Ralf Dillerup, Daniela Kappler 

(Heilbronn University, Germany)

 

 

Abstract: Innovation in the German Machinery and Plant Engineering Industry is the source of strategic differentiation or cost leadership. This competitive advantage involves a high number of challenges. Innovation includes a system of items which are complicated, dynamic and multi-dimensional — Innovation is a complex system which is a challenge to manage. Therefore, deviations from companies’ innovation objectives, commonly known as innovation risks, are also imminent and increasing. Although most managers are aware of the fact that from a system perspective innovation covers interconnected risks, they are managed isolated and one-dimensional. This separation limits the understanding of interconnections and behavior of risks from a system perspective. The cause of this inadequate management could be ascribed to the weakness of common methods in the risk management process. The limitations can be overcome by using System Dynamics to gain new insights into the interconnection and behavior of risk systems. The research project SYRIMAAN focuses on the development of cause-and-effect relations of main innovation risks in the German Machinery and Plant Engineering Industry and also their dynamics. In a comparison of standard risk assessment with the Causal Loop Diagram and the System Dynamics Model of innovation risks the potential of System Dynamics for a systemic and multi-dimensional risk management will be demonstrated.

 

 

Key words: innovation risk; holistic risk management; complexity; dynamic; risk systems; risk analysis; risk aggregation; system dynamics

 

JEL code: M1