Managers who want to create new and innovative value do so with the set of tools and techniques available to them. However, to be successful at innovation, you need to know precisely what you are setting out to do and pick the right approach that can get you there. Your innovation efforts could fail before you even start if the techniques you use don’t match up to the desired outcomes.
When you innovate, you are trying to do one of two things, you are either improving something (Incremental Innovation) or you are creating a brand-new experience (Transformational Innovation). Each form of innovation requires going down a fundamentally different path, and it is essential to understand the differences between the two and what you need to do to be successful at each.
Incremental innovations are usually improvements to offerings that are already available such as the next version of a product, extensions to a product line, improvements in design or manufacture, usability improvements, or ways to reach more customers. The next version of a smartphone, next year’s model of an automobile, a localized version of a software, and a better formulation of a drug all fall in this category.
The vast majority of the world’s innovations are incremental; this is the lifeblood of a company. These activities are essential to keep your products and services relevant and a lack of such continuous innovation results in the loss of satisfied customers and market share. There is no real change to your company’s business model, but without these innovations, we would still be driving Model T’s instead of Model 3’s.
Transformational Innovation involves creating new experiences by doing things in an entirely new way and without precedent. These innovations could include either a unique discovery or could be brand new experiences created with information and technology we already possess. The common element is that they fundamentally alter how we experience something.
Transformational Innovation involves viewing problems through an entirely new lens. Examples include the discovery of penicillin, the creation of the Internet, the invention of the airplane and the automobile. Other examples include category redefining products such as the iPhone, contact-lenses, or robotic surgery.
Succeeding at Incremental Innovation:
As an example of incremental innovation, consider the development of the next model of a sedan. The first thing to understand is that for incremental innovation to be successful, the problem set must be well defined. In this example, you know you are working on next year’s model of the automobile. You know—without ambiguity—that the outcome will be a new sedan, noticeably improved but still basically the same car.
Next, the set of improvements must be designed before you begin to work on them. In effect, you create an improvement plan first and then work toward achieving the plan.
For most incremental innovations, solutions are predetermined and then implemented—you don’t figure it out as you go. For example, if your sedan requires a third-party component, the decision on what to use is made first. You would never consider assembling cars with two different stereo systems or two different navigation systems to determine which one works better.
The primary tool to help drive incremental innovation is analysis. Both the problem set and the tools are well defined. We improve by measuring the drivers of satisfaction, learning from competitive intelligence, and deploying any of the countless techniques that help us analyze customers, competitors, and market trends.
Organizationally, advancement is best done within a single group and under a single set of priorities. There will be only one team responsible for designing and building the next generation of an automobile. You will never build a new version of your car through multiple parallel efforts within separate organizations and pick the one that results in the better vehicle.
Succeeding at Transformational Innovation:
For creating new experiences, the tools and activities we just discussed for incremental innovation will not work. Using an analytics-driven, single solution, and predesigned approach will inhibit you from creating transformations. This is because we cannot predict or even appreciate how transformations will evolve, and innovation here needs to operate with freedom, flexibility and an openness to ideas. To understand this better, consider the development of the Internet.
Creating the Internet was not improving something that was already out there. It was designed by a group of pioneers working independently across institutions and geographies who shared a common desire to have individual computers connected to each other. Its development required a high degree of information sharing and collaboration across organizations, something that is hard to achieve within today’s competitive corporate environment.
Transformational innovation has undefined outcomes. No one knew what shape the Internet would take. Here, rather than improved customer satisfaction, market share, or profits, the innovators were thinking about entirely new ways of doing something and were open and flexible to use any solution that worked.
The tools used for transformational innovation differ from the analytics-driven tools that are so effective for incremental innovation. Since the scope is broad and the solution is undefined, the best way to create transformations is through utilizing the power of a “community” or a group of people sharing a common goal.
These communities, sometimes referred to as networked improvement communities are people or teams that work independently but collaboratively. They work on developing their unique approach to a problem but also share information about what they have learned with other members of the community. This approach effectively boosts the collective IQ of all involved and moves the entire community closer to achieving a shared goal that often results in a world-changing innovation.
In the corporate environment, this means you need to broadly define an outcome and then let separate teams work independently towards that goal in their uninhibited way. The only condition is that they share their developments with other groups working in the same broad area. Information hoarding by any team will inhibit progress.
Having multiple teams work on creating a new experience gives you better odds of success than having a single team working on it because there is no defined solution. You never know which of many paths can lead to a breakthrough, and the best way to do that is to let multiple solutions develop in parallel. This is how the most significant transformations have happened.
Matching Structure and Outcomes
Understanding the differences between these two innovation activities can help resolve a common pain point facing most organizations. Companies often find multiple teams working in the same broad area. The logical reaction by managers is to propose consolidation of these teams into one; that way, there is a larger dedicated unit to solve the problem, and because there is more wood behind the arrow, success is more likely.
Before making such a decision, you would be wise to understand the type of outcomes the teams are trying to achieve. If they are working on incremental improvements, then it makes sense to consolidate the disparate units into a unified effort. On the other hand, for transformational outcomes, which are best served by networked improvement, your best bet is to let different teams work in parallel but insist on regular progress sharing to enhance the collective knowledge of all groups. This approach is most likely to allow the best solution to emerge.
Remember, not all innovation is equal. Understanding the differences between types of innovation and matching the right activities to the desired outcomes gets you started on the right track.