In order to manage the process of making innovation happen, it’s important to understand innovation and the different ways in which change can be categorized. In this field it is not a case of “one size fits all” – you need to tailor your approach. One way is to look at how much “newness” is involved – from incremental small steps to radical leaps forward.
Innovating in Stages
The results of innovation can be dramatic – from the first-ever automobile to landing a man on the Moon. But many of these innovations come about not through dramatic changes but doing the same things a little bit better. Incremental innovation – innovating in small steps – is about improving products and services and the processes we use to make them, making things better in quality and cheaper. Incremental innovation may not be glamorous ad instantly noticeable, but it is by far the most common kind of innovation.
For example, most things you might buy in the supermarket are not “new to the world” products, but improvements and extensions of existing products. In service industries such as hotels and catering, innovation is about “doing what we do better” – improving the level and quality of service around a basic formula in manufacturing, most innovation is about improving the way processes work – fixing bugs in the system, improving efficiency, quality, safety, and importantly, reducing cost. This is not a one-time act, but the result of incremental improvement.
Doing what we do better will get us a long way – but from time to time something comes along that changes the whole nature of a business or market, offering a great leap forward. This is known as radical innovation. Radical changes in products, services, and processes don’t happen every day, and it takes a long time for them to be perfect, but they do have a big impact. Significant examples include electric power, cars and railroads, the internet, and self-service shopping.
Managing Innovation Types
Understanding the difference between different types of innovation is important in learning how to manage it. Incremental innovation requires you to mobilize large numbers of people to make small improvements. The process is relatively low risk and high frequency and forms part of the mainstream activity in most organizations. Radical innovation is much riskier and often takes specialized knowledge. A dedicated team will manage it, often outside the mainstream of the organization’s workflow.
The development of most products tends to consist of long periods of incremental change punctuated with occasional radical breakthroughs. For example, the 20th century saw decades of incremental innovation of the standard filament light bulb to create a smaller, more reliable, and more efficient version of the original design. Now, however, light-emitting diodes (LEDs) promise a radical replacement in the form of a long-lasting and emery-efficient alternative. A successful organisation should not limit itself to either incremental or radical innovation, but be prepared to engage in both, and manage them under the same roof.
How to Build an Innovation Portfolio
- List all the possible innovation you could make.
- Arrange them by impact area: product, service, process, market.
- Score each idea in terms of impact and ease of implementation.
- The plot on a chart with impact and implementation on the two axes.
- Pick out easy to implement and high impact ideas to work on first.
- Look at other high impact ideas that may be harder to implement.
In addition to incremental and radical changes, innovation can be defined by the direction – by what is being changed. An organisation can innovate its product, its process, it’s market position, or it’s business model. Together with incremental and radical innovation. These give an idea of your “innovation space” and help you decide where to innovate.
Products and Processes
The most obvious areas of innovation are in what you produce and how you produce it. Product or service innovation can mean improving existing models – such as producing the latest CD player – or introducing something new – such as the first MP3 player. Process innovation can involve improving current processes – reducing waste, increasing efficiency. Alternatively, changing the way you operate – such as switching from paper to digital correspondence.
Quick Tips: Consider All Option
Keep reviewing the performance of your organization in all four directions, so you are always aware of the potential for innovation.
Markets and Models
Changing your business model and the market in which you operate may be more difficult. They can affect the structure of your organization. However, they can prove extremely profitable. Cell-phone makers at the turn of the century successfully transformed their product from a staid business tool into a mass-market fashion item. With a strong youth market. Similarly, luxury car maker such as Rolls Royce, unable to compete on price with cheaper car producers. Changed their business model to supply the trappings of a luxury lifestyle – vacations, watches, designer clothes – rather than simply a mode of transportation.
Quick Tips: Open Innovation
Innovation has always been a multiplayer game, involving weaving together technological, market, financial, legal, and other strands into creating new products, services, and processes. But in a world where markets are fragmented and globally spread, and global investments in R&D produce nearly $2 trillion of new knowledge every year, even the largest firms with big innovation budgets are increasingly aware of the importance of sharing knowledge. The idea of “open innovation” – originally the title of a book by US professor Henry Chesbrough. Is that firms need to open up their innovation search and share their own knowledge.