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Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke SS04 11.05.2004

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Page 1: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Incremental vs. Radical Innovation

Bianca BackesInga Janke

Innovation, change, and decision-making in international organizationsProf. Dr. J. Beneke

SS0411.05.2004

Page 2: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Overview

1. The notion of innovation (repetition)

2. The classification of Innovation

3. Incremental vs. Radical Innovation

4. Radical Innovations: historic examples

5. What influences Incremental/Radical Innovation?

6. Conclusion

Page 3: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Definitions (1)

“Innovation means a new combination of purpose and method.” (Schumpeter)

“Innovations are resulting in qualitatively new products or processes, which differ significantly from the former state – however this is to be determined.”

(Hauschildt)

Page 4: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Definitions (2)

“In contrast to a discovery - which is usually made coincidently- innovation is characterized by a (preceded) systematic innovation process with a certain objective at the beginning.” (Betz)

Page 5: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

product

innovation

process

innovation

combination

product/

process

goods service

basic

improved

fake

Innovation

Type Degree

Page 6: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Innovation

Incremental/Sustaining Radical/Disruptive

Page 7: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Incremental Innovation

Lower or first order innovations

“Repairing” the old

Keeps large companies competitive in a short term

Negatively correlated to breakthrough innovation

Page 8: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Incremental vs. Radical Innovation

Most innovations nowadays are incremental

Danger of getting caught unaware by newcomers

Companies need to come up with radical innovations

Page 9: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Radical Innovation (1)

“If you cannot beat radical innovators, your best chance to stay relevant to your markets is to become one” (CommunityIntelligence)

Higher order or breakthrough innovations

Dramatically changes social or business practices

Page 10: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Radical Innovation (2)

Creates new markets

Leads to rapid growth

Confronted with uncertainties: technological market

Page 11: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Main DifferencesIncremental vs. Radical Innovation

• low uncertainty

• exploits existing technology

improvements in existing improvements in existing products/processesproducts/processes

• business plan developed at the beginning

• process is formal

• key players are cross-functional teams

• high uncertainty

• explores new technology

• business plan evolves through discovery-based learning

• process is informal

• key players are cross-functional individuals

development of new development of new products/processesproducts/processes

Page 12: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Radical Innovationshistoric examples

Telephone 1861Light bulb 1883Television 1929Atomic bomb 1945Computer (1st gen.)1946Floppy Disc 1950Compact Disc 1979WWW 1991 InventionCellphone 1992SMS 1994 Invention?

The development of radical innovations is decreasing!

Page 13: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

What influences Radical/Incremental Innovations?

Organization size/age cultural characteristics (high/low risk) structure

Environment Process Management

Page 14: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

Conclusion

The capacity to innovate and make life better is present in each individual

Without radical innovation there is no economic growth!

Page 15: Incremental vs. Radical Innovation Bianca Backes Inga Janke Innovation, change, and decision-making in international organizations Prof. Dr. J. Beneke

The End…

…thank you for your attention!