Incremental vs. Radical Innovation

Bianca BackesInga Janke

Innovation, change, and decision-making in international organizationsProf. Dr. J. Beneke

SS0411.05.2004

Overview

1. The notion of innovation (repetition)

2. The classification of Innovation

3. Incremental vs. Radical Innovation

4. Radical Innovations: historic examples

5. What influences Incremental/Radical Innovation?

6. Conclusion

Definitions (1)

“Innovation means a new combination of purpose and method.” (Schumpeter)

“Innovations are resulting in qualitatively new products or processes, which differ significantly from the former state – however this is to be determined.”

(Hauschildt)

Definitions (2)

“In contrast to a discovery - which is usually made coincidently- innovation is characterized by a (preceded) systematic innovation process with a certain objective at the beginning.” (Betz)

product

innovation

process

innovation

combination

product/

process

goods service

basic

improved

fake

Innovation

Type Degree

Innovation

Incremental/Sustaining Radical/Disruptive

Incremental Innovation

Lower or first order innovations

“Repairing” the old

Keeps large companies competitive in a short term

Negatively correlated to breakthrough innovation

Incremental vs. Radical Innovation

Most innovations nowadays are incremental

Danger of getting caught unaware by newcomers

Companies need to come up with radical innovations

Radical Innovation (1)

“If you cannot beat radical innovators, your best chance to stay relevant to your markets is to become one” (CommunityIntelligence)

Higher order or breakthrough innovations

Dramatically changes social or business practices

Radical Innovation (2)

Creates new markets

Leads to rapid growth

Confronted with uncertainties: technological market

Main DifferencesIncremental vs. Radical Innovation

• low uncertainty

• exploits existing technology

improvements in existing improvements in existing products/processesproducts/processes

• business plan developed at the beginning

• process is formal

• key players are cross-functional teams

• high uncertainty

• explores new technology

• business plan evolves through discovery-based learning

• process is informal

• key players are cross-functional individuals

development of new development of new products/processesproducts/processes

Radical Innovationshistoric examples

Telephone 1861Light bulb 1883Television 1929Atomic bomb 1945Computer (1st gen.)1946Floppy Disc 1950Compact Disc 1979WWW 1991 InventionCellphone 1992SMS 1994 Invention?

The development of radical innovations is decreasing!

What influences Radical/Incremental Innovations?

Organization size/age cultural characteristics (high/low risk) structure

Environment Process Management

Conclusion

The capacity to innovate and make life better is present in each individual

Without radical innovation there is no economic growth!

The End…

…thank you for your attention!