Much of the discourse surrounding innovation today refers to the disruptive kind, but rarely is innovation truly disruptive. In fact, innovation falls into four distinct categories – routine, disruptive, radical and architectural – all of which are defined in a recent Harvard Business Review (HBR) article. The type of innovation you pursue will depend on the specific competitive needs of your organisation. Which type – or types – will best enable your company to create and capture value?
In a previous blog we explained the importance of having a clearly articulated innovation strategy that aligns with that of the business. Different types of innovation require different types of strategic approaches. As such, an organisation’s innovation strategy should specify how the different types of innovation fit into the business strategy and the resources that should be allocated to each.
The four innovation categories are as follows:
While it might appear to be an oxymoron, this type of innovation is highly effective. In fact, the vast majority of profits are created through routine innovation, and it’s practised some of the most successful and seemingly innovative companies in the world – Apple, Microsoft and Intel, to name a few. Routine innovation “builds on a company’s existing technological competences and fits with its existing business model – and hence its customer base”. In other words, it’s when companies play to their strengths.
Apple CEO Steve Jobs is one of the most famous routine innovators. Many of Jobs’ most profound innovations, such as the iPod, iPhone and iPad, were based on existing technologies available to everyone, which he linked together with exquisite designs and sophisticated marketing. Through reinvention, he was able to turn the ordinary into the extraordinary. Other examples are Microsoft, which has retained its competitive position by reinforcing its Windows franchise, and Intel, which has built upon its success in pushing the technological frontier of the microprocessor. As we discussed in a previous blog, not all innovations have to be revolutionary.
Harvard Business School professor Clayton Christensen introduced this term in his 1997 book, The Innovator’s Dilemma. He defines it as “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors”. Disruptive innovation requires a new business model (but not necessarily a technological breakthrough) and challenges the business models of other companies. An example is Google’s Android mobile operating system, which potentially disrupts the likes of Apple and Microsoft. This has nothing to do with the technology and everything to do with the business model – Android is available to download free of charge, while the others’ operating systems are not.
Though often confused with disruptive innovation, radical innovation is the complete opposite in that the challenge is purely technological. An example is the emergence of biopharmaceutical drugs in the 1970s. These were radical innovations because they used a completely different technology (biotechnology as opposed to chemical synthesis) and addressed medical problems that were unable to be treated with existing drugs. The point of radical innovation is to exceed the performance threshold as opposed to serving underserved or unserved markets. Disruptive innovations don’t need to be based on radical technological innovations, though some disruptive innovations can also be radical.
This type of innovation is a combination of disruptive (business model) and radical (technological) innovation. When digital photography emerged, the likes of Kodak and Polaroid were forced to master completely new competences in solid-state electronics, camera design, software, and display technology, as well as find ways to profit from cameras as opposed to just ‘disposables’ such as film and paper. It is this type of innovation that is the most difficult for incumbents to pursue.
Ignore the hype
All the hype surrounding disruptive innovation overshadows the fact that most profits are generated through the stream of routine innovations that accumulate over time, even if there was breakthrough of some kind to begin with. In thinking strategically about the four types of innovation, it’s a question of balance – organisations have a choice about how much of their efforts to focus on technological innovation and how much to invest in business model innovation.
To read more about innovation and for a practical model you can adapt for your organisation, download a copy of our complimentary eBook, ‘The age of innovation: When change is no longer an option’, here.