5 Reasons Companies Should Forget About Radical Innovation
Radical innovation is too difficult for most companies and they should play it safer when it comes to innovation. You can read why I think so below – and you can get a few ideas how to do it should you decide to give radical innovation a try.
First of all, let me say that I define radical innovation as projects that had an identified team and budget, and were perceived as having the potential to offer either
- new to the world performance features
- significant (5-10x) improvement in known
features - significant (30-50%) reduction in cost
The definition is developed by the Radical Innovation Group which works hard to establish innovation as a management discipline. They know a lot about radical innovation.
Most companies should forget about radical innovation because…
• it usually takes 5-7 years before you see results on radical innovation projects. Consider the typical process of such projects which takes 3-5 years: you start a project when times have been good for at least a couple of years (you dare to invest), you hesitate as good times come to an end and you shut it down when we hit a crisis like now. This gives you no results despite heavy investments and you have to deal with frustrated employees.
• only few executives, leaders, managers and employees have successful experiences with radical innovation. As this is still such a new discipline companies simply lack the skills, mindset and knowledge needed to make radical innovation projects survive beyond 3-5 years and thus being able to prove themselves. The projects get too little time to show results while they become obvious targets for cost-cutting done by executives and leaders lacking the skills, mindset and knowledge to make radical innovation successful.
• innovation projects that range between incremental and radical innovation are more likely to succeed, making such projects more acceptable to risk-adverse executives and managers. I even suspect such projects could give a better return on investment than radical innovation projects, but I have not found data to prove this. Let me know if you can help on this.
• companies can simply buy startups with radical projects and try to integrate them into their core business utilizing their well-established brand and sales channels. This could be a dangerous approach as companies tend to make such projects fit their organization rather than to the needs of the customers. The chances of success increase when you develop entirely new platforms based on several radical innovation projects and let them live their own lives.
• it is not only difficult for big companies to create radical innovations, it is often contrary to their best interest and culture. Big companies have no incentive to change their markets. Read more about this in Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets, a new book by Markides and Geroski.
Companies should do radical innovation because…
• many companies have been successful with radical innovation projects providing others with the opportunity to learn and adapt to their own situations. Check these links to learn more about such cases and how to do it:
- Innosight – a leading consultancy on disruptive innovation
- Building Breakthrough Businesses Within Established Organizations – an article by Chris Trimble and VJ Govindarajan
- Innovation Lessons from Apple – an article in Fast Company
• when radical innovation is done successfully companies can dominate industries and earn huge pay-offs
This post has probably provoked some and hopefully inspired many to learn more about radical innovation. I hope we get a good discussion on this and I look forward to hearing from you here on my blog, in my LinkedIn groups and on Twitter.
Great topic, would agree, if you had said: big companies, focused on logistics, production or other areas, where cost structure is the dominant metric, and which are lead by accountants, lawyers or other number focused 'functions'.
You statement is too general, since it depends on culture, core competencies and market segment and positioning.
I do fully agree, big companies of any type, when they are doing fine usually have amonst their goals direct links to support the status quo. Radical change of the market is for them a risk. Bad luck for big companies, if #2 or #3 does it, it is a good luck for big companies, that it is so hard even for flexible and smaller companies to really change the market by radical innovation. And with human low villingnes to do changes, usually it comes from those froaffected by any type of crisis.
Hi Stefan
BIG-I Innnovation is obviously much harder than small-i innovation. That doesn't mean that they should be treated as mutually exclusive. Take Toyota as an example. Toyota has made over 20 million small innovative improvemenst during the last 40 years using its Kaizen process. Continuous innovation is a way of life for Toyota employees. At the same time, it takes bets on BIG-I innovations like Hybrid technology. The Prius Hybrid car took over a decade to develop. That's a long time in innovation circles.
Interestingly, in the recent BCG/Business Week Innovation 100 awards, Toyota came third overall but for process innovation not product innovation.
It speaks volumes for companies like Toyota who make innovation of different kinds part of their culture, rather than considering it a function, department or group.
Graham Hill
Customer-driven Innovator
I respectfully disagree. I believe strongly in a portfolio approach to innovation. Although companies should almost never rely on radical innovation to keep them competitive and should they make radical innovation the cornerstone of their innovation effort, every company's innovation portfolio should include at least some radical innovation projects. True, these projects have a low probability of success and may be a very small part of the overall portfolio. But, if we argue that companies failing to invest in innovation will be quickly marginalized by those that do, we must also recognize that companies failing to invest in radical innovation are dooming themselves to marginalization, albeit over a much longer period. I also believe that even in the short term, the possibility of being involved in radical innovation keeps innovators more alert to the environment outside their own projects and their own firm and, as a result, makes them more productive as innovators. Yes, big companies can do, and there are plenty of examples — see "Radical Innovation: How Mature Companies Can Outsmart Upstarts," by Richard Leifer, Christopher McDermott, Gina O'Connor, Lois Peters, and Mark Rice (http://books.google.com/books?id=fCePoidL4OwC).
