Every company knows that innovation is essential in this era. However, it’s not easy to become an innovative organization: coming up with good business ideas is difficult, and transforming those ideas into business initiatives is time-consuming and expensive. So how can a company that doesn’t have an innovative tradition and significant cash reserves do it?
A new model of innovation is emerging – low-risk innovation. As well as requiring little investment up-front, this approach is fast and agile. The model has been proposed by those who study the successful entrepreneurs of this era.
These scholars have noticed that many such entrepreneurs don’t follow the rules governing innovation taught in business schools: they begin to act before doing thorough planning, and then they proceed tentatively until the idea is proven to be viable.
Here are five tips detailed by award-winning entrepreneur, Victor Mitchell, on mastering low-risk innovation.
- 1. Begin with a business idea but without a full plan. The model deviates from the classic business-school approach by prioritizing action over planning. After an idea is developed – using whatever idea-generation process the company favors – a trial implementation begins on a small scale. This is similar to, but not identical to, a pilot project.
- Use available resources. The small-scale implementation makes use of available resources, where possible. Staff and production capacity are diverted from normal use to assist with this project. Project costs are kept to a minimum. The project team should be composed of personnel who are enthusiastic about the idea.
- Take tentative steps, re-evaluating after each step. The key to the low-risk innovation model is periodic assessments. The business idea is implemented in clearly defined stages, and a viability assessment follows each stage. If an assessment determines that the concept is not worth developing further, the process is aborted at that stage. If the idea is found to be viable after one step, the process moves to the next stage, and so on.
- If the idea receives positive assessments after a series of preliminary implementation stages, it is deemed viable. There is no clear guideline regarding how many stages are necessary. The assumption is that the data gathered should be sufficient to persuade senior management that the innovation is promising.
- Develop a business plan and allocate adequate resources. Now a full business plan should be created, using the data collected. Also, resources sufficient for the full implementation of the innovation should be allocated.
This low-risk innovation model may not be appropriate for every company. A company that has a tradition of managing successful innovation need not switch models. However, those businesses that have struggled with developing a culture of innovation may find that this model removes some impediments.
About Victor Mitchell:
Victor Mitchell is the founder and CEO of Lead Funding, a specialty lending organization that provides innovative private financing solutions for homebuilders and developers, reducing their red tape and speeding up loan decisions.
Victor Mitchell around the web: