Managing and overcoming innovation risk is one of the most overlooked risks in today’s landscape, and requires clear strategic business planning. This occurs because the term innovation is thrown around without giving it the credit it is due. Innovation is defined by XYZ, “as a new idea, or more effective device or process.” I partially agree with this definition. Innovation only exists when you are taking a product or an idea and changing it to elevate it to the next level.
Managing innovation risks on new ideas, products, or processes are critical during planning. Historically many new ideas that were thought to be revolutionary flopped due to lack of innovation risk management. A prime example of this can be seen in the Michelin run flats.
Michelin managed the internal risks of production and market placement. However, what they failed to plan for was what occurs after the run flats have been purchased. In order to service these specific tires, special equipment and training were required. This additional cost (risk) was not realized nor considered. Michelin discovered that the service facilities were not prepared and failed to purchase the tire specific equipment. This innovation risk caused their product to collapse.
So, how can an organization manage and overcome innovation risk? It’s much simpler than you think. If your organization embraces open planning and debriefing, you can reduce risk exponentially.
Imagine if Michelin included all parts of the supply chain, sales, engineering, financial, and operations into their go to market (GTM) planning process. Do you think this would have solved the problem? Maybe, then again maybe not, but it would have improved their chances of success because the room would have been full of diverse knowledge and experience.
Don’t Forget the Debriefing
Let’s say that it wasn’t caught and the end result was the same. By conducting a thorough debrief, Michelin would have been able to determine the root cause and not just the underlying symptoms. Using this root cause analysis, they would be able to develop transferable lessons that would guide future products and innovation. The goal here is to not make the same mistake twice.
The question you have to ask yourself is, “Do we have a strategic business plan to manage innovation risk?” Does that plan include the ability to increase knowledge and experience, as well as utilize past performance in order to create an exponential learning curve? If not, I would seriously consider taking a look at your current processes and how they can be improved.