The term innovation has a number of definitions, but it’s generally considered to be the invention of new products, business models, technologies and services through new ideas and concepts. It’s a fuzzy concept, but one which focuses on a simple equation;
Creativity * Risk Taking = Innovation.
Whether you think that’s the case or not, innovation does not serve one purpose – it serves four. Although they all require a good dose of creativity, not every function craves as much in the way of risk taking.
Some companies’ make the error of assuming that innovation is solely concerned with complete revamps of their product lines and services – truth is, innovation can often be at its most influential when it’s used in an incremental fashion. This could be in regard to new approaches to pricing or slight upgrades to products or services, it’s basically about taking your existing product and making it better, one small step at a time. But beware; this approach to innovation cannot be adhered to indefinitely – a company must be able to decipher when a product has run its course, then a new section of the innovation portfolio must be put into action, namely revolutionary innovation.
Revolutionary innovation is perhaps the closest to the widely conceived notion of what innovation actually is. It’s about entering the market with a groundbreaking idea and making it into profitable venture with high margins. Incredibly high risk, but with colossal gains, it’s considered the holy grail of innovation. Problem is, companies diversifying into this area can often get swayed by its rewards and lose sight of their company’s vision. Revolutionary innovation clearly requires investment, but those dabbling in it should be wary of putting all their eggs into one basket, as if it fails, the brand image which you’ve spent decades nurturing could fall by the wayside as the markets loses faith in your ability.
Differentiation should also play a key role in your innovation portfolio. You have your product and you’re happy with it, but how can you actually differentiate it from the products offered by your closest competitors? Whereas incremental innovation was about keeping up with the market and fulfilling your customers’ expectations, differentiation is about going above and beyond your customers’ expectations by making your product different. These changes are not incremental but substantial and create a wow-factor around your offering. The emphasis on companies here is to trust your ideas and to get them to the market as soon as possible. Often, companies will smother their innovation attempts by being overly apprehensive, meaning that they’re not considered first movers in the market, regardless of when the idea was actually constructed.
It’s often described as the fast-fail quadrant where creatives’ put their heads together in order to come up with an experimental idea. The difference between this function of innovation and revolutionary is that it’s low cost and a side-project. Because of this, it’s low risk and unlikely to harm your company’s reputation even if it fails - it also has the added allure of being highly profitable. These forays should never take over the core functions of the company however, as too many ‘think tanks’ can muddy a company’s ability to understand its culture.
This portfolio represents a balanced one for major companies. Depending on your industry and the success of your products, some parts of this innovation portfolio may take precedent over others. But at the same time, ignoring say revolutionary innovation just because you’re in a stagnate market could be the difference between your long-term success and failure as you never know what your competitors have up their sleeves. When all is said and done, it’s important for companies to invest in an innovation portfolio.