From my previous post, Aditya has commented about innovation being as a result of disruptive thinking which means that you cannot plan it. As I promised in my answer to Aditya, in this post I will try to clarify the concept of innovation by providing some examples illustrating different kinds of innovation. If you are interested to read more about innovation and how you can manage it, I would recommend a book called “Making Innovation Work” by Davila, Epstein & Shelton. From my point of view, this book provides a very clear understanding of innovation, not only from the conceptual level but also from a practical level. To make things simpler, I will try to highlight some key points from this book (even though there are many other understandings what innovation is)
First of all, it is essential to understand that not all innovations are created equally. Hence, they do not entail the same risk or provide similar rewards. From a very basic conceptual (business) level, innovation is about change generated from a technological perspective and/ or a business model perspective. At a very generic level, innovation can be characterized into three types: 1) Radical; 2) Semi-radical; and 3) Incremental innovation.
Radical innovation is about significant change that simultaneously affects both the business model and the technology of the company. If the radical innovation also shifts an industry into another direction and brings out fundamental changes to the competitive landscape, it can also be called as disruptive innovation. Remember how it was when Amazon.com started out? It changed the way in which books are sold and pushed the publishing industry into another competitive environment.
From a company’s perspective, semi-radical innovation involves substantial change in either technology of an organization or its business model- but not to both. Further, when substantial change happens at one level e.g. technology, it also involves small changes from the business level or vice versa. An example can be the success of Wal-Mart where the substantial change happened at the business model. With a souped-up supply chain that cut costs dramatically, Wal-Mart was able to apply the supermarket business model to retailing, opened large store space, and provided a wide variety of goods at discount prices. Another good example is DELL, its shift in business model is also substantial which required small changes to its process and enabling technologies (such as the supply chain management and internet technologies)
This is actually the most prevalent form of innovation, receiving more than 80% of a company’s total innovation investment (Davila et al.). The goal is of course, to get as much as possible from an already existing innovation without making major changes in investment. Any product improvement can be characterized as incremental innovation. For example new car models every few years, upgraded version of a program, new service procedures from a company etc.
Can innovation be managed?
My honest answer would be yes and no! Yes because it is possible to manage e.g. incremental innovation as well as semi-radical innovation; meaning that you manage the process from idea generation to launch of a product/service. It is also possible for a company to “manage” radical innovation in a sense that it will invest heavily e.g. on a certain technology, with an expectation for some returns in the future. Typically, these companies are industry leaders (and they would like to stay in that position). But there are also higher risks involved and thereby this type of innovation cannot be easily managed. However, if we are looking at the effects of innovation, it is not possible to manage or determine which innovation can be disruptive as such! Therefore when talking about innovation, uncertainty will always be a certain(!) factor which any innovation manager must deal with.
It is also important to recognize that there isn’t a clear cut between the different types of innovation. Everything is relative, dependent on e.g. the lifecycle of a certain technology/industry and how it relates to another technology/industry etc. Further, it is also very important to acknowledge that it is the perceived degree of changes which matters (novelty is very much in the eye of the beholder). An innovation can be considered as incremental for the company who invented it but when launch, it can have major effect for the user or for another industry. Nevertheless, management of innovation to a large extent is possible because every company or organization has the capability to be in charge of their internal sources of change that can be related to their technology and business models. If not, creative thinking or ideas are great but they will stay as ideas if organizations don’t know how to realize ideas into actions and thereby achieve some tangible (and intangible) results.