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Why Innovation Risk Is Different

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Innovation is an approach to change that seeks revolution over improvement. Businesses that innovate are able to leapfrog the competition by creating designs, technologies, processes, capabilities and experiences that are an order of magnitude better than the current state of the art.
Innovation typically requires an elevated level of risk taking as it's hardly possible to revolutionize an industry by thinking conservatively. As such, innovation risk is considered a special category of risk whereby a business expects regular failures as it tries many things to see what works.

High Probability, Low Impact

Early stage innovation risks are unique in that they are usually high probability, low impact. Early stage innovation involves experiments that are essentially expected to fail. At this stage, risk management is focused on the design of experiments to fail cheaply and safely. This is typically a lightweight process that involves reviewing an experiment for risks related to budget, reputation, business disruptions, safety, health and the environment.

Low Probability, High Impact

As innovation progresses towards launch, risks may shift towards low probability, high impact risks that require standard risk management due diligence. If you're launching a product that's truly an order of magnitude better than the state of the art there are usually risks that it will be rejected by the market, experience operational failures or cause impacts such as environmental damage. As such, innovation risk management is particularly intensive and may be centered around the precautionary principle.
Overview: Innovation Risk
Risk associated with attempts to produce a revolutionary leap forward in a business or design.
Related Concepts


This is the complete list of articles we have written about innovation.
Business Models
Concept Testing
Cost Innovation
Crash Of Ineptitude
Design Thinking
Discontinuous Change
First Principles
Innovation Risk
Inventive Step
Latent Demand
Market Fit
Naive Innovation
Prior Art
Proof Of Concept
Speculative Design
Systems Thinking
Technology Winter
Throwaway Prototype
Trough Of Sorrow
Value Creation
More ...
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