Integrating risk management in the innovation project

Abstract

Purpose - While innovation has many similarities to other forms of projects it is characterised by a high failure rate and the need to stimulate creativity. More explicit risk management could help in achieving success in innovation projects. However, too much or inappropriate risk management might stifle the creativity that is core to innovation. So, what project risk management should be applied and where in the innovation project? Design/methodology/approach - A theoretical framework is proposed which combines the generic innovation process with project risk management. The framework was used to analyse the current attitudes to managing innovation risk in a series of companies. Findings - The decision points of the stage-gate innovation process model provide an effective interface for incorporating project risk concepts. The general concepts appear most relevant to innovation management though it is useful to customise them to emphasise the particular characteristics of innovation projects. The experience of using the resultant combined model in a number of diverse case studies indicates the relevance of the model in understanding attitudes towards risk management in innovation. The analysis of the case study companies suggested that risk management needs to be applied in differential manner: simple, unobtrusive techniques early in the innovation life cycle with more substantial, quantitative methods being considered for later stages. Research limitations/implications - It would be useful to extend this research by examining more case studies from other countries and industries. Practical implications - The combined innovation and risk management model provides a framework that diverse companies can appreciate. The framework offers a basis for discussing the most appropriate form of risk management in different innovation-based industries. Originality/value - Although there are many separate models for innovation and project risk management described in the literature, there is very little discussion about explicitly combining these theories. This paper aims to help fill this gap in the knowledge.