I really love whitespace/revolutionary/disruptive innovation. I just dig it. Typical line extensions just don’t quite do it for me.
But that’s a personal preference. It doesn’t reflect the totality of my opinion on how companies ought to manage their innovation efforts. In fact, I have written of the need to pursue both revolutionary and evolutionary change.
To be honest, I think in most cases, revolutionary change should consume just a small portion of a company’s innovation resources. Even though cranking out the next flavor of Product X doesn’t excite me personally, the fact is that a company’s in-market brands and products pay the bills. These need to be maintained and refreshed to keep the business healthy.
A company needs to invest in and pursue more significant innovations not because they will drive current business performance (though they can) but because they will insure the company’s viability in the future. And very importantly – we don’t know when the future is coming. Time can sometimes move quite slowly but too many companies have been caught unprepared for significant market shifts.
I recommend that companies focus their efforts on three types of innovation:
- Incremental innovation: These are small innovations to refresh a product, expand into a new channel (within the same market), target a new group of customers and the like. These do not require significant innovation and are relatively low risk. They will generally involve an existing brand or product line. I think 60-70% of a company’s innovation resources should be directed against these activities.
- Expansive innovation: These are major changes that can alter the balance of power within a market. These could involve the creation of new product lines or even new brands. They require significant innovation, often an expansion of existing capabilities and are of moderate risk. I think 20-30% of resources should flow towards these projects.
- Disruptive innovation: These fundamentally remake markets or create entirely new markets. They require significant innovation and they typically introduce a new technology or fundamentally challenge a core industry assumption. These are very risky. I think 10-20% of a company’s innovation resources should be spent on such efforts.
BTW, a word about risk. Psychologists and behavioral economists (which are a group of psychologists that figured out they could probably get paid more if they called themselves economists and got jobs at business schools) know a lot about the impact of how risk is framed. The story you tell about risk has a big impact on how people think about it (even holding the actual numbers constant). It is very important that business managers understand risk properly.
For now, I just want to highlight the risk of doing nothing. This might be the biggest risk of all. Because if one thing is certain, it’s that change is on the way. The status quo will not last forever. And as I mentioned above, you aren’t always going to see it coming. If you are not consistently engaged in the behaviors of scanning the world, understanding trends, really engaging your customers, challenging your fundamental assumptions and trying to create the best damn experiences for your customers, then I promise you that you are headed for extinction. I cannot tell you when or how but I can promise you it’s coming.
Look around you. Do you see a Roman Empire in power? Are you tougher than the Roman Empire? No? That’s right. You are not too big or powerful to fail. If you understand that and you understand that change is the constant, then you should understand why consistent investing (at the right level of course) in expansive and disruptive innovation is critical to your future. [One more quick thought: You don’t necessarily have to invest by building these innovations organically. You can also buy them. But I don’t think it’s nearly as much fun.]
