Friday, September 18, 2009

Choosing the pace of innovation

I've invented another theorem or "law" of innovation, which suggests that the speed of innovation is inversely proportional to the kinds of innovations you create. If your team creates incremental innovations, then the pace of innovation must be high, and the pipeline kept full. If your team creates disruptive innovations, then the pace can be much slower, with perhaps fewer ideas in the pipeline. This is predicated on a number of assumptions:

The first assumption is that if you are satisfied with incremental innovations, that you understand that those are easy to copy and will have a short "shelf life". Betting on incremental innovation means that once you climb on the treadmill, you'll need to remain on the treadmill. Once you stop the incremental innovation, other firms are bound to continue and you'll lag behind. The implication is that you need to keep a continuous flow of ideas that can be cranked out quickly, as the older innovations become market standards and then commodities.

The second assumption is that you'll need more ideas if the concepts are incremental rather than disruptive. This is because no matter how smart your team is, there are a number of other smart people in your industry, and in the adjacent industries, who are likely to notice the same near term opportunities. You can't be on being the only firm that notices an incremental opportunity, so you'll need to keep a number of them active in case someone beats you to the punch. It's less likely to see a number of firms working on the same disruptive ideas, since the complexity around forecasting the trends in the market and customer needs and wants can be much higher. Therefore, you may not need as many disruptive ideas since there's less chance of duplication. The flip side of that argument also means that there's a greater chance of guessing wrong. You may be innovating in a space where firms have decided there's no opportunity, and they are right and you are wrong.

The third and most important assumption is that disruptive innovations have a longer shelf life. If that is true, then the pace of release of new disruptions can be much lower than if the ideas are incremental. If you consider a firm that has disrupted the market, typically a real disruption can maintain market leadership for several years, while an incremental innovation may remain distinct for six or eight months at best. Since replacements cannot come online as fast to match or replace a disruptive idea, your pace of development of disruptive ideas can be more methodical, more measured. In fact, it is probably in a leader's interest to be more methodical, because a firm that is successfully innovating as a disrupter is often only competing with itself.

In reality, few firms can afford to choose one approach or the other - they need both incremental and disruptive innovation. What we can argue is that the pace of both programs can differ, while the tools and methods remain the same.
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posted by Jeffrey Phillips at 1:51 PM

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