Importance of Incremental Innovations
Innovation is about big leaps forward, ‘eureka’ moments and radical breakthroughs – or is it?
Importance of Incremental Innovations
Due to constant advancements in the global technologic environment, the concept of innovation has become more important than ever, as it has become one of the most relevant parts of the modern competitive business practices. Innovation can be simply defined as a way to come up with unique ideas, proposals, devices or systems. It is principally considered as a process of coming up with better solutions for meeting latent needs, new requirements or existing market demands. From the context of modern business environment, Petkovska (2015) observed the importance of innovation in transforming a specific idea or invention into a relevant good or service that subsequently creates suitable value for money for intended groups of customers. Innovation, which involves deliberate application of imagination, initiative and information to ensure deriving greater or unique values from associated resources, can be properly justified if it has an economical cost with the capacity of satisfying a specific need. While in the business context, innovation results in successful application of ideas by a company to fulfil unique or existing needs and expectations of customers, social context of innovation help to erect new systems for creating an alliance, facilitating joint venture, enabling flexible work hours and influencing purchasing power of buyers. As a result, different instances of innovation can be divided into two categories, such as evolutionary or continuous innovations and revolutionary or discontinuous innovations. Evolutionary innovations are mainly observed in bringing about many incremental advancements in terms of technology or existing processes, where revolutionary innovations are disruptive and new (Souto, 2015). Innovation is closely related to risk-taking, as organisations, involved in creating revolutionary products and technologies, are the ones that are exposed to a wide array of risks because of their intention of entering or creating a new market.
Hence, this essay is critically prepared to investigate the importance of innovations by developing a differential overview of innovations in the form of a continuous or dynamic process and radical breakthroughs. A range of relevant literature and suitable examples from practical environment are used throughout the paper to enable formation of a significant understanding of variations between incremental and disruptive innovation.
Concerning the introductory discussion, innovation can be regarded as a collaborative process, which noticeably helps organisations to shift from old paradigms to new systems or processes to achieve significant achievements. From vision to reality, the entire process of innovation encounters several blocks, as an innovative idea is not useful to an organisation unless it is validated through appropriate implementation. As studied by Terjesen and Patel (2017), there are several sources of innovative ideas, including unreasonable demands and time pressures, which are also responsible for creating complexities for individuals to convert their dreams, thoughts or visions into reality. There is a wide range of examples, which dictates failure to transform great ideas into reality and achieve intentions successfully. An appropriate innovation process, as a result, should be in place for supporting discovery, creation and developing of required ideas, followed by refining those into beneficial types to enhance the chances of earning profits, increasing efficiency and reducing overall costs (Yang, 2016).
In the context of modern business environment, most firms successfully recognise the value of innovation thanks to its prevalent growth in changing industry trends and facilitating business growth simultaneously. A study conducted by Accenture, the consulting firm, revealed that 96 percent of its executives surveyed are well acknowledged about the impact of introducing new ideas on long-term growth and success of organisation. Furthermore, almost 87 percent of business leaders are studied to have their positive perception about the capability of innovation to produce a significant return on investment (Silva et al., 2018). However, it is also worth to mention that most respondents as part of the study are unaware of differences between significant types of innovation and achievement of incremental performance gains.
Considering the research of Bauer, Matzler and Wolf (2016) regarding numerous instances of failures to implement innovative ideas successfully, it is observed that innovation process mainly languishes due to lack of any formalised organisational system matching the intended initiatives. Instead of prioritising on collecting raw ideas, Cozzolino, Rothaermel and Verona (2017), as a result, identified innovation as one of the core elements of an organisational strategy to necessitate the initiation of the innovation process in line with strategic thinking to ensure suitable alignment between innovation outcomes and strategic intent of the organisation. More clearly, for every organisation context in modern business environment, the entire innovation process needs to begin with a specific goal to create strategic advantage for the organisation in the chosen marketplace. Critical thinking in line with innovation process, in this case, can certainly facilitate adding value to strategic intents by targeting key areas, where innovation has the greatest potentials to create a unique strategic advantage.
Types of Innovation
Irrespective of the types of organisations, including profit-oriented or non-profit, innovation can happen everywhere with the capability of affecting organisational performance through influencing its products or services. Due to the implication of innovation on changing the pattern by which service is provider or product is delivered, Valkokari (2015) categorised innovation into several types, including product, service, business model, process and technology among others. While product innovation is mainly used for differentiating existing offerings from market competition to create a unique competitive advantage, service innovations are highly important for supporting the firms to provide associated services, such as logistics, sales and complaint handling in its course of achieving desired competitive position.
In an era, which sees rapid changes in different environmental contexts, especially from the technological perspectives, the concept of business model innovation has become an important part, which encompasses integration of innovations in business strategy to upgrade different activities and functions related to marketing, pricing, cost structures, supply chains and value creation (Gobble, 2014). One of the well-known instances of business model innovation until a date can be observed by looking at the ‘power-by-the-hour’ business model, developed by Rolls-Royce, the British manufacturer of aircraft turbine. While the construction of Rolls Royce engines was exclusively a product business for the company before, the introduction of a new innovative business model, instead of selling those engines, thrusts hours to airlines. More clearly, the introduction of a new business model creates a significant competitive advantage for the company, as airlines now only need to pay for the operational hours of the engines rather than buying the entire turbine engines (Teece and Linden, 2017). It makes sure that the engines remain the sole property of the company while creating a responsibility for the business related to repair and maintenance.
