“Once you know that, you know how far you can push innovation in your
portfolio.”
To determine risk tolerance, Ms. Riveros recommends using a standard
risk-rating system. By using a scale of 1 to 15, for example—where 1 to 5 is low-
risk, 5 to 10 is medium-risk and 10 to 15 is high-risk—portfolio managers can
systematically score projects’ risk levels. Over time, tracking which projects are
approved, and which are denied, will give project leaders a sense for where the
innovation threshold lies.
“There are many factors—such as sector or type of company—but the level
of risk you’re able to take ultimately lies with your board of directors, your CEO
and how much money they’re willing to venture to achieve their objectives,”
Ms. Riveros says.
The type of project also will influence the risk calculation, says Vikas Patole,
PMP, acting chief information officer, Sydney Trains, Sydney, Australia.
“When organizations focus on improving processes and procedures, the risk
is low. However, technology innovation carries high risk. And even if a project
is successful, commercial benefits may become uncertain due to legal, safety or
cultural issues.”
To navigate these pitfalls, Mr. Patole advocates an agile approach to project
management, including running pilots with selected groups.
“Innovative projects by nature have a short timetable. Being agile helps to
deliver quick results that can be tested incrementally to ensure that innovation
delivers the adequate outcome for the business,” Mr. Patole says. “If the new
product or service is not going to meet the expected outcome, we can stop the
project without significant investment loss.”
Mr. Patole’s organization recently executed a
workforce mobility project that perfectly illus-
trates how an agile approach can enable
low-risk innovation. “We deployed
more than 4,000 mobile devices and
various mobile applications to our
corporate and field staff,” he says.
“The positive outcome of the ini-
tiative can be partly attributed
to being agile, which ensured
risk and issues were addressed on
time for successful delivery.”
Another way to manage innova-
tion risk is to outsource it to vendors,
according to Mr. Douarche. “We usu-
ally don’t position ourselves first on an
The Pace Quickens
The pace of innovation is quickening
across a multitude of industries. Using
the volume of patents granted from 2012
to 2013 as a measurement of innovation
activity, Thomson Reuters’ 2014 State
of Innovation report analyzed 12 sectors
to see where innovation is on the rise
around the world.
+35% in automotive, domestic
appliances and petroleum
+33% in telecommunications
+30% in aerospace
+29% in computing and peripherals
+26% in medical devices and food,
tobacco and beverage fermentation
+18% in cosmetics
+16% in semiconductors
+3% in pharmaceuticals
-3% in biotechnology
Source: 2014 State of Innovation, Thomson Reuters
“Being agile helps to
deliver quick results
that can be tested
incrementally to ensure
that innovation delivers
the adequate outcome
for the business.”
—Vikas Patole, PMP, Sydney Trains,
Sydney, Australia
