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Reducing the Risk of Innovation in B2B


The world is changing so rapidly that even established businesses need to act like a startup. Operational efficiency and agility have become the prerequisite for long-term success. B2B businesses must demonstrate to their end customers that they can deliver a quality product today and focus on developing their resources, systems, and capabilities to remain competitive well into the future. 

Over the past few years, data analytics, AI-enhanced automation, and cloud computing have opened the door to operational innovation. B2B small and medium-sized enterprises (SMEs) now have access to powerful tools and services that can help them completely redefine how internal business processes happen. However, the incorporation of these applications and services comes with added risks.

The benefits versus risks of continuous internal innovation and improvement are constantly at odds. To successfully achieve their goals, companies must find a way to balance both sides of the equation.  

Weighing the Benefits Versus Risks of Innovation

SMEs that embrace a culture of innovation are more likely to achieve a range of positive outcomes, notably increased profitability and growth and the ability to adapt during times of uncertainty. Internal innovation, in particular, leads to greater operational efficiency, efficacy, and cost reductions. Forward-thinking SMEs are better positioned to enhance the customer experience. They can also maintain a competitive advantage by building systematic tools and processes that enable new products and can tap into new markets.

On the other hand, there is a downside to the constant drive to innovate core operational processes and systems. The need to innovate often means that the organisation must change how it operates. It can include altered shift patterns and staff cuts, the use of offshoring, and investment in new IT systems. These changes may adversely affect productivity, workflow, and employee performance and morale. When innovation projects fail to produce the desired results, the financial and operational risks are significantly magnified. 

Successful innovation is thus inseparable from effective risk management. The smaller the business, the more likely its long-term sustainability will depend on how well it can identify and control the inherent risk of change and determine if the benefits outweigh the risks. 

How to Avoid the Pitfalls of Innovation

SMEs seeking to leverage new internal tools and systems need a fresh approach to risk management. 

Determining Risk Appetite 

The risks of innovation are higher for a small enterprise than for a larger one since an SME will generally have limited technical and managerial competencies, financial assets, and access to critical data. The risk of choosing the wrong innovative solution may even threaten the organisation’s survival. 

For this reason, senior leadership and risk managers must decide on the amount of risk the SME can afford to take on and any parameters that need to be maintained. A process should also be in place to determine if its business case accurately reflects the cost of risk management for a particular solution.

Conducting an Internal Audit

Conducting regular internal operational audits can help uncover the bottlenecks, setbacks, avoidable costs of doing business. With this information, business leaders can begin to think about the solution that will best address the company’s needs. They should also consider the new controls that may need to be in place to handle unknown anticipated risks, such as a potential increase in fraud and data breaches. 

 Part of this audit should include the approval process for new technology partnerships. Too many administrative steps requiring a significant amount of time won’t work in today’s fast-paced environment. Managing innovation risk is a continuously evolving process that requires new tools and systems. It is because digital innovation generally breeds unknown risks that only become apparent over time and may not be currently well-known or understood. 

Researching Potential Solutions 

SMEs need to pay close attention to market trends and technological developments as this may influence the solutions that make the most business sense. When researching any given solution, senior leaders should also consider ease of integration, the UI, compatibility with current systems, data security, and the built-in ability to scale. 

Included in this part of the process is some thought to execution. Several questions should be answered at this point, such as:

· What can be done with a particularly innovative solution to reduce the risk of poor execution? 

· How will human and physical resources be allocated during the transition? 

· What additional resources or partnerships are needed? 

· Who will be disrupted, how, and for how long? 

· How will the business continue to operate during the transition process? 

· How much employee training is required?

Keeping the Lines of Communication Open

Internal innovation cannot exist without open and proactive communication. That means employees and top-level staff should be able to communicate with one another, and that flow of communication should be in both directions. Employees throughout the company need to be clear about where the business is today and heading in the future. They also need to understand how new innovative solutions will potentially affect their jobs and what they can expect during the transition period.  

 Seeking Professional Advice

Effective risk management is a big challenge for SMEs working with limited resources and competencies. The bigger the innovative solution, the more details and data to be processed. For this reason, many SMEs will need the assistance of qualified consultants and industry professionals who can provide valuable insight and advice and, in some cases, assist in the transition itself.

In closing, the key to balancing the risks versus the benefits of internal innovation lies in understanding what is driving the sought-after change, determining which solutions make the most sense, and considering how to implement them at best. It is a process that is constantly evolving.



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