By Brett Farmiloe

Balancing risk with innovation and growth is a common challenge for startups. From developing a risk management plan to innovating safely with a two-track strategy, eight business leaders share their best strategies for managing these competing priorities.

Best ways to balance risk and innovation for startups

1. Develop a risk management plan

“Start by developing a comprehensive risk management framework that identifies potential risks and outlines strategies to mitigate them. This framework should include processes for risk identification, assessment, mitigation, and monitoring. By having a structured approach to risk management, you can ensure that innovation and growth are pursued in a controlled manner.

“Encourage employees to be proactive in identifying and managing risks. Promote open communication channels where team members can share their concerns and ideas. By fostering a culture of risk awareness, you create an environment where innovation and growth can flourish while ensuring that risks are acknowledged and addressed.”

—Jennifer Mea, Crestpoint Consulting

2. Consider the 80-20 approach

“Balancing risk and innovation is indeed challenging, especially in the dynamic world of startups. At our company, we have always believed in the power of data-driven decisions. While instinct plays a role, we lean heavily on user feedback, metrics, and trends to guide our innovation. We have often prototyped new ideas on a smaller scale to gauge their potential and risks.

“One strategy that stands out for us is the 80-20 approach. Eighty percent of our efforts have gone into proven, stable avenues to ensure consistent growth and manage risks; the remaining 20% are dedicated to experimental projects, pushing boundaries, and embracing innovative ideas. This way, even if an innovative endeavor doesn’t pan out, our foundational business isn’t at stake. It’s like walking on a tightrope, but with the right blend of caution and courage, it’s possible to navigate successfully.”

—Krishna Rungta, Guru99

3. Fail fast, learn faster

“In our startup, we believe that risk and innovation are two sides of the same coin. Within the confines of our workspace, we nurture an environment that not only embraces risk, but also celebrates it as a catalyst for innovation and exponential growth.

“One core strategy we’ve adopted is what we term the ‘fail fast, learn faster’ approach. Through this method, we place a premium on the rapid prototyping of new ventures, enabling us to promptly pinpoint potential shortcomings and setbacks. Rather than viewing these moments as failures, we see them as invaluable learning opportunities. Armed with these insights, we fine-tune our strategies, ensuring that each iteration takes us one step closer to groundbreaking innovation and sustainable success.”

—Itay Malinski, Dragonlabz

4. Foster a culture of continuous learning

“By fostering a culture of continuous learning, we strive to achieve breakthroughs that help us innovate further in our field while mitigating risks. However, this requires a team effort. To achieve this, we encourage our teams to share insights that help improve our organizational agility. This is done in a culture where any so-called ‘fails’ are used as springboards for learning. When our team takes calculated risks that can be mitigated, we take strides forward in achieving our ultimate goal of innovating.”

—Stoyan Mitov, Dreamix LTD

5. Integrate risk assessment into the innovation process

“One strategy that my organization has effectively employed is a structured approach to risk assessment and mitigation that is integrated into the innovation process. We have a dedicated risk-management team which works closely with our innovation teams. This approach allows us to identify potential risks early in the innovation process and devise proactive strategies to mitigate them.

“We have regular risk assessments, covering various aspects like technology, legal, and market dynamics. This proactive risk identification not only protects our innovations, but also informs our decisions about which growth opportunities to pursue. Additionally, fostering a culture of open communication is integral. Encouraging employees to voice concerns about potential risks or challenges associated with new innovations allows us to address these issues promptly.”

—Nimrod Vromen, CTech—Startup Confidential podcast

6. Regularly reassess your risk tolerance

“We’ve found that adjusting our risk appetite is a smart strategy. It’s not about taking on more risk than we can handle, but rather it’s about regularly reassessing how we perceive risks related to innovation.

“We stay adaptable, regularly reviewing and recalibrating our risk tolerance based on our evolving understanding of the market and capabilities. This ongoing evaluation allows us to stay nimble, adapt to changing circumstances, and make informed decisions that promote innovation while managing risks effectively. It’s a dynamic approach that ensures we’re always aligned with our growth goals and risk tolerance, helping us confidently navigate the startup landscape.”

—Neil Hodgson-Coyle, TechNews180

7. Test new ideas in a sandbox

“We’ve mastered the balance between risk and innovation with a ‘sandbox’ strategy, where we advise startups to allocate a small, manageable portion of their resources to test new ideas. This ensures that the core business remains stable while allowing room for innovation.

“This sandbox operates under a set of constraints—budget, time, and scope—to keep risks contained. For example, a startup might allocate 10% of its budget to develop a new feature or explore a new market. This is their space to iterate rapidly and learn from failures without impacting the stability of the core business.

“One of our clients, an edtech startup, used this strategy to test out a new learning platform with a limited user group before a full-scale launch. The feedback from this controlled trial was invaluable, helping them pivot with minimal cost and avoiding a potentially risky full market release before the product was ready.”

—Niclas Tim, spectup

8. Innovate safely with a two-track strategy

“In our startup, the balance between innovation and safety is achieved using our ‘two-track’ strategy. Picture it as two parallel paths. One path focuses on our tried-and-true methods, ensuring steady progress and minimal risk. The other is our experimental track, where we explore bold new ideas. The beauty of this system is that it allows us to chase innovation without putting our core business in danger. If a new idea on the experimental track succeeds, we integrate it into our main path. This dual approach ensures we’re always moving forward but with a safety net in place.”

—Eric Lam, Exploding Ideas

About the Author

Post by: Brett Farmiloe

Brett Farmiloe is the founder and CEO of Featured, a platform where business leaders can answer questions related to their expertise and get published in articles featuring their insights.