Innovation’s Biggest Risk

There are a lot of different reasons to stop an innovation project, but Innovation Engineering Labs categorizes risk into 3 categories: Technology, Organization, and Market Risk.

1. Technology Risks kill 40% of innovation projects. 

Innovation's Biggest Risk

These risks are all about whether you can actually build the innovation and make it work. While there are plenty of projects that start without a clear path of how to make it work, more often teams discover that it works, but just not well enough to deliver on the promise they want to make customers. If your organization struggles with high technology risk, I recommend creating ideas that stem from new technologies and patents. 

2. Organizational Risks comes in a close second with killing 35% of innovation projects.

These risks are all internal and specific to your organization. The most common organization risks relate to fitting the organization’s strategy and providing a return on investment for the organization’s time, energy and money. However teams should also be asking themselves if it meets the internal policies and values of the organization and does it respect the laws and regulations of your industry and country? Wether or not you can protect with intellectual property also falls into organization risk. If your organization struggles with high organizational risk, I recommend communicating clear boundaries before creating ideas that help prevent projects from starting that will violate strategy, policies, regulations etc. If the risks stem more from ROI, then rethink your organization’s system for how you do the math for early stage innovations.

3. Market Risks accounts for the remaining 25% of innovation projects stopping.

These risks mostly revolve around customer appeal, but also appeal to the distributers or any other stakeholders that you go through to get to the end customer. Market risks kill projects when there isn’t value in it for the customers or the customers just don’t see the value in it for the price. If your organization struggles with high market risk, I recommend doing market research before creating ideas. Test a dozen problems to see if they are worth solving. Then test a dozen benefit claims to see if they are worth promising.

I hope I sparked a few ideas of how you can identify and reduce risk in your innovation system. All these risks are normal and none of them are completely avoidable. The key to success is to have a system that can measure all the risk and pivot accordingly as you move though development.

The percentages were calculated from archived innovation projects in Innovation Engineering Labs over the past few years.