What methods can you use to manage risk in your innovation portfolio?

Depending on the company's condition, you can have 2 modes to hedge your bet. Condition 1: During the times of peace and growth 70% of efforts should be least riskiest - incremental innovation on existing product. 20% of efforts should be medium risk - breakthrough innovation to create new product for existing or new market. 10% of efforts should be high risk - disruptive innovation for re-inventing existing categories or creating new categories for existing or new markets. Condition 2: During the times of disruption (like the arrival of ChatGPT, iPhone, war) 80% of efforts should be high risk - disruptive innovation. 20% of efforts should be medium risk - breakthrough innovation.

A leading hospital sought to expand telemedicine but faced data breach and misdiagnosis risks. The ERM team worked with leadership to define risk appetite based on values, resources, existing policies, and market conditions. They concluded innovation was essential but patient safety was paramount. Using risk matrices and scenario analysis, they assessed risks and aligned appetite with stakeholders. Communicating the risk appetite across the organisation guided decision-making, ensuring innovation stayed within acceptable risk levels. This enabled responsible innovation, balancing progress and patient well-being. Defining its risk appetite allowed the hospital to expand telemedicine while prioritising patient safety.

As a boutique consulting firm, innovation was vital but risky with limited resources. To manage risks, we used targeted methods fit for our small size. We maintained a balanced portfolio of lower-risk service contracts and higher-risk product ventures. We rapidly tested new product concepts through light-weight prototypes and small pilot deployments to gather early market feedback. New ventures were presented in phased project plans with staged funding tied to milestones. By tracking utilization and satisfaction, we could quickly identify and exit unsuccessful efforts. Using these lightweight techniques tailored to our boutique size, we could nimbly innovate while failing fast and building on what worked.

Monitor your innovation portfolio like monitoring different crops in your farm. Different crops have different health conditions, build requirements, win conditions, caring methods. Look at them daily. Measure progress weekly, monthly, quarterly, bi-annually and annually. Be clear that you got to accept some failures (like all crops do)

There are times when the industry forces a disruption upon you like the arrival of ChatGPT, iPhones, sudden war. This is when you got to identify which problems are the most critical to solve based on problems that are: - Ubiquitous: it’s everywhere - Growing: it gets bigger as time goes by - Urgent: it’s catastrophic if it doesn’t get solved - Expensive: it’s expensive to get the job done - Mandatory: required by law to comply - Frequent: occurs frequently - Fragmented: broken in many parts