Incremental innovation helps existing organizations maintain and expand their current market position to ensure a steady revenue stream on the other hand Radical innovation explores ground-breaking innovative ideas to gain a competitive edge or ‘unfair advantage. We will explore a balanced approach, which allows you to filter and implement only the best ideas from both concepts.
What is Incremental Innovation?
Incremental innovation is the step-by-step change of something that already exists, usually in the form of linear improvement. The focus is on the further development of products, services, processes, technologies, and business models. In practice, incremental innovation includes new product functions, new designs, improved processes, and cost reductions.
An incremental innovation strategy is always based on existing products, knowledge, techniques, technologies, or processes. The aim is to continuously improve them. Incremental innovation is triggered either by internal interests, such as the company’s own desire for optimization or by external influences, such as changes in legislation that have to be met.
The ultimate goal of incremental innovation is to maintain and (at least to a certain degree) extend the current customer base.
- Creation of new customer value
- Market development or expansion
- Cost reductions
- Changing laws
- New guidelines
- Social change
Incremental Innovation – Important Benefits
Benefits of incremental innovation include:
- The majority of innovations are incremental changes
- Relatively low risk
- Short- to medium-term focus on success
- Evolutionary and linear
- The existing company structures & processes are optimized, but not fundamentally changed
- Marginal improvements of an existing product instead of a new business model
- The main focus is on small improvements to a company’s existing products, services, processes, new technology, and business models
- Requires well-thought-out strategy
- Important for existing markets and customers. Focus on customer retention whilst taking customer feedback into account at all times
- Existing products tend to have an already established customer or even fan base, which makes the success rate more predictable
Incremental Innovation Examples
Examples of incremental innovation include:
The continuous development of new technology such as smartphones led from simple calling devices to a focus on multifunctionality within the past decade. Devices today usually provide the user with navigation, communication, constantly improved cameras, entertainment, and many other functions. As we will see later on, the development of the modern smartphone might also be regarded as a radical innovation.
The continuous development of computers and processors to become increasingly powerful. Technological advancements are key in order to be successful today
The optimization and digitization of analog processes in companies. This means companies can respond faster and with more flexibility to new challenges
Now as we’ve established the foundation of what incremental innovation is and provided some examples of incremental innovation to understand how these processes come into play, let’s dig a little deeper to introduce incremental innovation into your company strategy.
The Emergence of Incremental Innovations
Incremental innovation strategies always build on existing knowledge, products, services, processes, technologies, or business models and develop them further. The main goal of an incremental development process is to keep the existing business model largely unchanged.
The entire development thus works through many small-scale improvements that build onto each other. Incremental development is ultimately aimed at short to medium-term periods of change.
The main goals are the preservation of core values and the optimization of the current business, achieved through marginal improvements rather than big changes. Incremental innovations thus focus on keeping the existing product up-to-date (e.g. through tool improvement, such as adding a new feature to a device), perceiving changing market trends, and customer retention.
The creation, realization, and management of an innovation process include everything from strategic planning and idea generation to realization and market launch. Compared to radical or disruptive innovations, incremental innovation follows a narrow and clearly defined process as well as a certain set of rules.
Why does Incremental Innovation Needs Structure?
Incremental innovation focuses on minor improvements rather than changing the core. This is why incremental innovation can be developed in a structured manner and does not require as much freedom for creativity.
The foundation of incremental innovation, therefore, lies within the area of innovation management. Fixed innovation strategies are usually taken from the overall corporate strategy.
The advantage is that existing knowledge about market size, sales potential, customer behavior, and trend analyses can be used to minimize risk and predict the result accurately.
This means that the risk is significantly lower within incremental innovation than within radical or disruptive innovation. However, in the area of innovation management, regardless of the degree of innovation, uncertainties and other pain points always remain.
Incremental Innovations vs. Radical Innovations
Companies today are confronted with a constantly developing social and digital landscape and thus continuously changing frameworks and guidelines. The causes are varied, from globalization and accelerating trade and ever shorter development cycles, to digitization and automation.
Limitations of Incremental Innovation
So does incremental innovation have any limitations? Yes, it does. One downside of incremental innovation is that only small developmental changes are possible. The customer benefit and the market remain almost identical if, for example, only an improved version of a product is launched. A small change will rarely lead to a completely new customer group.
Today, the unique selling propositions of a company are often barely present for many products or services. This means that the market share stagnates in the long run and the competition becomes stronger. Incremental innovation is important in this context as it helps a company compete in the market and achieve the best possible result.
In the long term, however, this approach may not be sufficient if you want to differentiate yourself from intense competition, stay relevant, open up new markets or offer entirely new and profitable solutions.
This is where radical innovation comes into play.
