It’s interesting to note that some would define Innovation to be the “gale of creative destruction”, which describes the process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. (Joseph Schumpeter: Capitalism, Socialism and Democracy)
Since my time with the Singapore Management University in the early part of the last decade, I have witnessed innovation going from a “nice to have” to an essential part of all businesses today. The saying goes, “innovate or die”, and in the face of accelerating technological progress, companies must continually destroy the old, and create the new.
In a McKinsey article, we test the adoption of innovation within companies with the following eight essentials:
While we home in on the answers to the questions posed, it is appropriate to discuss the levels of innovation within organizations.
Incremental innovation is a series of small improvements and/or upgrades made to a company’s existing products, services, processes, or methods. The changes implemented through incremental innovation are usually focused on improving an existing product’s development efficiency, productivity, and competitive differentiation.
Radical innovation is rare as it has similar characteristics to disruptive innovation but is different in a way that it simultaneously uses revolutionary technology and a new business model.
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Radical innovation solves global problems and addresses needs in completely new ways than what we are used to and even provides solutions to needs and problems we didn’t know we had, completely transforming the market, or even the entire economy.
Technological innovations, such as personal computers and the internet are examples of radical innovations that have transformed the way the entire world functions and communicates. These disruptive innovations provide our society with a platform to build on top of, leading to highly accelerated economic growth.
Disruptive innovation is a concept introduced by professor, academic, and business consultant Clayton Christensen first in an HBR article and later in his book called Innovator’s Dilemma.
Disruptive innovation is a theory that refers to a concept, product, or service that creates a new value network either by entering an existing market or by creating a completely new market.
In the beginning, disruptive innovations have lower performance when measured by traditional value metrics but has different aspects that are valued by a small segment of the market. These types of innovations are often capable of turning non-customers into customers but do not necessarily appeal to the needs and preferences of the mainstream customers, at least not just yet.
What makes disruptive innovation difficult, is that established organizations are completely rational when making decisions related to their existing business. They fail to adjust to the new competition because they are too focused on optimizing the existing offering or business model that has proven to be successful in the market so far.
Thus, the market is generally disrupted by a new entrant rather than an incumbent.
Innovation is imperative — how innovative is your organization?