Friday, December 6, 2013

Breakthrough Innovation vs. Incremental Innovation

From incremental to breakthrough, innovation is a continuous journey.

There are two types of Innovations: (a) Radical which may be classified as Breakthrough or Disruptive, and (b) Evolutionary which has two components - Incremental and Spiral. Breakthrough Innovation and Incremental Innovation are not separated items, but it's rather a continuous flow that it goes from innovations that break a market or create a new one to the simplest continuous improvement.

Breakthrough Innovation is better with greater ROI but with much greater risk: Incremental can be as rewarding as the initial Breakthrough, especially if the incremental is based on a breakthrough technology you increase and create value. Research identifies that projects that ultimately break new ground frequently are fraught with uncertainty on many dimensions: technical, market, resource and organizational uncertainties abound. This requires them to be managed with a whole different approach: processes that are fine-tuned to deal with uncertainty but not stomp it out immediately: metrics that take uncertainty into account; team members that thrive in conditions of ambiguity, and a culture that is dramatically different from the operational excellence orientation that dominates incremental innovation.

Breakthrough Innovation is disruptive and will change your organization in many fields: You need new technology, new processes, new customers, new knowledge may be a new business model. All that makes them very risky but on the other hand you will get very great chances and opportunities for new product lines, platforms etc They will need them in strategic long-range view. There are cases where incremental innovation has resulted in breakthrough impacts. Perhaps the terms should be used in the context of the desired outcomes rather than as process descriptions or technological developments. Breakthrough implies an a distinction in innovative solution at any type of innovation. Breakthrough Innovation is a radical new approach that leaves competitions behind in some way. It's out of the box thinking where incremental innovation is still inside the box thinking. Incremental innovation is what is used after the breakthrough to "touch" things up a bit. It is much more predictable, often the result of optimization efforts on the product or process.

Breakthrough Innovation is ‘new to the world’: It is ‘anything new to businesses’ or purists want to call it as ‘new to the world’; something that no one else has done before; really original. Incremental innovations fit into your core competencies and your core business. They are enablers to run your current business in a better way. Breakthrough innovation might be thought of as an initial innovation in an area, possibly the one shows that innovation is possible or gives a new route. Perhaps it is a major discovery regarding the area. It is generally not so predictable and may require a lot of luck, or advanced knowledge in one or more areas to accomplish. Evolutionary innovations can be either incremental or spiral. In incremental development, the end-state requirement is known, and the requirement will be met over time in several increments. Incremental innovation is also triggered and limited by the past (or something that already exists). On the other hand, breakthrough innovation is in the future with no necessary continuity with the past.

Breakthrough innovation differs from incremental innovation in a number of ways: First, the incremental innovation always start with a small objective/aim to achieve and breakthrough innovation starts with a problem, having no solution in the current situation.You know what do you want but do not know how. Second, incremental innovation generally brings short term value additions or competitive advantage. Breakthrough innovation differs from incremental innovation to be a "game changer". Third, breakthrough innovation is most of the time bottom-up process and incremental is top down. Differentiation between incremental and breakthrough innovation relates to the degree to which a particular innovation changes the competitive landscape, potentially making entire industries obsolete, as digital photography did to the film industry. Innovation involves many steps: The generation of an idea, the demonstration of its feasibility, its implementation, its commercialization, and its diffusion. Those who study innovation find it helpful to differentiate between these stages. In some cases, an incremental innovation in one area may be hailed as a breakthrough in another area.

Innovation is the successful implementation/adoption of creativity/invention. Incremental Innovation is Evolution (improvement or change to something that already exists). Breakthrough Innovation is Revolution (Something new that disrupts or replaces something else). Breakthroughs have four key components. A breakthrough:
1) Takes Advantage of Emerging Trends.
2) Provides for Basic Human Needs.
3) Uses Simple Business Models.
4) Build Barriers to Entry - by combining different choices about target markets, offerings, channels, and partnerships, breakthroughs are not easily.

The balance innovation management portfolio should include all different flavors of innovation: Businesses need to have a balanced portfolio of innovation projects, across the matrix of three types of innovation (process, product/service, business model) and three degrees of innovation (incremental, substantial, breakthrough). Managing this portfolio should be integrated with the annual strategic planning process and financial investment model. The size and mix of the innovation project portfolio depend on the business situation, strategic objectives and severity of external challenges/changes. Generally, all businesses should have a handful of "bets" in the breakthrough category. What's important when developing the mix is to make sure:

1) You're accepting risk for potential reward.

2) You aren't ignoring specific types of innovation

3) Innovation is benefiting the widest possible audience within your organization

3) You aren't sacrificing the long term viability of the portfolio for short-term rewards

Breakthrough innovation is the new s-curve, which mostly requires new technology: For incremental innovation, it is the improvement of existing technology. Incremental innovation will be useless if the breakthrough innovation becomes the disruptive innovation. Breakthrough innovations, the radical changes, require cross-functional senior leadership commitment most of the time. Projects cross budget boundaries in the corporation and can often interfere with pre-determined individual targets. These types of changes require a more thorough process to prototype, filter, test in a real world scenario, and ultimately add to our existing 'new demand' project processes. 

Once the innovation has progressed past a certain level of risk and uncertainty, it's gradually mainstreamed into the normal project pipeline: This may mean that it breaks into multiple projects owned and funded by different groups with the Innovation team providing Program management and oversight. But it ultimately becomes "just another project". Then track the ROI for reporting and keep the fingers in:
New Users + New Product/Service = Breakthrough/Disruptive innovation
Existing Users + New Product/Service = Evolutionary Innovation
New Users + Existing Product/Service = Product Extension
Existing User + Existing Product/Service = Product Improvement

To put it another way, breakthrough innovation changes how things are being created, and incremental improvements reinforce it. It’s a continuous life cycle to manage innovation and achieve its full business values.


I seem to recall that Nicholas Carr refuted all of this in "IT Doesn't Matter" a decade ago.

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