Radical Innovation Examples
Radical innovation is significantly more extensive than incremental innovation, as it creates something completely new, often challenging the status quo. As a rule, this means that solutions are completely new for an entire industry, or at least a large part of the industry.
The companies that use the concept of radical innovations focus on long-term success by creating breakthrough concepts.
A few examples of radical innovation include:
- Mobile apps for global ride exchange by private drivers on a commission basis. These completely replace the classic taxi and transportation concept in some places
- Introduction of the first smartphone as an overall concept with a completely new operating system and platform idea for apps. Within a few years, this has greatly changed, if not completely replaced, the previously existing feature phone business.
The challenge for companies in today’s day and age goes far beyond pushing day-to-day business. The main point is to implement a mix of incremental and radical innovation strategies in order to build predictable pipelines of innovation to be successful in the short and long term.
Disruptive Innovation: All or Nothing
As we’ve established the differences and importance of both radical innovation and incremental innovation, we need a closer look at disruptive innovation and the role it plays within modern-day markets.
This type of innovation explores new technologies rather than changing existing products and is therefore characterized by the highest level of risk and uncertainty.
Because of the high-risk factor, smaller firms or startups can often be seen focusing on this type of strategy, aiming at creating a significant impact in the market through disrupting and building groundbreaking innovations.
Disruption as Innovation Driver
What the benefit is? By standing out from the crowd, you sometimes don’t even need to compete with others for market share because you are on the way to creating your own market. If successful, the new product can have a huge impact and create breakthrough innovations. On the downside, it is generally a complex and lengthy process connected to high uncertainty and a big risk.
Finding the Sweet Spot of Innovation
Whether you choose disruptive or incremental innovation depends on many factors – for example, the industry in which you operate. The amount of technological change varies greatly between industries. Some sectors are characterized by rapid change and disruptive innovation, others by smaller, incremental ones.
At the end of the day, it’s best to strike a balance between the two approaches.
Competitive advantage can come through combining a revolutionary product with many small incremental improvements to an existing product or working on an incremental line extension while focusing your R&D efforts on radical innovations. The main goal is to achieve competitive differentiation and to implement both concepts early in your internal process.
The Stage-Gate Model as Gold Standard for Innovation Processes
As we’ve distinguished incremental innovation from other strategies, we need to briefly focus on the process in general, using a specific example to show you why continuous innovation is crucial for companies today.
Innovative processes enable ideas to be transformed into innovations through structured development. The best-known and also most widespread innovation model is called Stage-Gate. In this defined process model, clear work phases (“Stages”) and decision points (“Gates”) are set apart from one another.
The process is then adapted to the specific industry, the company, and the type of innovation in order to be able to use the company goals and resources in the best possible way. The type of process is therefore well-suited to developing a large number of product and service improvements that are all aligned with the company’s goals.
Incremental Innovation: A Conclusion
In this article, Digital Leadership has guided you through the benefits of incremental innovation for existing products and services and how it can help drive business operations forward whilst preserving existing business or product norms and foundations.
At the same time, we have also shown the importance of other innovation models and how new concepts and groundbreaking ideas can work alongside incremental innovation to help companies remain competitive in an existing or new market.
Ultimately, the best innovation strategy highly depends on your business model, the market dynamics, and what you want to achieve. Most successful companies know how to create strategies around innovation models that balance risk and innovation to fit their existing market position, customer needs, internal processes, and core values.
The UNITE Business Model Framework: A Framework for Innovation Success
How to Create Innovation includes a number of canvases that focus on value creation and finding the right business model to meet your customer segment and customer needs. The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.
Here is a summary of the key ingredients of the Business Model Framework:
The centerpiece is the Business Model Canvas, which covers the six main areas of a Business Model (the Operating, Value, Service, Experience, Cost, and Revenue Models).
A Business Model can be broken out into its numerous aspects. Depending on what challenges you face, you can zoom in on your area of interest using an appropriate tool or canvas:
- Your Business Intention and objectives as well as your Massive Transformative Purpose summarize your drivers and give direction to what you do.
- The Value Proposition Canvas details the central components of your offering (the product or service).
- To dig into your Customer Segments, work with data-driven Personas.
- The JTBD Customer Job Statement and Job Map frame the JTBD of your customers.
- The Business Model Environment puts your Business Model in a market context composed of emerging trends and disruptive forces.
- The Innovation Culture Canvas helps you understand and consciously shape a culture that supports innovation.
- The Innovation team structure enables you to draft a team structure for your innovation initiative.
- Using learning and growth metrics, you can measure progress at the initial stages of development. These metrics help you focus on what really matters instead of creating a detailed business plan that will not really help you. Later on, you can expand the financial aspect of the Revenue and Cost Models with a full business case.
- The Operating Model Canvas helps you think through the Operating Model.
- Business Capability Map: A Practical Business Approach