Balancing Innovation and Risk: A Guide for Business Leaders

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Innovation is vital in the business landscape. History is littered with stories of businesses who stayed in one place, and ended up paying the price for it – BlackBerry, AOL, Blockbuster…

Everyone agrees that innovation is important, but it must be approached carefully. Business leaders are constantly tasked with finding the balance between innovating and managing risk. But how can you get this right?

In this article, we’ll be looking at some of the ways that businesses can seek to innovate while also keeping risk management front of mind – and how culture and mindset are central to this.

Strategies for finding a balance between innovation and risk management

Have a structure or workflow

In business and in life, it’s generally accepted that you shouldn’t go for something just because it appears shiny and new. Doing so means you’re in danger of putting effort into something that won’t pay off.

One way to avoid this is by setting up or reassessing a system for analysing new opportunities. If you make people slow down and think about the details, you can find what doesn’t work for your business. And by following it every time, you can start baking this kind of critical thinking into your culture. Speaking of that…

Embed innovation risk management throughout a business

Humans are hard-wired to be risk averse. This was lifesaving in the Stone Ages but can create some hurdles in the modern day. Add to this the fact that people tend to shy away from ideas that seem too ‘out there’, and you can get an innovation drought. This is why larger businesses sometimes create ‘innovation units’ within teams. They provide a place where teams can openly share more radical ideas, bridging the gap between departments that might be traditionally more risk averse (like finance) with those who are naturally creative, like marketing.

Change how you see risk

This point follows naturally from the one before it. Earlier, we talked about companies that failed due to a lack of innovation. Now, let’s discuss Apple, which has become a global powerhouse because of its innovative ideas. Apple values risk-taking and encourages employees to think creatively in various ways. This culture of encouraging creativity and valuing new ideas fosters innovation within the company and is part of why it’s been able to remain at the forefront of technology for almost 50 years. Of course, this mindset alone is no guarantee of success – but it shows how seeing risk as a positive thing can be beneficial for a company as a whole.

 Use data where you can

Taking risks in business doesn’t mean going in blind. If you have data, like how competitors used an idea or how customers may respond, you can take calculated risks. That means you’re better able to differentiate between risks that are worth taking and which ones should be avoided.

It can also be used as innovation is being carried out. By tracking the success of decisions – from consumer sentiment, adoption rates, or revenue growth – businesses can see in real-time which decisions landed, and which ones need a rethink.


One less-known reason why innovations fail is because they aren’t scalable. When a business inevitably expands, the innovation doesn’t grow with it – rendering it unhelpful at best, and obsolete at worst.

A way to proactively approach this issue is to look at the scalability of innovations from the very beginning. When you’re first coming up with the ideas, try and think further down the line. If the business makes more money or opens in new places, will this still be important? When you make it a key part of the process, you’ll become more aware of a project’s scalability. This will help you determine if it would have a negative impact as it progresses. What’s more, starting on a smaller scale also means that there’s less at stake. Depending on the success of these smaller implementations, they can be expanded or reduced. Thus, it reduces the risk associated with large-scale implementation from the outset.

No company will go from being conventional to a risk-taker overnight. In the same way, innovation isn’t something a business will instantly get the hang of. If you’re like most companies, there will be more than a few false starts.

But by making small changes to your existing business processes, encouraging employees to think outside of the box, and asking the right questions at the right time, you stand a good chance of getting the balance of innovation and risk right.

Want to foster innovation in your business? Sage software is a great place to start. Contact PKF Smith Cooper Systems today – fill in an enquiry form or call us on 01332 959 008.

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