I agree with Steven here. In fact the author does state a couple of reasons for radical innovation, and he would be showing some kind of break from reality if he did not. Radical innovation is necessary and of course large companies are aware of this.
Innovators need to be cautious about involving large interests as well, not just vice versa. Large interests who take control can sometimes stifle important forward movement.
Hi Steve,
You make some valid points and I hope you noticed that I did give some suggestions why companies should do radical innovation. I am fully aware that my post is a bit provacative. The reason for this is that I would like to see companies do radical innovation the proper way which is one of the reasons I included the link to Radical Innovation and others.
Graham, good input on Toyota. The more I look into them, the more interesting they become with regards to innovation. Have you visited their http://www.toyotawhynot.com website? I also like their guiding – zeronize and maximize – for their technology development. Check http://www.toyota.co.jp/en/ir/library/annual/pdf/… – search for Zero. I assume this innovation intent also crosses over to other kinds of innovation.
Working with Targeted Innovation (the folks who created Swiffer, Cascade Action Pack, the plastic spouts on orage juice cartons, …) I think we've found that radical innovation is not only do-able but, thinking strategically, is mandatory for the company that is finding incremental innovations to be less and less profitable long-term. Start-ups are looking for large corporations to buy their innovations, and the large corps are looking for the innovations that fit into their needs. The essential component which is so often missing is the expert in bringing the two together for mutual profitability.
Yes, and…
While risky and difficult radical innovation is the one thing a company can do to escape the product/company life cycle trap. Incremental innovation extends the life of a company, and is necessary, but once a product type has peaked out, it's the re-invention or radical innovation that saves the company.
I think of Virgin. What if they had stuck strictly to music? Record labels are disappearing because of iTunes, free downloads, and inexpensive recording technology. Virgin exists now because they got into new businesses and did them well.
Hi Stefan
Indeed provocative thoughts – and I'm happy to see that you and all the rest actually believe in building an innovation portfolio which is balanced but also includes big bets. Market leaders will become losers if they do not constantly challenge traditional ways of doing business to find the next big idea.
In Denmark the Technical Univesity has launched educations focused on overcoming the barriers that Stefan mentions – Certificate in Entrpreneurial Leadership a 5 month MBA level course working on company cases – teachers are a.o. Richard Leifer, Joanne Hyland and many other prominent US leaders within Radical Innovation.
see http://www.tem.dtu.dk/uddannelse/cel.aspx
And to overcome organizational/Management barriers the course Leading Corporate Entrepreneuship is a 7 days experience for Leaders. http://www.tem.dtu.dk/uddannelse/lce.aspx
Both are highly recommeded..
If interested check out
Hi,
First, let me emphasise that I absolutely agree on the need for radical innovation. However, I would like to add more details to this article as i did my MBA on innovation:
Time-to-market of radical innovation does not per se take 5-7 years. This may be true for technology-driven radical innovation, if the company tries to push new technology on the market, which users don't want or need, but radical innovation does not necessarily introduce new technology. Much radical new business combines known technologies in an new-to-the-world way and thus create a new business model, which – at least for some time – gives the company a competitive advantage.
Radical innovation is not a new discipline. Actually it origined by Peter Schumpeter in 1942 as "creative destruction". Schumpeter "invented" the term innovation in 1934 calling it "the motor of development". However, modern business may have forgotten innovation (perhaps due to short-term shareholder value) but have now rediscovered it. I agree that many managers still don't know what innovation actually is, but that doesn't mean that the company should neglect it – managers must learn. And once again, don't confuse radical innovation with technology and time-to-market.
A helthy business looking for both short-term results and long-term sustainability should keep a balanced portfolio of low, medium and high risk projects i.e. incremental, semi-radical and radical innovation. Project portfolio management is yet another skill that managers must learn, including a strong ability to say "no" to projects that prove to be poor.
It can be argued that business performance of multiple incremental innovations exceeds performance of radical innovation, because the latter are rare in almost every industry – Toyota are great at incrementals.
Buying start-ups is a strategic option but remember that success rate of mergers & acquisitions is rather low – it may be a 50-50 bet or even lower, depending on what you buy and how you treat it.
Some large big companies actually managed to change themselves for the future – e.g. IBM (office hardware -> computers -> consultancy) and Virgin.
A learning point may be that diversifying into new industries may kill the business – sticking too much to your old industry certainly will kill it. Just look at General Motors – will they be able to renew themselves? Until now they failed several times. So innovation is also about renewing your business in due time.
BR Svend
Thanks for starting a good discussion Stefan. While disruptive innovation is certainly challenging, it is essential. For a great analysis of disruptive vs. sustaining innovation, I recommend Clayton Christensen's "The Innovator's Solution." He reviews the life cycle of companies and their products, how to organize for success (essential commitment to quality processes vs. creating products that are "not-good-enough") and guidelines and roles for success for leading new growth. Really great book!
