The Four Fundamental Categories of Innovation
In our book, Ten Rules for Strategic Innovators: From Idea to Execution, Chris and I made it clear that our subject was strategic innovation.
We strongly believed that there are many different kinds of innovation, and each requires a profoundly different management approach.
Here are the four fundamental categories of innovation, as described in our book:
1. Continuous Process Improvement
GE's well publicized six-sigma program made continuous improvement a household word. The focus is on incremental process innovation.
2. Process Revolutions
The implementation of new technology to create a significant improvement in process efficiency. For example, the introduction of RFID technology can dramatically improve supply chain management productivity by 30 percent.
3. Product or Service Innovations
Remember Cabbage Patch dolls, Tickle Me Elmo, and Razor scooters? Those were all product innovations- creative ideas that bring in revenue, but don't change existing business models.
4. Strategic Innovations
As described earlier, strategic innovations may include process or product innovation, but they always involve uncertain, new business models.
The cost, timeframe, and risk of each type of innovation increases as we go down this list. We encourage companies to try all four, but we chose to focus on strategic innovation because it's the key to breakthrough growth. It is through strategic innovation that companies lead change, create new lifecycle curves and alter the very nature of their industries.
Finally, the limits of innovation have less to do with creativity or technology than management skill. But that's the subject of another post.
Comments
You are right. Business model innovation is the key. But how? The imperative is to do R&D for new business models the same way companies do R&D for new products and technologies today. Successful CEOs will have to manage the transition to several new business models over the course of their careers. They do not have the tools or experience to do it. We are trying to turn the entire state of Rhode Island into a real world test bed so that CEO's can try out new business models in a smaller more manageable environment. We call the strategy Innovation @ Scale and we have created the non-profit Business Innovation Factory to enable public and private sector innovators to explore and test better ways to deliver value. It is time to get these ideas from the white board on to the ground.
Posted by: Saul Kaplan | May 7, 2006 11:40 AM
Saul: Your point about turning "ideas from the white board on to the ground" is right on.
Chris Trimble and I have recently written a book -- Ten Rules For Strategic Innovators: From Idea to Execution (HBS Press) that expands on the theme of executing breakthrough innovation. We identify three challenges in such execution: forgetting, borrowing, and learning. We elaborate on ways companies can overcome these challenges.
Posted by: Vijay Govindarajan | May 9, 2006 12:23 PM