While taxi companies have come a long way over the years in improving service to their customers, nothing could compare to the radical change engendered by the introduction of Uber, a company which drastically changed the taxi industry almost overnight and captured a large market share. Is this model of disruptive innovation an innovation model which more companies should be striving to adopt?
Innovation specialists generally divide innovation scope into two broad categories: Incremental and Disruptive. Incremental innovation focuses on cost or feature improvements in existing products or services. Disruptive innovation creates a dramatic change that transforms existing markets or industries, or even creates new ones, by introducing groundbreaking new products. Should a company put an emphasis on trying to generate one ‘magical’ idea which will revolutionize the business and generate millions in new revenue streams? Or should they prioritize cost savings and incremental innovations which will be much more likely to bring in smaller profits? Both methods have their benefits and drawbacks. Which one is right for your company depends a lot on its specific circumstances. Here we will take a look at both methods.
Walking on the Safe Side – Incremental Innovation
Incremental innovation focuses on continually making existing products or services more competitive by focusing on reducing costs and improving or adding features. Thanks to its low level of uncertainty and risk it is by far the most popular form of innovation. It’s hard to go wrong with incremental innovation.
A good example of incremental innovation is Google’s Gmail, the world’s most popular email service. When first launched, Gmail had few features, but did one thing very well. It delivered emails quickly, without lots of confusing ads. As time passed, Google introduced many additional features and improved its service, making it faster and better. Since then, the company has successfully emulated this method numerous times with their other products, from Google Maps to the Chrome internet browser. Google rushes to get a simple product to market in order to quickly stake out market share in emerging industries, then gradually improves their offering, making it the best in the field.
But there are still dangers with incremental innovation – especially if this is your only method. Take Kodak, for example. Kodak led the photography industry for years with incremental, yet steady improvements to traditional film. When the disruptive innovation of digital imaging was introduced, it revolutionized the way people captured, stored and used images – making Kodak obsolete. Had the company been willing to invest time and effort in more disruptive innovations, perhaps it would have remained an industry contender.
All or Nothing – Disruptive Innovation
This brings us to disruptive innovation. It explores new technologies and as such is characterized by a high level of risk and uncertainty. Ironically, disruptive innovation often depends on incremental improvements, refinements modifications in complementary technologies. Due to the high risk factor, smaller companies or start-ups usually play important roles in disruptive innovation. On the positive side, you sometimes don’t need to compete for market share with disruptive innovation, rather you branch off and create your own market. And the eventual pay-off can often be spectacular – much greater than with incremental innovation. The Uber example, provided above, is an excellent case of disruptive innovation that payed off big.
Since it’s generally a complex, lengthy process, with big ups and downs, the criteria used to evaluate a radical idea should not be the same as those applied to incremental innovations. Whereas incremental innovation will often have a formal, phase-gate development model, disruptive innovation usually requires an informal, flexible model, especially in the early stages, due to the many uncertainties. Viewing ideas associated with high uncertainty from the perspective of mainstream business and traditional trajectories either gives a false sense of security or leads to prematurely rejecting good ideas. You can switch to a more formal model in the later stages, after these uncertainties have been minimized.
Find Your Innovation Balance
Whether you choose disruptive or incremental innovation will depend on many factors – for example, the industry you are operating in. The rate of technological change differs greatly between one industry and another. Some sectors are characterized by rapid change and disruptive innovations, others by smaller, incremental ones. But generally speaking, there is no need to put all your eggs in one basket. At the end of the day, it’s best to find a balance between the two approaches. Combine the introduction of the occasional revolutionary product with many small incremental improvements in existing products. By having a comprehensive view of your initiatives over time, you can avoid either overwhelming or underwhelming the marketplace.
Adopting the Right Innovation Technology to Support your Innovation Framework
Qmarkets’ Idea Management platform is often configured to tackle Business Process Improvement, allowing it to serve as a framework for analyzing and improving the ongoing nature of processes as part of organizations’ business models. It can generate new policies and procedures, helping to ensure that your business operations deliver optimal results at a minimal cost, meeting the market’s needs and expectations.
With this platform, Qmarkets enables you design a tailored made process for both incremental and disruptive innovation, optimizing their effectiveness.
When designed and implemented effectively, business process improvement, can deliver significant benefits to any organization, including:
- Cost reduction
- Continuous Improvement (CIP)
- Greater strategic value
- More efficient resource utilization
- Higher quality products and services
- Improved customer satisfaction
- And more…
With the process in place, the Qmarkets idea management software will enable you to gather innovative (incremental or radical) ideas from specific teams in the organization or from all employees. You may also involve in the process other stakeholders across the value chain, such as partners, suppliers or third party consultants.
Contact Qmarkets to consult with our experts and discover how your enterprise can innovate and transform ideas into results!
Read more: When the Incremental Cost of Stupidity is $0