Competitive innovations must solve the dilemma of innovation risk and offer price. The risk of innovation is often uncertain or not calculated with probabilities. The offer price is more based on wishful thinking than on probabilities to win the competition. Both together cause the later overrun of the innovation budget. An innovation risk management solves the dilemma.

Competitive innovation budgets are rarely achieved. For example, Augustine shows that of 81 large and complex development projects, only 10% of the projects reached budgeted costs of development and production. 50% of the projects exceeded the costs by more than 30%, 30% by more than 50% and 10% by more than 150%. It is unrealistic to hope that overall budgets would be reached on average without reserves.

One cause is the risk of innovation. Unsecure costs can be calculated with probabilities. This is usually not carried out for technical risks and sometimes for every risk. Uncertain costs can not be calculated. They can be identified as a qualitative risk, which often does not happen.

The root cause of budgetary overrun in competition has already been recognized by Thucydides 2400 years ago: Their judgment was based more on wishful thinking than on sound calculation of probabilities; for the usual thing among men is if they want something they will, without any reflection, leave that to hope, while they will employ the full force of reason in rejecting what they find unpalatable. Wishful thinking wins.

A largely independent innovation risk management is the counterbalance to wishful thinking. It makes it possible to take insurance against risks of innovation.

We advise you to manage innovation risks, for example through external reviews of individual innovation projects or by optimizing the innovation system.