The Three Levels of Innovation
There are three ascending tiers of innovation that you can pursue. The level you choose will dictate the simplicity or complexity of the journey you will undertake. Unfortunately, far too many companies expect to achieve the highest levels of innovation while only providing the strategy, tools, and support for lower-level success, at best. The three levels are:
1. Incremental Innovation. This consists of small, yet meaningful improvements in your products, services, and other ways in which you do business. These tend to be the "new and improved" innovations we are all bombarded with every day: new flavors, shifts to better or all-natural ingredients, packaging improvements, faster/slower functioning, just-in-time supply chain enhancements, bigger/smaller sizing, cost reductions, heavier/lighter weight. We see them every day and they help extend product, service, and business life cycles and improve profitablity. They can be easily visualized and quickly communicated and give you something new with which to grab consumer attention in an increasingly noisy marketplace.
2. Breakthrough Innovation. This is a meaningful change in the way you do business that gives consumers something demonstrably new (beyond "new and improved"). Breakthrough innovation produces a substantial competitive edge for a while, although the length of time anyone can maintain such an advantage is growing increasingly shorter.
3. Transformational Innovation. This is usually (but not always) the introduction of a technology that creates a new industry and transforms the way we live and work. This kind of innovation often eliminates existing industries or, at a minimum, totally transforms them. For this reason, transformational innovations tend to be championed by those who aren't wedded to an existing infrastructure. Transformational innovation is exceedingly rare. Think about it: how many truly new-to-the-world ideas happen in a year? In a lifetime? Not many!
Yet, in some ways, transformational innovation is easier to pursue because the change required to achieve it usually doesn't rely on an existing entity that is committed to the old way of doing things. That's why we often find transformational innovation coming from start-up companies. But no company can survive by pursuing only transformational innovation.
There are benefits and problems associated with focusing your efforts on any type of innovation. Incremental innovation is the oil that keeps the engine running, but it cannot be your only focus. You can only grow your business so much by adding aloe as an ingredient or offering a different color. Breakthrough innovation is expensive, messy and uncomfortable but it is becoming increasingly necessary to pursue if you want to remain relevent. Gambling on transformational innovation alone is too risky. Go ahead and try to hit those home runs, but remember the importance of having a high batting average too. You just can't afford to make any one type of innovation the sum of your innovation strategy.
At Creative Realities, Inc. we recommend that businesses take a portfolio approach to their innovation effort; concurrently pursuing at least two of the three levels. A portfolio of incremental and breakthrough innovations can provide most companies, in most industries, with an edge over their competitors and opportunities to grow their business.