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Managing risk through business innovation

By: Jessica Thomson

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When we talk about business risk management using business innovation, we must first understand better regarding the process of innovation.
People always go for new gadgets. We hardly remember people who preferred status quo rather than any change. We always remember those people who introduced new products. Because, these innovations led to radical change and went beyond the thinking of ordinary people.
Basically, to develop any innovative idea, you should be able to think out of the box. This could provide new insight to concepts and processes you were already familiar with. New products could be developed out of already existing items. Similarly, new ideas were developed out of old ones. Innovation does not always means creating of new ideas or producing completely new products. Innovation also means developing new things out of the existing ones.
Similarly, you will find that every action of ours, however big or small, is always fraught with a certain degree of risk. We should be able to quantify the amount of risk involved so that we could evaluate how serious the risk is. We could think of different kinds of loss: monetary loss, opportunity loss, time loss etc. Therefore, whenever a new idea is developed, one must assess the amount of risk involved when this innovation is implemented. So, management of risk would constitute as a part in the development of these innovations.
Therefore, before accepting any new innovative idea, risk involved with it should also be found out. After this assessment is over, we have to compare the risks involved with the benefits obtained. By comparing the pros and cons, we could make a decision regarding whether we should go ahead with this new innovation or not.
The way the amount of risk involved is quantified is by using Risk Measurement and Risk Metrics. The process by which the Risk is measured is known as Risk measurement and the resulting value is known as Risk Metrics.
A good example may be customer response for the launch of a new product. Risk Metrics used in this case would include the negative and positive response given by a focus group about this new product. After collecting these responses, if the overall response appears to be negative, it would mean that the product could not be introduced in the market, whereas a positive response would mean the product could be launched in the market. dws76p
Again innovation could be divided into four types:
Continuous process improvement
Continuous process improvement involves small modifications made as an incremental process.
Process revolutions
It involves improving existing business processes but it could lead to a big improvement say 25% improvement in productivity.
Product or service innovation
These innovations do not change any business models. Generally, toy and game manufacturers utilize this kind of innovation.
Strategic Innovation
It may involve innovation in product or process or in both but it always involves in developing new, unproven business model.

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Managing risk through business innovation

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