Which type of innovation would be less expensive? Why?

Marketing
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Which type of innovation would be less expensive? Why?

Sep 10th, 2015

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Innovation may seem like a catch-all term for the creative endeavours in products and services, but in reality it encompasses much more subtle definitions. There are several main types of innovation, and choosing the right one or right combination can make or break a company. In order to determine whether incremental, radical or disruptive innovation is best for your organization, there are a number of factors to consider including the company’s current standing, resources, and company culture.

Company Standing

Before choosing which type or combination of innovation to utilize, it is important to consider the state of the company. In order to do this, evaluate whether it is a start-up, well-established or somewhere inbetween. From there, look at the current line of products and services available and the current market share which they command.

Start-up and younger companies typically have fewer products and lower market share than more established organizations. These situations lend themselves more towards radical or disruptive innovation techniques. Using these methods, younger companies can develop completely new or disruptive products intended to create a whole new market or gain an section of existing market share respectively.

Incremental innovation, on the other hand, focuses on keeping products up to date. Start-up companies with few products will not benefit as much from investing a lot of effort into this form of innovation as it is intended to maintain market share as opposed to increasing it.

More established companies are well suited to utilizing incremental innovation methods to update a large range of products in order to prevent them from falling behind the competition. However, larger companies often fall into the habit of investing too much time and effort into incremental techniques, while neglecting radical and disruptive innovation. As such, they eventually fall behind organizations with a more balanced mix of innovative techniques.

Apple Inc. is an excellent example of an established company which utilizes both incremental and radical innovation to its advantage. While actively maintaining its range of iPods by increasing storage capacity, reducing size and cost, it released the iPad – a radical innovation. By doing so, Apple maintained their dominance in the mp3 player market, while creating an entirely new market for tablet computers and capturing a majority of the market share there as well.

Resources

Of course, not all organization have the resources that Apple has. Monetary and human resources are two concerns which will influence the effectiveness of the various forms of innovation. From a budgetary standpoint, incremental innovation can be the least expensive as it is fairly low risk and typically does not require the intensive R&D that is required to develop brand new products. On the other hand, it generally does not result in a radical increase in ROI either. Organizations with a modest range of products and market share but low resources should take advantage of the relatively low cost of incremental innovation to maintain market share and keep the company stable.

Much research has been done in the area of innovation, and if there is one thing that is clear it is that money alone cannot be the bearer of creativity. There is a human element that must be taken into consideration during the innovative process. Disruptive and radical innovation require a very creative team of people and depending on the organization’s goals, they are worth investing in.

Companies with a view to create new markets and take command of market share must invest in having a strong, creative team in place to drive product development and marketing. Without the right team or teams, attempts and radical or disruptive innovation stand a far smaller chance of success. Many start-ups are successful because they are rich in human resources despite having relatively modest monetary resources and even with limited capital are able to create new products and services to establish and dominate new markets.

Culture

Company culture is another aspect which much be incorporated into the decision-making process. Not all types of innovation can thrive under standardized corporate structures. Given its systematic nature, the process incremental innovation is able to proceed in traditional environments. On the other hand, looser, less structured company cultures tend to be more conducive to radical innovation.

Radical and often time disruptive innovation can be hindered in organizations if individuals are not encouraged to contribute ideas or if poorly rated ideas result in negative consequences. These types of creativity require an open, non-judgemental environment.

From a cultural perspective, implementing several types of innovation within one company can be difficult. However, fostering radical innovation does not lead to hindering incremental innovation. These forms of innovation can work harmoniously together provided individuals understand how these ideas are separate and the different ways to treat their respective processes.

By reviewing these three factors, it should become clear what type or which types of innovation(s) will work best for your organization. More often than not, companies require a combination of innovation types in order to take advantage of their innovative full potential. Determining how to apply resources to each innovation type depends on the goals of the organization.

For example, companies wanting to pursue the development of new types of products will want to focus their efforts on radical innovation and ensure the correct resources (both monetary and human) are applied accordingly and the right type of culture is in place to support it. In contrast, companies with established market share and products will probably want to dedicate more resources towards incremental organization, ensuring long-term customer loyalty and stability.

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Sep 11th, 2015

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