avoiding negative outcomes, has reduced our ability to take the risks that are an unavoidable aspect of innovation?

When people talk about risk they are generally talking about two things:-

  1. the chance or probability that something is going to happen
  2. the outcomes - and usually focusing on the possible 'bad outcomes'

In the innovation context it is good project management to brainstorm all possible risks - and to find ways to mitigate them. But don't let immersion in this activity cause you to overlook the possible outcome of the project succeeding; and for that project to deliver new revenue and profit streams.


  • When assessing risk on an innovation project, try separating the probability from the outcome.
  • Secondly, ensure you consider both good outcomes along with the bad outcomes. For instance, you might determine the chance of your new product failing to achieve forecast sales for the first six months as 30%. This might seem risky – reason enough to consider pulling the launch or cutting back on investment. But don't stop there. You should also consider how this means there is a 70% chance that you will achieve forecast sales for the first six months - great stuff!

Now think a bit further about the implications of not launching. Perhaps by not launching there is only a 10% chance of achieving business plan for the whole portfolio - and therefore a 90% chance of a bad outcome.

Breaking down the components of risk in this way means you are more likely to make a rational decision, rather than a risky decision.