It would appear you have never heard of / are not aware of the discipline of "EVO Project Management Principles" by Tom Gilb. He has a 20-30+ year record in software and engineering projects that achieve what you would call radical results.
Because of my experience in EVO I also disagree with 2 of your definitions:
- significant (5-10x) improvement in known features
- significant (30-50%) reduction in cost
I do not think that it is unrealistic to achieve such goals – because I have seen it done on features in software products I managed and I know of other companies who did the same (using EVO).
I can see what you are writing and understand why people accept it as making good sense but what I am reading is "Jantelov" – I am not so keen on the thought that no one should be bold enough to think they can improve so much on something that already exists.
That's like saying that thinking out side the box is not welcomed as a mgmt discipline in most companies.
That may be true in some cases which would be why we see new competitive companies rise to out compete older giants who got too comfortable and stopped thinking outside the box.
When you stop pushing your limits you allow others to take over.
That is a choice – but I do not think it is good advise.
I agree with Steven Gordon on February 19, 2009 at 10:32 am
"I respectfully disagree. I believe strongly in a portfolio approach"
Brian Glassman
Hi Stefan
Thanks for your links to Toyota. As it happens I worked as a consultant and interim Head of CRM for Toyota for a number of years. I saw first hand how small-i innovation through the Kaizen process was literally everybody's responsibility. For example, I ran marketing programmes where we made 100+ small improvements during their first year in the market using Kaizen. I also saw how Toyota invested in BIG-I innovation through a structured innovation process with a strong front-end. It is the strong front-end that is the key to success for Toyota.
Part of the reasons why radical (read: BIG-I) innovation is so unsuccessful is that it isn't innovation at all. It is invention. Inventors have great ideas, push them through the internal development process and then launch them with a marketing fanfare. Research suggests that around 80% of these inventions fail in the market. In contrast to this, Toyota starts its radical innovation with a thorough understanding of customers' needs and uses that as a catalyst to think up radically different technological solutions that will meet its long-term commercial objectives too. Technology solutions change all the time, but customers' needs do not.
Radical innovation can be successful, but you have to stack the odds in your favour by first starting out with a thorough understanding of customers' needs, then, and only then using them as a catalyst to find radical, new, commercially-viable solutions to meet them.
Graham Hill
Customer-driven Innovator
I agree. My expereince with innovation bears this out. The business leaders of today have no time for such actitivities. they want quick result projects and do not have the patience for results that will come after 5 years. In fact most of them will not be there to see the end of it.
these projects lose steam after the first one or two years and internal politics ensures that they are terminated pre maturely and the blame is put on the teams or the facilitators shoulder.
Organizations are better off folowing the incremental or between incremental and radical approach to innovation
Sorry, can't buy into your argument for abandoning "radical" innovation. The marketplace is shifting quite hard right now, and those companies that will succeed in the future must adapt to new market requirements. The fact that the current shift is so traumatic indicates how many businesses have been unwilling to adjust – thus causing a bigger schism when the adjustment happened. A classic punctuated equilibrium. The new normal is now upon us, and it will require some pretty severe innovation for most companies to return to previous sales and profit levels, not just a higher growth economy. Those that don't consider radical innovation may well find that they doom their company.
While it may be hard, change is not impossible nor need it take as long as you've indicated. There are better approaches which can allow for much greater adoption more quickly leading to improved results in far less time. Take a look at http://www.thephoenixprinciple.com
It need not be so slow or onerous if you trust and listen to your staff.
In many large companies the basis for major innovation is there, distributed amongst staff.
You have already invested in them, and they already know your business better than anyone.
Typically, Top Down management acts as a lid on this. There is no forum or mandate to listen to and collect the ideas.
You can take the lid off, with care. Structured Online Collaboration provides a fast and effective means to do this: challenging a wide range of staff to address a specific need over a limited period.
Gary Hamel keeps emphasising this need to engage, as well.
If you need to get the process right (we can help here), then this can be done fast and cost effectively, using existing technology platforms.
Richard Ritchie, Habar Consulting
It is true that radical innovation takes time not only for its process but as well as the results of such drastic movement. But it's sure to give such positive improvements in both function and feedback.
This is why I find the 'fail fast' idea to be so annoying. You can't go around randomly trying new things if it's going to take years to see results.
There's no substitute for careful planning and understanding your stakeholders.
Is it time to ban the word "innovation"?
The word "innovation" is a fluffy, substance-free cliché that's abused by many companies to mask a lack of real growth, some experts say. Company securities filings mentioned "innovation" 33,528 times last year, up almost two-thirds from five years before, without evidence of a corresponding increase in creativity. "It is a chameleon-like word to hide the lack of substance.
Innovation means inventing a product that has never existed.
I think there is a need to discuss what exactly is meant by "radical innovation" in the article and how it works before we can start some assessment as to whether or not it is high time to change this particular approach. But the insights are great though.