Assessing the Risk

Unit V (2)
Two Kinds of Risks

• The Risk of Innovating

• The Risk of Not Innovating

Innovation Risk

• Degree of Risk

• Forms of Risk

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Determinants of Risk

• Size of the innovation/investment

• Singularly Focused Companies
• Place of Innovation
• Area of Innovation
• Social & Psychological dimension
Obstacles to innovation

• Internal

• External
Internal Obstacles
• Difficulties arising out of change in
strategic objectives
• Difficulties in creating role and structures
• Difficulties in attracting qualified staff
• Difficulties in gathering information on
competitors
• Difficulties/inability in costing innovation
External Obstacles

• Technological barriers
• Barriers linked to licenses and
standards
• Barriers due to vertical integration
• Barriers due to financial partners
• Collusion between competitors
• Barriers due to inexperience.
Forms of Risk

• Commercial Risk

• Intrinsic Risk

• Personal Risk
Increasing Scale of Risk
1. Improvement of existing
techniques (Eg. Nokia)
2. Application of existing techniques
with new focus (Rasna)
3. Applying technologies that have
been tested externally (Nano)
4. Applying entirely new
technologies (Toyota)
Risk Vs Uncertainty
• Risk is the mathematical product of the
probability of failure (or partial success)
multiplied by the scope of financial or
organizational consequences.
• Uncertainty, however, cannot be
measured by probability. It simply (but
potentially devastatingly) reflects the
lack of knowledge about the scope and
likelihood of the results
Business Implication

• Invention

• Development
Possible Responses to
Risk
• Preparing the ground by
observing, discussing, gathering
information
• A judicious spreading of the
risks of innovation and
containing the same.
• Protection of innovation
Protecting Innovation
• Nature of • Instrument for
Innovation Protection
• Product • Patent
• Process
• Internal • Copy Right
Organizational
• External • Trade Secret
Organizational
• None
Making Innovation
Successful
• Competitive production
• Efficient distribution
• Responsive after-sales service
• Positive image
• High effective demand
• Existence of complementary technologies
• Financial Services (to the business and
customers)
• Ability to adopt technology rapidly
Risk of Not Innovating
Evaluation
• For how long will we be able to stay in the
market with our products?
• Is the market expanding or contracting?
• What are our Current and potential
competitors doing?
• What are our human resources compared to
those of our competitors?
• Are there any potential sources of improved
productivity inside our organization?
• Are any new technologies available in the
market?