Innovation is often misunderstood in a world marked by growing uncertainties and rapid technological change. It is frequently equated only with the swift and agile launch of new products or technologies, rather than with the strategic risk management of possible futures. When these efforts fail, many companies retreat from such initiatives. However, true innovation goes far beyond this narrow view: it is an investment in understanding potential futures and developing the capability to prepare for uncertainties and initiate innovation projects (RORR - Return on Risk Reduction). For executive boards and boards of directors, this means embedding innovation into the company's DNA to proactively address scenarios that may seem unimaginable today.
Investing blindly in innovation execution projects that aim to solve unknown problems for unknown users in an uncertain future is bound to fail spectacularly. Innovation should not be viewed merely as execution but as a forward-looking learning project with a clear return for stakeholders.
Understanding Strategic Risk Management as Innovation Trend in 2025
Leaders must realize that innovation is neither a vanity project nor a fleeting trend—it is an indispensable part of risk management as a trend in 2025. In an uncertain future, the goal is to reduce the likelihood of undesirable scenarios while simultaneously uncovering opportunities that others may overlook.
Long-Term Value: Instead of viewing innovation as a cost factor, it should be positioned as insurance against market and technological disruptions.
Iterative Experiments: Small, targeted investments in experiments ("Smart Bets with RORR" — Return on Risk Reduction) can yield valuable insights without tying up significant resources.
Developing and Visualizing Scenarios
To convey the urgency of innovation, executive boards and directors should visualize potential future scenarios:
Scenario Workshops: These workshops enable the analysis of various future developments and their potential impact on the organization.
Storytelling: Tangible narratives about potential successes and risks highlight the critical role of innovation in ensuring future resilience.
Simulations: Simulations guide decision-making and focus on innovation areas, helping leaders understand the complexity and dynamics of potential developments.
Establishing Innovation as a Learning Process
Innovation is not a guarantee of immediate success but rather a process of learning and adaptation. Companies should focus on:
Exploring the Unknown: Systematically investigate new technologies, customer needs, or market changes.
Testing Hypotheses: Conduct iterative experiments to validate assumptions.
Reducing Uncertainties: Treat uncertainty reduction as a measurable success and, consequently, as the ROI of innovation activities.
The Role of the Board of Directors: Driving the Innovation Culture
Boards of directors play a crucial role in embedding innovation into the company’s strategy:
Supervisory Function: They must ensure that the executive board allocates adequate time and resources to future opportunities.
Continuous Learning: Board members should stay informed about technology and market trends to credibly drive the innovation agenda.
New KPIs: Success should be measured not only by traditional metrics like EBITDA but also by the progress in innovation projects, such as the number of hypotheses tested or scenarios validated.
Embedding an Innovation Philosophy into the Company
The most successful companies do not view innovation as an isolated activity but as an integral part of their DNA:
Sharing Best Practices: Present case studies that demonstrate how early innovation investments secure learning successes or valuable insights.
Strategic Embedding: Innovation should be as important as finance or operations. Ultimately, it serves as an extended arm of future research and thus becomes a part of business development.
Success Stories: Positive examples of small experiments ("Smart Bets") can build trust and motivation. The focus should be on the learning curve, from "what we thought would happen with a technology or market" to "what we learned."
Concrete Next Steps
To implement innovation sustainably, the following measures can be taken:
Develop Scenario Platforms: Implement tools to simulate possible future scenarios. Use uncertainty matrices (existing products and technologies remain central / products and technologies are replaced by alternatives, knowledge and expertise remain central / knowledge and expertise domains are replaced by alternatives).
Finance Pilot Projects: Allocate budgets for initial experiments to gather insights.
Define Innovation Horizons: Align projects with short-term, mid-term, and long-term goals.
Conclusion - Innovation Trend 2025
Innovation is more than just developing new products. It is an essential tool for understanding potential futures and preparing for uncertainties. Executives and boards must use innovation as a strategic instrument to minimize risks and maximize opportunities. Through clear scenarios, iterative learning processes, and strong integration into the company culture, businesses can not only react to changes but actively shape them.
However, it should be reconsidered whether the term "innovation" is the most fitting, as it has often been overused in the wrong contexts in the past. A more precise language may better reflect the true purpose and strategic nature of these "futures risk reduction" activities.
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