Levels of Innovation


What is Innovation?

Is Innovation – ‘new to world’ or is it ‘anything new to business’ (and could be re application of an idea/concept used by some one else). Purists want to call it as ‘new to world’; something that no one else has done before; really original. Pragmatists tend to see differently- ‘reapplication is good’; do not re invent the wheel; find more uses; new to world is restrictive. The debate continues.

Many companies would want to have purists certify that they are truly innovative, but the business pragmatism require them not to lose an opportunity to reapply and gain.

Let me present a different perspective. It is probably more important to evaluate and classify ‘Ideas’ not on basis of new to world or company but on the basis of impact that they would have on the business and as a corollary the resources needed and the associated risk/reward equation.

The ‘Innovation Ideas’ can be

Incremental : they would lead to some gains albeit small ones. These are like small improvements that companies do to their products/services basis the small shifts in consumer needs or due to a better technology available to do the same work or just to bring a sense of ‘newness’ or change to address consumer fatgue. Things like new flavor, new shape of soap bar etc. would be typical examples of this. These require very little resources, no change in any process – sourcing, manufacturing, selling or marketing, has low risk and also less likely to have great rewards.

Substantial : in these the company would be making significant changes to its offering. Like moving from soap bars to shower gels; adding portfolio of still water drinks to carbonated drinks. The company needs to commit resources in devloping these. Add on technology for the new products is required. There would be changes required which could span not only production but also sourcing, selling and marketing. These changes would require organisation to make efforts but would largely be congruent with existing business. the risks would be there, due to new product category and changes mentioned. But the success would have the potential of great rewards – both top line and profits.

Transformational : This is pretty much like changing the skin. The company adds not just a new kind of product but also moves into new business. The move requires a BIG change across entire organisation. Like cosmetic company launching retail saloon via frianchising. The business model of new idea is entirely different from the existing business. The risk level is high. The resources needed are large and expensive. And success could take longer but when successful it can open a completely new revenue and profit stream. The company could also undergo transformation.

Now many companies and more importantly their senior managers would have to decide what they want, and how much can they do – i.e can they manage only those ideas which are ‘incremental’ or would they want to go for ‘substantial’ and maybe even ‘transformational’.

This is where the Balancing the Innovaiton Portfolio comes into play. It makes sense to have enough incremental level ideas – to capture the low fruits and remain constantly relevant to consumers. Then it is as well required to have some ideas of the substantial level. These ensure that big opportunities in the existing business are captured and company can build/retain its competiitve advantage. It also allows company to secure its medium to long range business growth. If this is done and company still has the resources to pursue more innovation, have the risk appetite then they can look at transformational ideas. It is essential that company does not take on too many of these. The high resource requirement, high risk, high degree of change entailed and long time required for completion are the obvious reasons for this.

It is always more desirable to have a balance portfolio where in enough numbers of all levels of innovation ideas are pursued. This allows for better overall success and growth through Innovation.

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7 Responses so far »

  1. 1

    I think every company needs to have an innovation portfolio, with all the three innovation categories that you have mentioned. What is Innovative today will become mainstream tomorrow and hence you need to work on the innovation for tomorrow. To extract the maximum out of today’s innovation, you need to constantly feed it with incremental innovations.

    Innovations are multi-dimensional, and companies need to look beyond just the core product / service innovation.

    An innovation roadmap can guide the organization on a ever evolving innovation journey.

  2. 2

    Andy said,

    Innovation does involve a certain level of risk taking capability. How many major organizations do we see doing innovation in currrent scenario? Major organizations have a rigid system of working which they would not like to change. Their product lines might go for an change in terms of lowering prices,promotion, placement but not in terms of conducting their business. After all the Organizations themselves have to encourage developing these new “ideas” but mostly they get shelved due to the age old calculation of increased revenues in quick time by the “INNOVATION”.

  3. 3

    Savannah said,

    Awesome blog!

    I thought about starting my own blog too but I’m just too lazy so, I guess Ill just have to keep checking yours out.
    LOL,

  4. 4

    Innovation is a key driver for success. Sooner or later all organizations look for innovation in the form incremental, substantial and transformational. The important thing to look is the time factor i.e. which kind of innovation level you require and when do you require that. Their are times when organization can walk away with incremental but at times they have to come with either substantial or transformational innovation to survive in a highly competitive business environment; failing to do that result in wiping off their market share.

  5. 5

    Andy said,

    Innovation needs to be a continual process rather than an one attepmt thing. If we go over Mr. Singh’s blog it has spoken of three aspects of innovation: Incremental, Substantial and Transformational. I don’t think I have ever heard of a organization gaining footage in all the three aspects at one go. All the three aspects will move in a synchronized way I feel. Remember kellog when it made a entry in India where there was no history of consumers having cornflakes for India. And then they innovated bringing out local flavors….Patience and proper marketing mix ensures success. The marketing team,investment team,strategic team all would require to work in a synchronized manner to achieve success of like manner.
    I would request Mr.Singh to post his comments.

  6. 6

    Davinder Singh said,

    Andy,

    Innovation and all major initiatives which ahve cross functional involvement require the ‘collaboration’ from all involved. Your point is well accepted on this.

    I would like to add that Business Strategy precedes all other functional strategies including Marketing , Finance or Innovation. Simply put Business Strategy dictates Innovation Strategy and not vice-versa. If the business strategy requires that Innovation agenda include multiple types of innovations(i.e incremental, substantial or transformational) then it is imperative for company (and people handling Innovation) to remain true to this and work accordingly.

  7. 7

    abnortmom said,

    Premium article, great looking website, added it to my favorites!!


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