Companies centred around products need to innovate to survive. We all know that.
Innovation is hard.
Fossils of corporate dinosaurs who dominated in decades past litter the business world.
Sun Microsystems was an IT giant and an innovation powerhouse for a couple of decades but failed to adapt its innovation efforts to serve a changing market.
Nokia’s share of the mobile phone market went from 50% in 2007 to 10% in 2011, because it failed to keep up with the innovation spurred by Apple’s introduction of the iPhone.
Many companies have lengthy periods of innovation success followed by collapse as they fail to keep innovating, and competitors inevitably take market share from them.
One reason innovation is so hard is the simple fact that not all innovation is the same.
To set yourself up for successful innovation, you must understand what type of innovation you are attempting.
There is a diversity of research on types of innovation.
In the mid-20th century, Schumpeter popularised the term “creative destruction” to describe the way technological innovation can disrupt and destroy existing dominant players. A modern example is the way online publishing is destroying traditional newspapers.
In the 1990s Henderson and Clark looked at the difference in innovating new components (the building blocks of a technology) versus innovating new architectures (the way components are organised into systems or products). They showed– surprisingly – that many organisations struggle with architectural innovation. The reason being that they gather significant architectural knowledge over time and become entrenched in one mode of thinking, so entrenched that future architectural innovation is difficult or impossible without fundamental organisational change.
More recently, observers have noted the difference between business model innovation and technology innovation. In fact, we can represent distinct types of innovation in a quadrant diagram.
Incremental innovations are improvements on existing technologies using existing business models. Volkswagen releasing a new model Passat is an example. Same business model (consumer buying a car) and an incrementally better product (perhaps new features such as lane detection, parking sensors).
Disruptive innovations do not focus on technology innovation at all; they focus on business model innovation to disrupt existing players. Music streaming services like Spotify or Tidal are examples. The technology is important, but not as important as the introduction of new ways to make money.
Radical innovations are major new “components” that fundamentally change the delivery of an existing business model. An old example is the introduction of jet engines to the airline industry. Same business model (selling tickets to people to fly somewhere) but obviously delivering much shorter journey times.
Architectural innovation is the combining of new “components” in a novel way to deliver a new business model. Web publishing of news is a good example. Traditional newspapers have both adapted new technology and implemented new business models.
Why does this matter to product people?
Remember, every product organisation must innovate to survive. Each of the 4 types of innovation covered here demand different product strategies.
Unless you understand the type of innovation you are attempting, you cannot hope to align your product strategy.
For example, the introduction of a disruptive innovation (a new business model) requires an innovation strategy that encompasses far more than just the technology aspect.
Think of Spotify. The strategy for a music streaming service is fundamentally different from a company that sells physical vinyl records and CDs. The way they brand, the marketing channels they target, the relationships with suppliers (the musicians), the relationship with distribution partners (who provide server and network hardware), the way they collect royalties, the way they manage long-term relationships. All of this requires a coherent innovation strategy to align all parts of the organisation: marketing, sales, operations, development.
This shows that an innovation strategy must cover not only the technology, but all the other aspects required for success.
So … Do you understand the type of innovation your organisation is really trying to achieve? It might pay to spend the time to understand this, if only to ensure you have an appropriate innovation strategy in place that covers not just the technology aspects, but also all the other things required to succeed.