It’s a common belief that intrapreneurs (and entrepreneurs) are natural risk takers.
This impression is perpetuated by press articles that frequently paint a picture of a plucky founder taking a big bet based on their gut. It makes for a good story. But nothing could be further from the truth.
Research from MIT and Harvard has uncovered the reality: successful innovators are, in fact, skilled risk managers.
Intrapreneurs tend to be great at spotting risks, then working on them relentlessly to drive risk out of the business. This is great news for all intrapreneurs. You don’t need some inbuilt intuition or sheer luck to succeed.
What you do need however, is a process and a set of simple management skills.
And so, as intrapreneurs and entrepreneurs our goal is to systematically work to minimise risk.
How do we do this? First we need to understand the types of risk that impact innovation projects. There are three groups.
- Desirability – Do people want our product?
- Viability – Will people pay for it? Can we deliver it profitably?
- Feasibility – Can we build it?
Our goal as intrapreneurs is to find the sweet spot – a product that people want, and will pay for, at a price that covers our build costs and leaves us with a healthy profit margin to-boot.
To achieve that goal intrapreneurs use a three step process:
Identify the assumptions – Prioritize the risks – Manage the risks
To get started, ask yourself:
- Do you have evidence showing that people want your product? Is it solving their most pressing need? Is the problem worth solving?
- Do you have evidence showing that people will pay your prices? Can you reach your target market? At scale?
- Do you have evidence you can build it? At the scale you need? At the price you need to hit your profit goals?
Use this risk-based project planning approach to identify the riskiest areas of the project then tackle the risks systematically.
The Importance of Risk Management in Innovation Projects: Embracing Uncertainty
Intrapreneurs systematically manage risk by designing and executing experiments to gather evidence. By iteratively testing their assumptions, they collect valuable data that informs their decision-making, allowing them to pivot or refine their approach as needed. This evidence-based approach helps intrapreneurs validate their hypotheses, minimize guesswork, and move forward with greater confidence.
The experimental process typically involves the following steps:
- Formulate a hypothesis
Clearly define the assumptions you want to test. These assumptions may relate to customer needs, product features, or market demand, among other factors.
- Design an experiment
Develop a method to test your hypothesis, such as creating a minimum viable product (MVP), conducting customer interviews, or running surveys. Keep your experiments lean and focused, allowing you to obtain results quickly and efficiently.
- Execute the experiment
Implement your experiment and gather data. Ensure that you collect unbiased, accurate, and reliable data to support your findings.
- Analyze the results
Examine the data to determine whether it supports or refutes your hypothesis. Be objective in your assessment, and remember that negative results are just as valuable as positive ones, as they help you identify potential pitfalls and adapt your strategy accordingly.
- Iterate and refine
Based on the experiment’s results, make adjustments to your project or approach. This may involve tweaking a product feature, redefining your target audience, or pivoting your overall strategy. The goal is to incrementally reduce risk and move closer to a viable solution.
By embracing uncertainty and systematically reducing risk through experimentation, intrapreneurs can drive innovation and increase the likelihood of success in their projects. This proactive approach to risk management helps them navigate the complex landscape of innovation and create lasting value for their organizations.
So there you have it. Identify your assumptions, prioritize the risks, then build experiments to enable you to understand the risk better, and either mitigate it or embrace it.
Build. Measure. Learn.
Go to it!
If you’re passionate about improving your innovation project risk management then you’ll definitely want to check-out the Intrapreneurship Mastery Programme. This cohort-based coaching and training programme offers a comprehensive curriculum designed to develop the entrepreneurial mindset and skillset of attendees. Or as always, you can contact us if your team has specific challenges you’d like to talk through.