There are two ways that companies can innovate, incrementally or radically. This is a neat way of saying “a little bit at a time” or “in a completely crazy way.”

We’ve already covered the importance of innovating, now it’s time to discover exactly how a firm can accomplish such a task. Which method is better? Which is worse? Which is more suitable to your firm? Read on and discover more.

Slow and steady wins the race

Incremental innovation is not about huge sweeping changes. On the contrary, firms that innovate incrementally tend to do so just a little bit at a time. Think of incremental innovation as cost cutting or feature improvements in existing products or services (Leifer, 2000).

The reason incremental innovation is so popular is because it has reduced risk in comparison to radical innovation. Additionally, once a company has a product up and running it tends to have built up considerable amounts of human capital and competencies so the firm may as well devote time to making it better or reducing costs.

Google’s release of Gmail, heralded by many as the best internet mail service, is an example of such dedication to incremental innovation. When Gmail launched it had a limited feature set but did one thing very well, delivered emails. Unlike competitors it was clean and easy to use with no distracting flash ads and numerous interface improvements.

Over time Google released more features and made the service better, faster, and easier to use. Years later Gmail was taken out of “beta” and finally listed as being “complete,” though to this day improvements continue to happen.

The company has used this exact same policy multiple times with their new products, from their Maps service to the browser Chrome.

Their dedication to continuous improvement in a way that meets market demands keeps them:

• Relevant to the consumer
• Continually making their product more competitive
• Focused on cost reduction (i.e. less bandwidth usage though more efficient code)

As previously noted, the advantage of incremental innovation is that it’s hard to go wrong. By either reducing costs or improving the product there is nothing dramatic that the market can reject. In the worst case the market simply won’t respond to your product while in the best case you see huge increases in sales, popularity, and your brand.

Incremental innovation is important but it is not the only way that companies can turn things upside down…

If something’s worth doing…

If you’re looking for a firm that radically innovates look no further than Virgin. With over two hundred separate businesses under their umbrella, the firm is beyond massive and from a quick analysis appears to be absolutely wild with their corporate strategy. After all, what kind of company has divisions for gaming, mobile, planes, music, and wine among many others?

This is an example of a radical diversification strategy. The firm is continually innovating itself in such an extreme way that if an entire industry collapsed overnight Virgin would be able to continue on without much difficulty at all. Not many companies can make that statement.

It’s interesting to note that when Virgin launches a new brand their tendency is to differentiate and then innovate in some way that makes them unique or gives them an advantage. They radically innovate their offering but incrementally innovate how they bring it to market. An interesting hybrid of strategies.

Radical innovation can be taken a step farther than what Virgin does. Pure radical innovation would best be described by Kim and Mauborgne as what they call “blue ocean strategy.”

Blue ocean strategy involves not fighting competition but circumventing it. Rather than fighting for market share a company steps aside and simply creates its own market (Kim and Mauborgne, 2005).

The example Kim and Mauborgne give in their seminal book is that of Cirque Du Soleil, a Canadian circus which despite being formed in a declining industry has soared to unimaginable levels of profitability.

Historically circuses have been events one would take their family to. A weird mix of a carnival and performance, individuals were sure to see spectacles they otherwise wouldn’t. Cirque du Soleil removed most of the weirdness and focused instead on producing absolutely phenomenal performances.

Instead of charging a couple dollars for entry tickets regularly sell for upwards of $70. In return for such a huge price the viewer is treated to a genuinely amazing spectacle. It’s not a circus, it’s something completely different and it leaves a lasting impression on the audience.

That’s the power of blue ocean strategy. Don’t compete or fight for market share, branch off and create your own.

This all sounds great but the most difficult part of blue ocean strategy is conceptualization. In the last 30 years the vast majority of competitive strategy has revolved around competition, not opening up new market share. As a result determining which venture to undergo becomes extremely challenging.

That’s why many companies decide to stick with incremental innovation. With the decreased risk and usually investment required plus the track record of a product that is already working on the market, it does make sense.

Then again some firms miss out massively because they refuse to do anything more than incremental innovation.

Here’s a good parting thought: the New York Times is one of the most prestigious newspapers in the entire world and has been for a long time. Their goal is to take information and bring it to the consumer. So why didn’t they create Google? After all, the mission of the two companies is nearly identical.

It’s one thing to sit on your laurels but by completely passing on radical innovation your firm can miss absolutely massive opportunities. It would be quite a different world today if the New York Times actually had created Google.

Bibliography
Kim and Mauborgne. (2005). Blue Ocean Strategy. Boston: Harvard Press.
Leifer. (2000). Radical Innovation. Library of Congress.