Innovation is a powerful competitive advantage that starts with company leaders taking time to decide what kind of innovation they are after before determining the appropriate course of action:
Incremental innovation demands rethinking existing products or services to increase value. Tweaking a product design, streamlining a financial process, or evolving a marketing approach are all examples of incremental innovation. In many high performing organizations like GE, this is part of the organization’s culture and day-to-day operations.
Breakthrough innovation develops “game changers,” moving an existing category in a completely new direction. For example, Toyota Prius – the first commercially available hybrid car – challenged basic assumptions about what consumers wanted in a vehicle and reinvigorated the car industry. Breakthrough innovation often slaughters “sacred cows” (e.g., car companies need the oil industry), making it a challenging process to lead.
Disruptive innovation invents an entirely new game. Disruption happens when the current market moves in a totally different direction, or is replaced by something completely new. Think Amazon and its impact on book selling and publishing. Disruptive innovation emerges from the chaos of collaboration. One of the reasons Marissa Mayer wants Yahoo employees in the office is so ideas can collide and coalesce, to capitalize on new opportunities and tackle big challenges.
Salesforce mastered disruptive innovation – the toughest, least understood and most elusive of the three – early on by doing something new in an “old” market. And the company continues to disrupt the marketplace, leading the charge into cloud computing and now helping its customers become “social enterprises.” It has left competitors playing a never-ending game of catch up.
But resource investment for truly disruptive innovation is considerable and the odds of success low. The rules for launching, managing and measuring disruptive innovation are different, leaving it hard to manage, especially while keeping the core business running smoothly. Leaders considering the disruptive innovation path should pause at three decision points to determine how ready they – and their organizations – are to switch gears.