Types of innovation strategies – the practical guide
Many of us think of innovation as a black and white process – a choice between the extreme Black of lacking innovation altogether and the White of being a visionary next-gen innovator. We do the same when we think and consider companies, be it as potential employers, vendors or partners – they are either innovative or not at all.
In fact, the topic of whether an organization innovates or not is a lot more nuanced, and as in most things, there are many shades of grey here as well. We must consider the different types of innovations and, oversimplification would be counter-productive.
The Innovation Matrix below examines the 4 types of innovation: Incremental, Disruptive, Radical and Architectural. Let’s take a closer look at them.
Routine/ Incremental innovation
It would be hard to find a modern organization that does not, inherently, innovate at this level. Every new product release, every new software upgrade, no matter how trivial represents incremental innovation.
Even the most entrenched, slow-paced, commodity “widget-makers”, have to deal with changing supply chains, raw material costs and properties, packaging, labeling and distribution requirements, regulatory shifts and many other moving pieces.
Without incrementally innovating both processes and products to deal with the constant changes in the social and economic ecosystems they operate in, no company can stay in business.
Just because we would classify some innovation as routine and incremental, this does not mean that it does not add significant value to the products and customers that benefit from it.
Tiny improvements in existing technology, adding, or changing just a few features in software or implementing just one or two internal process improvements and easily make the difference between a successful product launch, a good financial quarter or a flop and a miss.
Often, the devil is in the little things, and some of the best business managers insist that it is better to not try to “boil the ocean”.
Looking at the market value of innovation quantitatively, we notice that some of the pillars of the technology business do indeed rely heavily on incremental innovation. In semiconductors, the CMOS process has not changed materially for many years – but we do keep shrinking dies, improving lithography, and increasing transistor density – incrementally.
We create new programming languages to address only a few fundamental inconveniences of what we already have. Take some of the recent hits – golang is much better and cloud-scale parallelism, Rust excels at wrangling memory and protecting us from ourselves, and Deno is a safer, faster, multithreaded and less messy Node.js. One can safely argue that these are incremental, yet incredibly valuable innovations.
Disruptive innovation and Architectural innovation
These two types of innovation are the playground of most entrepreneurs. It makes a lot of sense to bring an existing technology to a new market or address a problem in an existing market with new technology.
The difference is, however a little hazy and likely not very important. In most cases, when we say, “new technology in an existing market”, we are talking about applying technology that is not in fact “new” but has not yet been applied to a problem in a market we know. Similarly, in many cases, a group of experts in a technology field will talk about new markets, simply from the standpoint of not being familiar with them.
To illustrate – please consider the current hyper-fashionable conversations around Artificial Intelligence and Machine Learning. These technologies and the core concepts behind them have existed for decades, and in some cases for more than half a century. It took lowering the cost of implementation and operation (faster computers, better software and cheap scalable cloud infrastructure) and the rise of new market categories (global retail distribution – like Amazon and Ali Baba, and global direct advertising – like Google AdWords) to make these innovations relevant.
It does not matter if we can argue that some technology or market are “not new”. The fact remains that these types of innovations are incredibly valuable and have created, and will continue to create, enormous economic value.
There are two approaches to drive disruptive and architectural innovation.
One is better suited to more mature organizations that are already well established in their markets and have some organic investment capability. This approach is to assemble and enable multi-disciplinary teams of experts and to task them with design improvements and ideas, even when it may not be immediately obvious how the expertise any one individual brings to the table maybe relevant.
The other approach, which is where most startups dwell, is to adapt existing, often narrowly focused technology to a feature set that can impact many markets. These are exemplified by the power-point decks we have all seen and fondly remember:
“Every business will have a portal!” (yes, they do now),
“Every phone will have a digital camera!”, (check),
“Everyone will have a social media account!”, (true again),
“Every building will have wireless networking!” (mostly true in the original target markets),
“Every consumer business will sell online and needs a shopping cart website!”, (indeed).
Clearly, disruptive and incremental innovation are the dominant innovation processes and will likely continue to attract the Silicon Valley – style entrepreneurs.
This is the land of visionaries is where few dwell, survive and succeed, because we must not only invent something new, but must believe that someone will want to buy it.
It is equally hard to create a new market as it is to invent a breakthrough technology.
Those who succeed become household names.
Gates (“people will want to buy and own personal computers and we can build an operating system for them”),
Jobs (“people will want their phone to be a computer and we can build one without a keyboard”),
Musk (“people and businesses will pay a premium for access to digital payments, and we can build them to be easy to use and inexpensive to operate – unlike the existing banking system”).
You will note that we do not mention Musk in the context of spaceflight, because it is not a new market, or in the context of electric vehicles, because the market there is also well understood, and we may not know for decades, whether fuel cells may well “win” in the end.
This is also where the greatest failure and the most vaporware are found. Just wishing for a solution to a problem and fining the money to throw at it are not absolute guarantees of success – a perfect example is the story of Theranos and the literally unblinking, maniacal drive of the founder to be the next college drop-out household name.
Of course, many radical innovation failures end up into what early investors like to call “successfully pivots” into a much more realistic goal. Take wireless power technology companies, for example. Every single one, early in their existence, promised to power consumer wireless devices (specifically cell phones) at a meaningful distance – to as much as 20 feet away. Some even demonstrated smoke-and mirrors solutions, managed somehow to convince fruit-named companies to bet on their technology, and bamboozled the media well enough to win CES awards. Yet today the remote-charging cell phone projects are cancelled, and the best we can do is broadcast-trickle a few milliwatts of power to a distance of a few feet and claim great opportunities in the IoT and industrial sensor markets.
Radical innovation is the Wild West of technology – home both to the best and the brightest, as well as the delusional and the snake-oil salesmen.
There are great rewards to be had here, at an equally great risk.
The positive impact of innovations
There is no bad innovation, as long as we are honest and realistic about the expectations we set, the milestone we have reached and the resources we can dedicate.
Internalizing the fact that innovation is not something with just two possible black-or-white states, helps us appreciate the value of both the little incremental improvements, on par with radical, major breakthroughs. Innovation is good – it pushes the boundaries of our intellectual and cognitive capacity, to a large degree drives the growth of the global economy and, at the micro-level, has a positive impact on internal organizational culture by demanding continuous learning, growth and personal development.