Tenet #3: Focus on the risk
In this blog I will talk about risk, and how a focus on risk will drive a project faster and through reducing risk, be able to allow for greater innovation. By necessity, I will also talk about some of the methods of reducing risk. Aspects of this discussion apply also to the previous tenet, “Tenet #2: Think in sprints”.
There are two types of risk of which all participants on a project must be aware: Market risk and implementation risk.
- Market Risk: A market (or market segment) is the collection of customers to whom you are targeting the new offering. Market risk in summary is the risk associated with market acceptance of the new product. Your view of the risk may be seen in your uncertainty of the projected unit sales forecast or the price you will be able to charge.
Implementation Risk: This is the risk that your implementation of the project necessary for the product offering will not go according to plan. It includes technology risk, logistic risk and other areas potentially impacting the successful completion of the project.
All New Product Development (NPD) projects contain some level of both of these risks. And both must be actively managed for faster projects. Figure 3-1 shows six major ways to manage risk.