The successful development of innovations is a critical factor in the survival and growth of companies (Schmidt et al. 2009). Consequently, scholars as well as practitioners have an interest in development strategies and the way they affect the success or failure of innovations (Henard and Szymanski 2001). The persistently high rate of innovation failures (Stevens and Burley 2003), forces companies to continually search for the most effective ways to develop such innovations (Astebro and Michela 2005). As a result, the study of factors that affect the success of product development (Cooper and Kleinschmidt 1996) has been expanded in recent times with studies about the impact of each factor on performance, both direct and indirect (Carbonell and Rodriguez 2006; Voss et al. 2008).
In order to identify such factors, a definition of a successful innovation project must be outlined. As presented in the previous article, such innovation project should:
As a result, every success parameter could be risked by factors external to the project like: financial and economic risks, demand and market competitiveness risk, trademark or regulation risks, etc. Following these macro venues of innovation project’s risks, I have constructed a list of potential external risk sources that could negatively influence the outcome and performance of the innovation projects:
In the following paragraph, the analysis of the external risks of innovation projects has been projected, using the same methodology explained in the previous article.
Table 5, has summarized the results of such analysis on external barriers to innovation projects.
The innovation costs risk is revealed to be the second biggest external barrier to successful innovation projects.
“Demand risk” along with “Innovation costs risk” lead the risks’ list. In fact, being new and innovative, a product, service, method could very easily be not accepted by the targeted final users (Cierpicki, Wright and Sharp, 2000; Griffin, 1997) and face an uncertain demand. The innovation costs risk is revealed to be the second biggest external barrier to successful innovation projects. This could be evidenced even in large-scale projects like (1) the construction of the Opera House in Sydney, exceeded 94.8M Australian dollars of the planned budget, (2) the Airbus A380 – 1.77 billion over budget; and (3) the London Millennium Bridge had £8M over the initial budget.
At the bottom of the list indicating the lowest barriers to successful innovation projects, the surveyed firms have ranked the need to meet the EU and local (national government) regulations.
As a matter of fact, this area usually is not subject to dynamic changes and could, therefore, be well-predicted by the firms exercising the right mitigation activities
In conclusion, the dominating external risks of innovation projects have been:
By Altin Kadareja
Part 1: What drives a Successful Innovation Eco-System
Part 2: Internal and Hidden Risks of Innovation Projects
→ Part 3: External Risks of Innovation Projects
Part 4: Risks of Incremental, Differential, Radical, and Breakthrough Innovation Project
Altin Kadareja, MSc, passionate about innovation management has experimented several risk management techniques in innovation projects in Italian banks. Holds a Master of Science degree in Economics and Management of Innovation and Technology from Bocconi University, Milan. Former organizational change consultant focusing on business process re-engineering. An amateur entrepreneur, already founded a start-up and an economic think tank.
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