Innovation and Risk Management

2011-09-12 / Management Innovation / 0 Comments

innovation-and-risk-managementInnovation has currency in risk management discourse. I presented “How Risk Managers Can Lead Innovation” at the Infonex Public Sector Risk Management Conference (February 2 – 3, 2010) in Ottawa. Sasha Shymanska, the conference organizer, originally suggested to me a topic to link risk management with innovation, but then was hesitant as the idea did not at first have internal support. But I knew she was on the right track, and encouraged her to keep it on the agenda.

The title of this year’s RIMS ERM Conference (Nov 1-3, 2011, San Diego) is “Where Risk Meets Innovation”.

Many risk managers will be puzzled by the possibility of a link between the two. It is curious that the economic crisis has raised the profile of both the traditionally conservative profession of risk management and its polar opposite, high-risk invention. Yet a risk manager’s identification of risk becomes, with the right attitude and support, a structured and thorough search for opportunity for innovation.

We can see that invention and novel practices, even for mere survival, have a renewed relevance in general business discourse, especially in view of the economic downturn. One good source, for example, is the BusinessWeek site on innovation. In the public sector, the CCAF-FCVI convened a symposium Risk, Innovation and Control back in the fall of 2008.

General ideas of encouraging innovation and responsible risk-taking are familiar. Risk managers will need to know exactly how to build such a culture. If they are to take a hands-on role, they will also need tools and methods to actually begin exploratory projects. I believe the risk professional is perfectly situated to take the role of facilitator, who leads the discussion of risk and opportunity amongst subject matter and program experts. Innovation needs champions, and the risk manager can help not only greenhouse new ideas, but assist in their evaluation within a graduated framework of intended benefits. Finally, the risk professional can assist with implementation according to proven principles.

[Revised. Originally published 16 Mar 2010]

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University Research Innovation – Pt2

2011-05-06 / University management / 0 Comments

university innovation strategyOverview: academic literature in university research innovation

Academic literature on innovation in the university, including research funding and R&D policy, identifies programs common in industrialized countries: spin-offs; programs to help small-medium sized enterprises access and absorb technologies; and seed and venture capital instruments. [Innovation and university references pdf.]

There is a general recognition that the conventional “linear” model has been replaced by a “holistic” or interactive model incorporating non-traditional disciplines and policy domains. Inter-disciplinary collaboration and a blurring of lines between pure and applied research has resulted in both evaluation problems and the clashing of cultures among academic fields. Governance of the innovation system is compartmentalized; policy makers face the difficulty of coordinating different societal and economic goals of research. Proponents of the controverisal entrepreneurial university (subject of a future post) construe the university’s mission as contributing to economic benefit of both the community and university faculty.

Strategic risk: small firms’ contribution to productivity

UK researcher Alan Hughes, in examining US pre-2003 data, draws conclusions pertinent to commercializing high-tech in the knowledge economy:

1. Significant gains in productivity were achieved not by high-tech firms themselves, but rather by the diffusion of information-communication technologies and its adoption among relatively low-tech sectors (such as retailers);

2. The part that new-intellectual-property firms play in the overall economy in terms of number of companies and revenues is very small, even if qualitatively important. It is instead other firms, second movers with different skill sets, who seize and profitably scale-up new technologies – while university licensing offices do not break even, given their research expenses;

3. The overwhelming contribution to productivity (studied in all sectors in all OECD countries) is not made by new entrants, who exit at the rate of 50-70% within 5 years, but rather by persistent firms: post-entry growth is more critical than entry per se;

4. In both the UK and the US, with similar results for the EU and Australia, it is the firm’s internal knowledge, customers, suppliers, and a list of other factors, that rank ahead of government and private research institutes as direct sources of innovation knowledge (measured both in frequency of consultation and information value).

Hughes goes on to analyze a diverse array of activities performed by universities, and reports on the perceptions by business of their relative importance for innovation. All this has relevance for nuanced decision-making in university research policy. The university, as a source of innovation and productivity, must consider itself part of a wider complex knowledge system.

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