Types of Innovation
The Innovation Spectrum
There are threetypes of innovation that an organization can choose to pursue: incremental, breakthrough, transformational. On type is not better or worse than another but they may require different processes to achieve success.
1. Transformational is the most difficult because it changes the way we live and often makes big companies, even whole industries, obsolete in a short period of time. Most organizations are loath to pursue ideas that will make themselves obsolete. Unfortunately, this is one of the reasons that they die. The computer and entertainment electronics industries have been prime examples of this. How many of us have audio 8-track machines, cassette players, videotape cameras, recorders and players, bag phones, clunker desktop computers, etc. sitting in our basements? In most cases transformational innovation starts in someone's "garage;" by a visionary outsider. It rarely happens within the walls of an organizational structure.
2. Incremental Innovation - If transformational innovation sits at one end of the innovation spectrum, then the opposite end is Incremental Innovation. This is the kind that most of us are used to pursuing. It focuses on the kinds of improvement that keep a product, brand or company in the game. They tend to be line or brand extensions, new bells & whistles, new packaging, new improved ingredients, etc. In fact, an Advertising Age innovation study several years ago concluded that over 60% of innovations claimed by the consumer products industry were nothing more than packaging improvements. Nevertheless, it is instrumentalism that fuels most of the competition experienced in any industry. And it is this type of innovation that requires:
- Multi-disciplined, cross-functional collaboration
- Strong, definable metrics at each decision-making point (i.e. A Process like Stage Gate see the Process Module under this topic)
- Consensus-based decision making between multiple stakeholder functions
- Internal competition for people, money, and operational resources, such as:
- Packaging development
- Qualitative and quantitative market research
- The interruption of production lines for short, unprofitable test market runs
- Distribution channel support in small test market geographies where channel competition is fierce enough for the established brands (who has the bandwidth to push the new ones [sales] or hear about them [buyers]?)
- Promotional and advertising development
The amount of resources that are made available for this type of innovation are almost always tied to current business performance; available in the good times and one of the first things to be cut in the bad times (right after the ad budget).
3. Breakthrough innovation falls between incremental and transformational on the innovation spectrum. It requires significant change on the part of the innovating organization, both in terms of cultural and systems support. It creates true competitive advantage for a sustainable although increasing shorter period of time and it involves significantly more risk-taking, which is why the decision-making that results in true breakthroughs must in many ways be the opposite of the decision-making that supports incremental innovation. It must be sponsored at the top. Breakthrough ideas create new markets and business opportunities that did not exist before. Therefore, there is no "frame of reference" upon which to deliver the metrics called for by a Stage Gate process. Customers don't have a frame of reference by which to easily judge the idea, business analysts have no track records - no sales numbers, no relevant trial or repeat data, etc. upon which to build volumetrics. For this reason breakthrough needs the higher level of consideration and judgment.