Clients often ask how they can effectively manage the risk profile with their innovation efforts. I like to tell them that it is a lot like managing your personal financial portfolio risk. You wouldn’t put your life savings in one stock or bond issue would you? Well the same applies to innovation projects.
CEO’s need to apply the same approach to their business when it comes to investing in innovation. Using a ‘portfolio’ approach of new business ideas will help reduce the risk of investing too much in one idea that potentially fails.
Innovative companies invest in a portfolio of small (low risk), medium (medium risk) and large (big risk) projects that offer various degrees of opportunity or new business potential. Obviously having an innovation portfolio loaded with large, expensive ideas that drain the company of resources and management attention come with a lot of business risk. These projects need to be selective and be offset with smaller projects that offer smaller pay-offs but offer a higher degree of certainty.
Not all innovation efforts need to be industry killers or change the game type of projects. Betting too much on a small number of projects means you’re taking on too much risk and putting the business at risk. Adopting a portfolio approach will help manage the overall risk of your innovation efforts and likely lead to greater benefits down the road.
To learn more about how we can help you accelerate your innovation efforts contact us today at 1-416-435-5290