Clarifying Innovation: Four Zones of Innovation

“Innovation” is a tricky word to define: it means different things to different people. A recent article in the Wall Street Journal entitled “You Call That Innovation?” provides a solid review of the use of the word “innovation” in business contexts.

The article points out that some people limit the scope of term. Scott Berkun, author of The Myths of Innovation (see my review), reserves “innovation” for civilization-changing developments, like electricity and the telephone. This avoids the dilution of the term, which has already become the buzzword du jour.

In a broader perspective, some consider any change to be an innovation. Etymologically, this is acceptable: the Latin root “innovare” simply means to renew or change.

To distinguish between these two extremes, some definitions view innovation on dichotomous scale. For instance, Michael Porter talks about “continuous” and “discontinuous” technological changes;  Tushman and Anderson distinguish between “incremental” and “breakthrough” innovation; Abernathy and Clark refer to “conservative” vs. “radical” innovations; and Clayton Christensen shows the difference between “sustaining” and “disruptive” innovations. While this helps differentiate types of innovation efforts, viewing innovation along one dimension doesn’t tell the whole story.

To clarify the situation, I’m proposing a 2-dimensional picture of innovation:

• The y-axis indicates the degree of technological progress an innovation brings with it. Moving from low to high along this line indicates improving existing capabilities, services and products.
• The x-axis shows the impact an innovation has on the market, also from low to high. This usually entails new business models or reaching underserved target groups.

This gives rise to four distinct zones of innovation:

• Incremental innovations involve modest changes to existing products and services. These are enhancements that keep a business competitive, such as new product features and service improvements.
• Breakthrough innovation refers to large technological advances that propel an existing product or service ahead of competitors. This is often the result of research and development labs (R&D), who are striving for the next patentable formula, device and technology.
• Disruptive innovation is a term coined by Clayton Christensen. In his best-selling book The Innovator’s Dilemma he shows that disruptive innovations “result is worse product performance, at least in the near-term. [They] bring to a market a very different value proposition than had been available previously” (p. xviii).
• Game-changing innovation transform markets and even society. These innovations have a radical impact on how humans act, think and feel in some way.

My proposed view of innovation isn’t original. It’s directly influenced by a model developed Wheelright and Clark (1992), which is mentioned as a way to prioritize and plan for innovation in the book The Innovator’s DNA. Still, I believe my approach improves their model and sheds new light on some important differences in our discussions and efforts around innovation.

Chief among these is the confusion between “breakthrough” and “disruptive” innovation. Scott Anthony et al. point to this common misconception the book The Innovator’s Guide to Growth (see my review). They write:

The word disruption itself is loaded with alternative meanings and connotations, many of which run counter to the precise pattern Christensen identified is his original stream of research. As the concept has seeped into the mainstream, this language “disconnect” has led to confusion, misunderstanding, and the occasional misallocation of resources… The error people make most frequently is assuming that a great leap forward in performance is synonymous with disruption.

Breakthrough innovations promise significant improvements in performance compared with existing products. Examples include the Airbus 380, Nokia’s flagship Lumia 900 phone and Microsoft Office 2007. To contrast, disruptive innovations address underserved market needs with products that are more convenient to access, easier to use, and cheaper to buy. Examples include budget airlines, plain vanilla $25 mobile phones, and “good enough” web-based word processing software.

The value of viewing different levels of innovation along two dimensions, as in the graph above, is that you can plot different trajectories of innovation that keep breakthroughs separate from disruptions, as needed.

What’s more, the above zones of innovation can better guide innovation efforts. I believe a good innovation program should balance attention to each zone. Each has a different purpose and requires a different strategy:

• Incremental innovations help keep a company in the game and provide short-term revenue.
• Breakthrough innovations can catapult a product or service well ahead of competitors.
• Disruptions usually entail a change in a business model, making them harder to implement. One strategy is to create a separate brand or company that operates at a lower level than its parent — perhaps more like a startup. (See my review of Xiameter, a sub-brand of Dow Corning launched to address the low end of the market.)
• Game changers transform markets. They introduce new product categories, for instance, which can ensure long-term success for a business.

Of course the lines between each zone are blurry. And you can argue about the labels themselves. But it’s the logic behind the above graph that’s key here. I’ve found it helpful in explaining innovation to clients and hope you find it helpful too. I hope you’ll adopt my labels.

Please let me know what you think.

Tags: breakthrough innovation, disruptive innovation, game changer, incremental innovation, Innovation