- Your competitors will eat you for breakfast if you don’t remain competitive and innovate
- Innovation compensates for price erosion and shrinking margins
- In mature markets, growth through geographical expansion has its natural limits, and therefore growth has to also come from new products and businesses created through innovation
- Where there's insufficient growth, staff levels may need to be reduced to compensate for price-erosion and/or wage bill increases
- It creates shareholder value: share price is influenced by consistent performance with premiums for future growth potential (innovation confidence)
However, managing innovation is easier said than done. It involves making correct choices and executing in the right way, neither of which is straightforward to do!
Managing innovation depends on the type of innovation, the phase of market maturity, competition, and internal factors such as management, culture, the organisation, etc.
Also, different rules apply depending on whether the focus is on evolutionary or breakthrough innovation. Let me summarise the key differences.
Breakthrough innovation, on the other hand, is a different kettle of fish.
In contrast to the small steps that characterise incremental innovation, breakthrough innovation consists of large step innovations usually without previous examples. Here, market acceptance is a risk (in many cases the market has yet to be created), and this is why working closely with lead customers and partners is essential for success. Time to market for new product developments consists of relatively long times (less so for business model and service innovation). Also, vision plays a significant driving role.
Managing this type of innovation requires a tailor-made approach (phase gated with the right decision criteria, timeline and governance) that take into account the type of innovation, and internal factors such as management, culture, the organisation, etc. Different skillsets are also needed.
It is not a case of which one is best - evolutionary versus breakthrough innovation? As a business, you need to manage both, investing wisely to build a portfolio of profitable innovations, with different reward/risk profiles. But don’t try to manage them in the same way or you will run into big trouble.
For more information on breakthrough innovation, please see the case study I co-wrote in Chapter 17 of Discontinuous Innovation: https://t.co/IcpETsmyt2
Do you want to be more successful at managing innovation? I recommend the book Innovation Unplugged – helping managers prepare today’s business for future growth.
Director of 3inno