How do you manage risk and uncertainty in innovation processes?
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— The LinkedIn Team
Innovation is essential for any organization that wants to stay ahead of the competition and create value for its customers and stakeholders. However, innovation also involves risk and uncertainty, as you may not know if your ideas will work, how much they will cost, or how the market will respond. How can you manage these challenges and foster a culture of innovation in your organization? Here are some tips to help you.
Define your innovation goals and strategy
Before you start any innovation process, you need to have a clear vision of what you want to achieve and how you align your innovation efforts with your overall strategy and objectives. This will help you prioritize your resources, set realistic expectations, and measure your progress and impact. You can use frameworks such as the innovation funnel, the lean startup, or the design thinking approach to guide you through the different stages of innovation, from ideation to testing to scaling.
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When it comes to defining your innovation goals and strategy, it's important to start by setting clear, measurable objectives. You'll also need to identify potential risks and uncertainties that may arise during the innovation process, and develop a risk management plan to mitigate those risks. Additionally, it's important to establish a solid project management plan to keep your innovation efforts on track. Regular monitoring and assessment are also crucial to identify potential risks and make any necessary course corrections. Remember, successful innovation requires careful planning, risk management, and ongoing evaluation to ensure that you achieve your goals and objectives.
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This is an ideal scenario, though often it is not realistic. If we are not talking about big companies with set processes or very talented managers, in SMEs or most businesses innovation is very chaotic and it comes from the top. For a mid-level manager, it is very important to understand that top-level executives may not be organized and work in energy spikes, so it is their job to help define the strategy and the process for the innovation, in the same time preventing the person who started the process from sabotaging it.
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Embrace experimentation and learning
One of the key aspects of innovation is to test your assumptions and learn from your failures. You cannot eliminate risk and uncertainty completely, but you can reduce them by experimenting with different prototypes, hypotheses, and feedback loops. You can use methods such as minimum viable products (MVPs), pilot projects, or A/B testing to validate your ideas and learn from your customers and users. You should also encourage a culture of learning and improvement, where you celebrate successes and failures as opportunities to grow and innovate.
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If you're comfortable with it, I highly recommend "failing in public." Here's why: 1. It gives you a push, to keep you consistent 2. It gives you a feedback loop 3. If you fail, you can reflect on the failure It's really difficult to embrace experimentation privately. It's 10x easier in public!
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We shouldn’t.” “That’s impossible.” All of those phrases are kryptonite to innovation. So indulge yourself with a counterfactual: what if you had unlimited time, unlimited budget? Then, begin reimposing constraints. You may be surprised at the creative options that emerge when you work backwards. Part of this process is getting comfortable with failure — rewiring yourself to view flops as learning opportunities that are just as valuable as wins. When you’ve got nothing to lose, asking big, audacious questions is more comfortable. It’s rarely a bad idea to ask the questions: Are we thinking too small? Can we 10x this? You may not always find that magic solution or reach Everest. But trying and failing can reap its own learnings and rewards.
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Manage your portfolio and resources
Another way to manage risk and uncertainty in innovation is to diversify your portfolio and allocate your resources accordingly. You should have a balance of incremental and radical innovations, as well as short-term and long-term projects, to ensure that you have a steady stream of value creation and growth potential. You should also allocate your resources based on the level of risk and uncertainty of each project, and adjust them as you learn more about the feasibility and viability of your ideas. You can use tools such as the innovation matrix, the innovation radar, or the innovation scorecard to help you manage your portfolio and resources.
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A key word in this passage is manage. My experience has been that this is often overlooked, as it is somehow seen as inconsistent with innovation. Nothing could be further from the truth. Active management ensures the resources and time as spent wisely. Relevant thoughts: 1. Do you have a schedule? 2. Who is responsible and assigned to manage? 3. How and when would you decide to change something - the path, members of the team, or just stop on this idea Structure and innovation are not inconsistent.
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Based on my experience here are some tips on how to best manage your portfolio of innovation projects and resources. 1.Diversify your innovation portfolio to manage risk and uncertainty. 2. Balance incremental and radical innovations, as well as short-term and long-term projects. 3. Allocate your resources based on the level of risk and uncertainty of each project. 4. Adjust resource allocation as you learn more about the feasibility and viability of your ideas. 5. Use tools such as the innovation matrix, innovation radar, or innovation scorecard to manage your innovation portfolio and resources effectively.
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Communicate and collaborate
Innovation is not a solo activity, but a collaborative one. You need to communicate and collaborate with your team, your stakeholders, and your customers to ensure that you are on the same page, share your insights and feedback, and leverage your diverse perspectives and skills. You should also communicate and collaborate with other innovators, partners, and networks, to learn from their experiences, access their resources, and create synergies and opportunities. You can use platforms such as online communities, innovation hubs, or co-creation workshops to facilitate communication and collaboration.
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The important of communication cannot be over stressed: Effective communication is at the heart of successful business operations and change, it acts like the blood in our bodies, but instead of supplying vital oxygen and nutrients, communication supplies information and motivation to our teams.
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One of the greatest leadership skills, according to a recent study of CEOs, is communication. So if you want your organization to innovate and thrive, you need to be able to communicate both active listening and inspiring your team. Do all you can to facilitate and be the example of communicating and collaborating effectively. Create spaces to fail, learn and grow together.
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Adapt and iterate
Finally, you need to be flexible and adaptable in your innovation process, as you may face changing conditions, new challenges, or unexpected outcomes. You should not be afraid to pivot, iterate, or abandon your ideas if they are not working or delivering value. You should also monitor and evaluate your innovation performance and impact, and use data and feedback to inform your decisions and actions. You should also be open to new ideas, trends, and opportunities, and constantly look for ways to improve and innovate.
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Stay flexible and adaptable in your innovation process. Embrace change, pivot when necessary, and iterate or let go of ideas that don't work. Iteration is crucial in Agile as it allows for continuous improvement and adaptation based on feedback, making your innovation process more effective and successful.
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LinkedIn gives everyone a great platform for connecting through this very process. If you're experimenting in public, you can use experimentation as a chance to get feedback and connect with others. And it's fun!
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Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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Innovation is experimental and there is risk involved. Leadership in such an environment involves supporting processes that allow for testing ideas even if they seem hard to be successful. A great leader understands the ‘Innovator’s Dilemma’ and supports org designs to support both sustaining and disrupting innovations. A good leader ensures disruptive innovation is sacrificed because companies are caught up in serving exciting customers. Leaders also have to celebrate failures while enabling learnings from such failures so that future innovation is better. Clayton Christensen’s books like ‘The Innovator’s Dilemma’, ‘Prosperity Paradox’ help us understand the role of leaders in innovation
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A key element to managing uncertainty is to understand our own and our team’s mindsets. As long as we do not adequately understand our own attitudes, beliefs and needs in situations of uncertainty, we will limit our creativity and ability to co-create new connections and solutions, because we might self-protect, contract, judge or defend rather that open up, build on the ideas of ourselves and others, expand from a place of confidence and personal safety. When we adopt practices rooted in our self-awareness and fearlessness, anything becomes possible.
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