The three levels of innovation
What is your innovation ambition?
One of the most important things I have learned during the last 8 years of innovation consulting is the importance of setting goals and metrics. There are so many different ways to approach innovation, and there is probably not one model that works for everyone, everytime. In my experience, innovation work is a game of improving odds and placing your best bets. To hit home runs, you need a strong portfolio of concepts, some of which will securely get you to first and second base, and some of which might just help you hit it out of the park. But contrary to what many think, breakthrough innovations can and should be planned for. They require a different way of approaching innovation.
Building innovation capabilities should be about setting yourself up for continuous learning and improvement. In my experience, innovation work is about balancing somewhat fuzzy, "no-limits creativity" with rigid, disciplined, systematic ways of working. At Wonder Agency the brand and innovation company I founded and manage, we have developed a broad range of tools and methods to help improve the odds of success over the mid- and long term.
We use this tool mainly for innovation goal setting with clients. You can use it opening up a discussion and set KPI’s for your company or team. You could decide to set a percentage split, or simply decide how many new offerings you want for each level.
Incremental innovation - playing the existing game
This term refers to innovation which aims at helping the company stay competitive within existing categories, primarily using existing capabilities and exploiting existing business models. Typically, this level involves replacing old products with new ones, introducing line extensions, making improvements to current products or services, bringing some newness to the market in order to stay in the game. The output of this type of innovation brings some improvements to the category, and often it only brings newness to the company itself. While you could argue that this hardly qualifies as innovation, it is an important level as typically the majority of the business volume sits here. On this level, the focus is on exploring your current knowledge and assets using your current advantages and business system. An example of incremental innovation would be Apple’s continuous updates of its iPhone (the latest being the iPhone 7).
Breakout innovation - leading the game
The second level of innovation is what we here call breakout innovation. As the name suggests, these are innovations by which companies break out from the crowd, taking the lead within an existing category. These types of innovation often require some degree of internal change within the organisation. A business is a system, and for breakout innovations to happen, the system might have to be redesigned (such as operational models, strategy, business model etc.) Consider Nike’s Flyknit technology that made shoes feel like wearing socks on top of a sole. The Flyknit brought lighter shoes that provide better comfort and performance while reducing shoe waste by up to 80% compared to traditional footware manufacturing. To make it happen, Nike had to rethink its whole manufacturing line and rethink many of its structures, capabilities and processes.
Breakthrough innovation - changing the game
Breakthrough innovations are innovations that create a significant change in the market, often making old solutions and categories obsolete over the short or long term. (I deliberately avoid using the overused term "disruptive innovation" for this level, as it has a clear definition of its own (breakthough innovations can be disruptive, if you go by Clayton Christensen’s original definition)). Instead, we define the highest level of innovation as breakthrough innovation.Breakthrough innovations often happen as the result of sudden, dramatic insights, discoveries, findings or changes in consumer preferences. More often that not, breakthrough innovations require new business models and whole new ways to serve customer needs. In recent years, mainly thanks to the rapid technological breakthroughs, the internet and digitalisation, we have seen many breakthrough innovations that shake up entire industries. Tesla has pioneered self-driving, electrically powered cars that threaten existing technologies. Uber threatens the taxi industry with its business model innovation, Dyson introduced a similar product (vacuum cleaners) but with breakthrough technology, making old vacuum cleaners pale in comparison. Airbnb innovated how we travel by giving us the chance to see the world as a local, and the list goes on. Breakthrough innovation is often also social (a topic I have deliberately avoided to keep it simple) what creates real progress in our world.
There are people who claim “safe is the new risky”, and I certainly agree with that. Industry after industry is seeing phenomenal change and innovation, and just to stay competitive today and in the future will require strong innovation capabilities. I believe that the best way to create your future is to work with two goals in mind: improving the business you are currently in, and creating the business must become. This tool can help you set goals in accordance with your innovation ambition.
Disclaimer about credits:
This model was designed by Tobias Dahlberg. As with many models, they are combinations of existing thinking and other models. While we have not seen the same or a similar model out there, the three levels have existed in various forms for a long time. We don’t know who to credit for them, instead we do what innovation is all about - taking something existing and trying to make it as useful and valuable as possible.