What is Innovation?

What is Innovation?

I was hired at SFU, back in 1995, as a "junior chair" in Management of Technological Innovation. I have had a long time to think about—and teach—the topic of innovation and innovation management. If I have learned one thing it is that innovation is not the same as invention. In other words, innovation is not just a good idea. It is a good idea brought to market. 

Some people like to add the proviso that an innovation that has been successfully brought to market. They would argue that market failures, for example the Apple Newton, are not innovations. I think this is a quibble, actually, but you definitely have to have your idea in the marketplace—if only for a while—to credibly call it an innovation.

Taken this way, innovation is as much about business as it is about science or technology. And, when I say "business" I should really broaden that to any type of organization, because it is completely possible to have a social innovation, and a non-profit entity (e.g., Wikipedia) can certainly bring forward innovations.

Innovations don’t need to be "hard" (technologies), either. Many of the most important innovations in our lives are services, such as FedEx’s innovation in overnight delivery.

Image: Flickr/Erik Leenaars

Image: Flickr/Eric Leenaars

Different Types of Innovations

Innovations come in all kinds of shapes and forms. You can divide innovation into incremental (small, steps that are easily seen from where you are now, smaller, faster, better), and radical (entirely new, not previously seen, wow).

Because innovation has been extensively studied by business professors, these variants have been further refined, and endlessly reduced to the old stand-by, the "Two by Two Table." For example:

Market Innovation Radical Innovation
Incremental Innovation Substitution Innovation

If you make a small change to your technology but launch it in a new market, for example a new kind of consumer or a new way of selling the product, you have market innovation. Lease this car!If you look at your existing market and your existing technology, and you make a small change you can have something we call incremental innovation. Plenty of new features on existing products fall into this category. Tail fins!

If you go to your existing customers with a radically new technology, you have substitution innovation. Electric cars!

If you go for a whole new market with a whole new technology, then you have radical innovation. Transporter? Electric Bicycles?

This is just a sample of how people think and write about innovation, of course. There are many other two by two matrices out there. And there are many management elements to be considered: financial investment (Henderson 1995), risk management (Kadarja 2013) , human resourcing (Koberg 2003), project planning and management (Kenny 2003).

The Innovator’s Dilemma

Being innovative isn’t easy. Clayton Christensen has identified one of the biggest challenges that faces a firm that wants to be innovative but already has products and/or services in the market: deciding when to drop their old version. This debate is called “the innovator’s dilemma” and it frequently surprises and stymies firms who can’t let go of existing revenues in order to pursue the new - and possibly unproven - product or service.

The innovator’s dilemma is often brought on by something called a disruptive innovation. This is typically a product or service that is currently not comparable to what your company offers but it has a couple of things going for it: it is probably improving at a faster rate than your product is, and it quite possibly is going to offer most of what your customers want, at a lower price, before you think it is. 

Organizations tend to refine and refine their existing product and end up overshooting the needs of their customers, adding features that no one ever uses. When the cheaper alternative comes on the scene, the company’s engineers sneer at it, but customers may not be as loyal as you think. And before you know it, the disruptive technology has improved enough to capture them away.

Clay Christensen used the example of computer hard drives, which changed from giant platters the size of dinner plates to tiny things that can fit in a mobile phone. What was remarkable about the story, however, isn’t so much how that the gadgets got smaller - that is completely to be expected - but that in every case the incumbent, dominant manufacturer lost their place to a newcomer who came into the market with a cheaper, smaller (but slower and less capacity - at first) competitive product.

MDM students are often creating projects that are disruptive, or potentially disruptive. In one case, our students explored (for a large producer of console games) the potential of HTML5 for creating games. It was slower, less visually rich, but was it possibly a disruptor to their console games, often built painstakingly using machine code? We were able to help them understand that market and that technology, before it became disruptive.

Sources

Clay Christensen, The Innovator’s Dilemma. MIT Preprint, available here: http://web.mit.edu/6.933/www/Fall2000/teradyne/clay.html.

Henderson, Rebecca. "Underinvestment and incompetence as responses to radical innovation: Evidence from the photolithographic alignment equipment industry." The RAND Journal of Economics (1993): 248-270. Available at http://dspace.mit.edu/bitstream/handle/1721.1/49362/underinvestmenti00hend.pdf?sequence=1

Kadareja, Altin. Risks of Incremental, Differential, Radical, and Breakthrough Innovation Projects, Innovation Management. July 2013. Available at http://www.innovationmanagement.se/2013/07/29/risks-of-incremental-differential-radical-and-breakthrough-innovation-projects/ 

Kenny, J. D. J. "Effective project management for strategic innovation and change in an organisation." Project Management Journal 34.1 (2003): 43-43. Available at http://ecite.utas.edu.au/44055

Koberg, Christine S., Dawn R. Detienne, and Kurt A. Heppard. "An empirical test of environmental, organizational, and process factors affecting incremental and radical innovation." The Journal of High Technology Management Research 14.1 (2003): 21-45. Available at http://entreprof.com/wp-content/uploads/2012/07/Koberg-DeTienne-Heppard-2003.pdf