Integrating risk management in the innovation project

Abstract

Purpose - While innovation has many similarities to other forms of projects it is characterised by a high failure rate and the need to stimulate creativity. More explicit risk management could help in achieving success in innovation projects. However, too much or inappropriate risk management might stifle the creativity that is core to innovation. So, what project risk management should be applied and where in the innovation project? Design/methodology/approach - A theoretical framework is proposed which combines the generic innovation process with project risk management. The framework was used to analyse the current attitudes to managing innovation risk in a series of companies. Findings - The decision points of the stage-gate innovation process model provide an effective interface for incorporating project risk concepts. The general concepts appear most relevant to innovation management though it is useful to customise them to emphasise the particular characteristics of innovation projects. The experience of using the resultant combined model in a number of diverse case studies indicates the relevance of the model in understanding attitudes towards risk management in innovation. The analysis of the case study companies suggested that risk management needs to be applied in differential manner: simple, unobtrusive techniques early in the innovation life cycle with more substantial, quantitative methods being considered for later stages. Research limitations/implications - It would be useful to extend this research by examining more case studies from other countries and industries. Practical implications - The combined innovation and risk management model provides a framework that diverse companies can appreciate. The framework offers a basis for discussing the most appropriate form of risk management in different innovation-based industries. Originality/value - Although there are many separate models for innovation and project risk management described in the literature, there is very little discussion about explicitly combining these theories. This paper aims to help fill this gap in the knowledge

Risks of Development and Implementation of Innovative Projects

“…These methods should be applied pointwise and rely on data obtained in the course of quantitative risk analysis. Hence, the task of formation of a single methodological approach to risk management in innovative projects is quite relevant (Bowers, J. and Khorakian, A., 2014). The above difficulties and deficiencies of approaches to risk management in innovative projects pointed out to the need for development and enhancement of approaches to identification, assessment and mitigation of risks pertaining to innovative designs.…”

Reconceptualizing Design Risk Management as a Learning Strategy

“…Risk management is frequently not present in the early stages because there is a concern that excessive risk management in the early stages could stifle the creativity that is critical for innovation. (Sharma, 1999;Bowers and Khorakian, 2014) The paradox is that innovation management recommends that risk management should not be present in the early phases (Sharma, 1999;Dodgson et al, 2008;Petetin et al, 2010;Dodgson, 2013) although we do implicit risk management when innovating (Bernstein, 1996). When a concept faces a RM review late in the development, important risks could have been frontloaded and addressed earlier (Haughey, 2017).…”

“…According to (Bowers and Khorakian, 2014), there is very little discussion about explicitly combining risk management and innovation management theories and specific risk management approaches are rarely integrated in the front end development process (Neumann, 2016). Risk management is not a very well acknowledged part of innovation management, and most risk management initiatives are linked to the later stages of innovation (Chapman and Ward, 1996;Goffin and Mitchell, 2005;Ilevbare et al, 2014).…”

“…While risk management is frequently acknowledged in innovation management, there is little discussion on how it should actually be executed, or integrated into innovation management. (Boothe, 2014;Bowers and Khorakian, 2014;Neumann, 2016) However, both innovation management of radical innovation ideas and risk management are processes that deal with managing uncertainty: It can be easily imagined that they clash (Sharma, 1999), if risk management is seen as a process that excludes high-risk options. In our understanding, there is no fundamental reason why risk management cannot support managing high-risk undertakings.…”

“…We observed two failure modes discussed in the literature: Either risk management is perceived to kill good concepts too early before they were explored thoroughly (Sharma, 1999;Dodgson, 2013). Alternatively, a lack of risk management in the early phases leads to cancellation of projects after several years of development time due to unresolved and often undiscovered critical risks, with a general sentiment that an earlier involvement of risk management(RM) could have identified and resolved the risk (Boothe, 2014;Bowers and Khorakian, 2014;Neumann, 2016;Haughey, 2017). Risk management is an important aspect of design and design-related processes and project management (Olechowski et al, 2012;PMI, 2013).…”