Incremental Innovation Is Underrated
29 July 2012
In a previous post, I show that not all innovation is the same. By putting innovation on a two-dimensional matrix, different types emerge — from incremental to game changers. This isn’t new per se, but it does help locate initiatives relative to each other.
Some business stakeholders are swinging for the fences in their innovation efforts: they want the big wins. And rightfully so: reaching for the stars keeps the company pushing forward, beyond what it can currently deliver. This inspires and motivates employees and management alike. But sometimes this quest for the next biggest and best thing overshadows everything else.
In particular, incremental innovation is underrated, I believe. I’m not just talking about continuous improvements and optimization of existing products, rather clear steps forward that keep a business in the game.
And I’m not alone. Innovation expert James Gardner writes in his book Future Proof Banking. He describes how incremental innovations not only sustain a business but are prime source of positive returns. They’re downright profitable:
People are surprised when I tell them most returns from good innovation programmes come from incremental innovation.
Perhaps the most famous incremental innovator is Toyota. The volume written about this company and its rise from relative mediocrity to global dominance on the back of small, quite basic changes is monumental. Founded in 1937, the company started commercial passenger car production in 1947, and by the 1980s was consistently ranked higher than any other manufacturer in owner satisfaction surveys. Attention to detail, and making small changes to create lasting improvements, led the company to become the largest automotive manufacturer in the world by 2007. Clearly, incremental innovation can pay, even if the individual changes aren’t exciting and high profile.
Convincing people that small improvements are important is a big challenge for an innovation function. A common response to the idea that innovators should do incremental is that innovators who do so are reducing themselves to optimisers. (p. 11)
Breakthroughs, as Gardner points out, are risky with a lot that can go wrong. They also often suck up more money than they bring back in the short-term, but also in the long-term. So it’s no wonder some companies have done well focusing on incremental innovation.
Marriott hotels, for example, are known for continuous innovation. They identify the services people want and launch them in a planned way to continually “wow” customers and keep the competition guessing.
Even Apple, which frequently tops lists for the most-innovative companies, profits from incremental innovation. Sure, Apple has launched more game changers than any other company in recent times. But after the initial release Apple sees huge returns from incremental innovations. In his article “Incremental Change Wins Apple Big Gains” tech commentator Glenn Fleishmann describes Apple’s incremental approach:
Apple is consistently criticized by pundits, bloggers, other firms, and market analysts for either innovating too much with initial releases (the MacBook Air, the iPhone, and the iPad, notably) or too little in subsequent product revisions. There’s a reason for that. I want to defend Apple’s incremental improvements as the basis of its success in the market, something its competitors seem baffled by, because they apparently don’t understand the difference between revenue and profit, and between delighting customers with products that can be used for several years and those that are obsolete before they’re even sold.
The advantage of incrementalism seems clear if you can make products that are outstanding enough to cut through the clutter of the marketplace. Rather than focusing at any point in the last decade on a cheap item that could outsell PC and then handset competitors, Apple has largely focused on releasing hardware that costs more in order to buy more of the future for its purchasers. The iPad is unusual, in that it marks the first time that Apple can be both ridiculously ahead on price relative to features and have such an extreme lead over competitors that it can maintain its position, all while making only incremental improvements.
The key, I believe, is having an incremental innovation strategy. Sequences of smaller innovations — taken together or spread out over time — can give the illusion that a company is moving forward faster than competitors.
One such strategy is “The Long Wow,” a concept first developed and described by Adaptive Path’s Brandon Schauer. With this approach, companies strive to pace features that will give a “wow” experience over time. He writes:
Plan and stage the wow experiences. Developing all your ideas at once is a risky undertaking. Instead, organize a pipeline of wow moments that can be introduced through your platform of touchpoints over the long haul. As you learn more about your customers and how they perceive the wow moments you can better organize your pipeline of ideas for development. Outline where and when additional wow experiences will emerge in the future, unfolding in a coordinated network of experiences.
Finally, consider also Steven Johnson’s notion of the “adjacent possible,” one of the core concepts of his excellent book Where Good Ideas Come From. Johnson shows that innovative ideas aren’t conjured up out of thin air; rather, they most often come together by combining existing ideas in new ways. Rarely in the history of innovation has man leaped forward ahead of what’s currently possible. Johnson explains:
What the adjacent possible tells us is that at any moment the world is capable of extraordinary change, but only certain changes can happen.
The strange and beautiful truth about the adjacent possible is that its boundaries grow as you explore those boundaries. Each new combination ushers new combinations into the adjacent possible. Think of it as a house that magically expands with each door you open. You begin in a room with four doors, each leading to a new room that you haven’t visited yet. Those four rooms are the adjacent possible. Three new doors appear, each leading to a brand-new room that you couldn’t have reached from your original starting point. Keep opening new doors and eventually you’ll have built a palace. (p. 31)
So not only is incremental innovation profitable, it’s also necessary to fuel and support breakthroughs from a creative standpoint. It’s the foundation that helps you build a palace of innovation.
In the end, none of this is an either-or question: companies need incremental innovation, breakthroughs and disruptions alike. To do this, there must be a comprehensive innovation program in place to channel attention and effort in the right direction.
We can use matrix for the “Four Zones of Innovation” to balance resources. I’m suggesting a ratio of 5:2:2:1, as shown in the chart below:
If you had $1 million, for instance, you’d dedicate $500k to incremental development, $200k to breakthrough ideas and disruptions each, and $100k to a game changer. You can argue with this distribution (please do!). But for immediate returns, focusing on incremental innovation makes sense.
The point is that incremental ideas shouldn’t be neglected: they are profitable and can fund your big idea projects. And they also provide a stepping stone toward game changers via the adjacent possible.