In case of process and technology innovations, these involve technological innovations, including enhancement of production processes or IT technologies for apps to contribute to rich product characteristics, quality improvements and cost reduction to create a unique operational advantage for the businesses. Changes in equipment and technology, from the aspect of manufacturing industry, are one of the common examples, where software used in product designing and development has dramatically changed over years. The moving assembly line, which was designed by Henry Ford, is one of the most famous, path-breaking instances of process and technology innovations. Such an innovative idea behind the entire system has not only simplified the vehicle manufacturing process but also shortened the time required to produce a vehicle from 12 hours to 90 minutes (Teece, Peteraf and Leih, 2016).
Types of Innovation from Technological Perspectives
In order to succeed in a business environment, which is dominated by continuous technological advances, companies need to develop a suitable understanding regarding types of innovations they need to pursue from the context of technology and market.
(Source: Constant Contact | Tech Blog)
From the context of technology, innovation can be categorised mainly into two types, including incremental and disruptive innovations, where the former is the most common form of innovation involving upgradation of existing technologies to provide increased value to customers, and the latter deals with introducing new technologies or processes to the current market to create disruption in existing ways of operation (Andersson et al., 2016). One of the most common examples of incremental innovations is adding new features to existing products or services. In addition, the particular innovations also significantly include removing any feature from a specific product or service for creating an increased value through simplification. Gillette has over the years gained a competitive advantage to stay ahead of competition by relying substantially on incremental innovations. Continuous product evolution has become a core element of Gillette, which has enabled the company to constantly evolve its products to increase value for customers and expand existing markets beyond boundaries (Brexendorf, Bayus and Keller, 2015). The single-blade razors of Gillette, for example, are successfully evolved by adding more features and more number of blades, thereby helping the company to fulfil customer needs and expectations in better ways.
As new products, processes or services are discovered almost on a regular basis, the pace of innovation has become incredibly fast-paced. One of the most significant examples of disruptive innovation is the market entry of iPhone by Apple, which completely disrupted the mobile phone market worldwide. Prior to the introduction of iPhone, consumers of mobile phone market mainly relied on phones with numerous buttons, keypads or scroll wheels for user input. The fundamental introduction of iPhone, iterated by personal digital assistants (PDAs) and Palm Treo phones, was a notable example of a technological revolution that was years in making. Considering the recent technological changes worldwide, Internet of Things (IoT) and Artificial Intelligence (AI) are two of the most prominent examples of disruptive innovations disrupting the existing markets, as machines are becoming more rational to replace a wide number of facilities from the definition (Christensen, Raynor and McDonald, 2015).
Difference between Incremental Innovation and Disruptive Innovation
Given the two broad categories of innovation, mainly including incremental and disruptive, the former mainly aims at improving features or reducing costs by enhancing products or services while the latter relies specifically on dramatic changes to introduce path-breaking products or services to completely disrupt existing markets or industries. Concerning their individual benefits and drawbacks, it has been a point of debate whether a company must emphasise on coming out with an exceptional idea to revolutionise current business and generate millions of revenues from new streams or it should rely heavily on cost-cutting and incremental innovations, which is more likely to generate smaller returns. Tontini, Picolo and Silveira (2014), in this case, has found out that incremental innovations have become the most popular form due to low level of uncertainty and reduced exposure to risks, as they mostly emphasise on improving feature and minimising business costs to mark products or services more competitive in the existing marketplace. Google’s Gmail, which was launched with minimal feature but serving its main purpose of sending emails quickly and efficiently, has over the years relied on incremental innovations to improve its services and add additional features to make faster and better than ever. The study of Nagy, Schuessler and Dubinsky (2016), on the other hand, has observed a high level of risks and uncertainties in disruptive innovations, as such is intended to explore new technologies, leading smaller companies or start-ups to play important roles in the particular scenario. However, disruptive innovation, ironically, often needs to depend on incremental improvements and consistent modifications in complementary technologies to enable companies to create a whole new market while eliminating the need of competing with other rivals for market share. Emergence of disruptive innovation over years has created substantial threats for companies relying on incremental innovations. Kodak, for example, was the leader in photography industry with continuous improvements of services. However, the introduction of digital imaging led by the disruptive innovation has changed the face of the industry, where people immediately shifted to a new way of capturing, storing and using images, making Kodak obsoleting completely from the market (Ho and Chen, 2018). Perhaps the company would have stayed in the industry as a prominent competitor if it had invested necessary time and resources in disruptive innovations.
Importance of Incremental Innovation
As discussed earlier, incremental innovation is the most popular from throughout the decades mainly due to its reduced levels of costs and uncertainties while prioritising on gradual product or service development and cost-cutting to improve competitive position of the business. The important roles played by incremental innovation can be observed behind the growth and progress of a wide range of organisations in modern, contemporary business environment. Prevalent market presence of Coca Cola, for example, can be an effective example for explaining importance of incremental innovations. Where the initial formula of Coca Cola was found to contain illicit substances, the company in the current period has slowly evolved its product ranges with multiple flavours and offerings with the help of disruptive innovation to create a superior competitive advantage in the beverage industry worldwide (Koschmann and Sheth, 2016). Despite the increasing role of disruptive innovations changing the face of modern industries, incremental innovations have successfully captured many portions of the history of conducting business.
Unlike disruptive innovations, which tends to be expensive with ineffective services that require continuous upgradation, incremental innovations lie at the core for allowing businesses to increase competitive advantages, thereby achieving success in the existing marketplace. With its priority in facilitating minor changes in existing features and characteristics to provide increased value to customers at affordable prices, incremental innovations have become more relevant with organisations across industries with minimal degrees of risks and uncertainties. Until the introduction of disruptive innovations disrupting the existing markets and taking the lead, organisations throughout the world need to emphasise more on incremental innovations to prolong product or service lifecycles while improving quality and performance.