Get involved in a discussion about innovation these days and almost everyone in the room will nod his or her head in agreement when the discussion turns to “incremental” innovation versus “radical” or “disruptive” innovation.

It seems almost everyone has read–or at least absorbed the important nuggets–from Clayton Christensen’s work on the topic. (Essentially, all Christensen did was repackage Schumpeter’s famous work on “creative destruction” for a business audience, but that’s a different story.)

And yet discussions about disruptive vs. incremental innovation often breakdown over what is truly disruptive and what merely incremental. In fact, one person’s disruptive technology is often another’s incremental product improvement: hybrid engines are possibly disruptive to engine makers, but they are simply incremental innovations to the auto manuvacturers who put them into cars.

Which is where the authors of Fast Second come in again…

Markides and Geroski look at innovation from both the impact it has on companies/industries and from the impact it has on customers, which produces a neat 2×2 grid that solves the Clayton Christensen dilemma. There are in fact four dimensions to innovation, not just the two Christensen identified:

1. Incremental. Innovations that have a minimal impact on the company/industry and also require little or no change in behavior from the customer are truly incremental. Think model years on cars, a second–no, wait, a third–wait, a fourth!–blade added to a razor, a “new and improved” bigger button on the remote. These are all incremental innovations (which is not to say they aren’t important; sometimes they can make or break a company’s product in the market).

2. Major When a company introduces something that causes its customers to go through a major change but doesn’t really force the company or the industry to change who its customers are, that is a major innovation. Here, just review your own history of interactions with the music industry. Are you old enough to remember buying albums? Eight Tracks? Cassettes? Each of these was a major innovation because it had very little impact on the company but caused the company’s customers to undergo huge changes to how they got or used the product.

For the record (no pun intended) music companies are in the business of controlling and exploiting copyrights, not selling the particular formats for storing those copyrights; each new format gave them a new opportunity to sell you the same thing again. And again. And again.

Until the CD came along…

3. Radical The CD represented the first time that the music industry distributed “golden masters” rather than poor copies of masters to its customers. No doubt they saw the CD as yet another in a string of major innovations designed to keep people buying the same product over and over and over again. But this time, some enterprising young entrpreneurs took it upon themselves to eliminate the need for any physical media and just ship virtual copies of music around the globe. This disrupted not only how consumers listened to and acquired music, but also had a disruptive impact on the music industry itself.

Radical innovations are what is known as “supply push” products. This is the world of Shift Happens. No one knows they want them until some inventor “pushes” them into the market. Typically–frequently–there will be lots of competing formats until eventually a common standard emerges that a mass market accepts, and thus a new industry gets launched. Be honest: 10 years ago, you didn’t know how desperately you needed that iPod, did you?

Radical innovarions are sexy. But they are also incredibly risky. The pioneers behind most radical innovations truly are the guys with the arrows in their backs. You know Amazon, but you probably don’t remember local boy Charles Stack, who started online bookselling long before Jeff Bezos headed west. The world of Shift Happens and radical innovation is a world of cometing forms and formats. In the early days of automobiles, you could get cars with wooden wheels or cars with rubber wheels; cars that ran on steam or cars that ran on electricity or cars that ran on fossil fuels and even a car designed to run on biofuels (the diesel engine) but which more tyically ran using a fossil fuel variant. It was only when Henry Ford recognized a mass market coalescing around a certain form and format that he was able to consolidate and drive (again, no pun intended) the market to that standard and become the Winner in the newly created and rapidly growing marketplace. And now? Well, I think it’s pretty safe to say the Ford Motor Company is well into Big Daddy territory. Which leaves us with…

4. Strategic A strategic innovation is one that does not cause the customer to have to change what he or she does much, but which disrupts your competitors and even unrelated markets in such a way that your innovation steals customers away. Disk drives and backhoes, two of the supposedly “radical” innovations studied by Christensen are actually strategic innovations in that they disrupted the markets for disk drives and backhoes and even created new uses for each, but did not cause customers to have to change what they did or how they did it much at all–a backhoe is a backhoe is a backhoe…

So what, you say? Well, if you’re trying to develop a radical new innovation, your best path to market might be to try to squeeze it into a strategic play first. Take fuel cells as an example: are we more likely to see fuel cells replacing the electrical power plants and furnaces in our homes and offices in the next few years, or see fuel cell batteries that can be popped into our laptops, cameras and phones?

Radical innovations are by far the most exciting, breakthrough technologies, but precisely because of their nature they cannot be predicted or planned for in any meaningful way. Instead, smart companies keep their options open across all four dimnsions of innovation. And the smartest companies let others play around in the radical space until they see a potential mass market coming together. Then, quickly, they move in, consolidate, and dominate the newly emerging market.

From a regional perspective, we have to have lots of things going on in all four dimensions of innovation if we hope to be competitive with other regions. This requires specialization on the one hand–independent inventors and small companies pushing radical, disruptive innovations, medium and large companies making incremental improvements to existing successful products, large companies on the lookout for opportunities to consolidate new markets, or to disrupte other people’s markets–as well as lots of cross-collaboration and cooperation on the other hand. Sometimes the radical inventor’s best friend might be the stodgy “Big Daddy” company that gets it–and has the resources to capture the mass market that doesn’t even know its out there, just waiting for something new…

This entry was posted on Tuesday, November 15th, 2005 at 12:37 pm and is filed under Strategy, Innovation, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.