Innovation and Risk Management

This article discusses the concepts of innovation and risk management in the context of business. It explores the different models of innovation and the importance of risk management in driving innovation forward.

Running head: Innovation and Risk Management
Innovation and Risk Management
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1INNOVATION AND RISK MANAGEMENT
Invention refers to the formation of products or processes for the very first time while
Innovation refers to a process wherein a person makes an improvement to a product or service.
An invention should be something that is new and novel in nature, have a utilitarian purpose and
should be practical. Innovation on the other hand should be replicable at a cost that is economical
and should be able to satisfy a particular need (Sadgrove 2016). For an invention to be
innovative in nature, it has to be economically feasible. Innovation can be implemented
successfully to achieve growth in the energy industry by investing money obtained from the
public, in research and development. One should also support grassroots innovators. One ought
to remove subsidies on fossil fuels. One should also alter their perception of public utilities
companies. Prizes are also central in screening innovations that are full of potential for investors.
One should also garner a lesson from cook stove innovation and discover a lot by observing the
evolution of cook stove programs. Last but not the least innovation requires taking risks
(Sadgrove 2016).
The different models of innovation include Organizational Innovation, Product
Innovation, Process Innovation and Marketing Innovation. Organizational Innovation refers to
the execution of an organizational method that is new, in the business practice of a firm, in the
organization, in the workplace, or a firm’s external relations. Organizational Innovation reduces
the administrative costs of a firm, enhances work satisfaction and consequently leads to an
increase in productivity among employees, and decreases the cost of various supplies. Product
Innovation refers to an introduction of a product or service that is novel and new or has
significant improvement in techniques, equipment, technology and software. Process Innovation
refers to the implementation of a delivery or production method that is new. This includes major
changes in technology, techniques, software and equipment. Marketing Innovation refers to the

2INNOVATION AND RISK MANAGEMENT
implementation of a method in marketing that is new, which involves major changes in product
packaging or product design, placement of products, promotion of products and pricing of
products. Companies need to manufacture hydrocarbon as cost effectively and efficiently as
possible. They have achieved this through innovation wherein they have adopted a digital oilfield
to improve reservoir recoverability, increase production, and decrease environment, economic,
safety and health risks (Sadgrove 2016).
Risk management is the essence of innovation. The main competency of the most
successful and effective innovators is risk management. Innovators perceive systematic risk
management as helpful aids in the successful implementation of innovation because they are
aware of the fact that no new model of business is ideal from its beginning. Therefore, they test
the plethora of components and make the necessary changes that are integral and treat risk
management as a process of learning. Risk management thus not only helps in the successful
implementation of innovation but also drives innovation forward and speeds up the process
(Bowers & Khorakian 2014).

3INNOVATION AND RISK MANAGEMENT
REFERENCES:
Bowers, J. and Khorakian, A., 2014. Integrating risk management in the innovation
project. European Journal of innovation management, 17(1), pp.25-40.
Nikolova, L.V., Kuporov, J.J. and Rodionov, D.G., 2015. Risk management of innovation
projects in the context of globalization. International Journal of Economics and Financial
Issues, 5(3S), pp.73-79.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
Teece, D., Peteraf, M. and Leih, S., 2016. Dynamic capabilities and organizational agility: Risk,
uncertainty, and strategy in the innovation economy. California Management Review, 58(4),
pp.13-35.