What is the difference between innovation and improvement – are they different words that essentially mean the same thing or are they fundamentally different? Well the answer to this conundrum is that they are similar, but they have important differences, differences that are important when it comes to how the different initiatives need to be executed and managed. To unpack these differences, it is important to start by establishing what each concept is.
Improvement means making something ‘better’, whether that’s a value proposition, a product, a customer experience or an organisational process, the improvement initiative is designed to make the thing ‘better’. The important word here is better – for improvements to be improvements, they have to improve the product, experience or process on dimensions of value that matter to customers. But critically improvements don’t necessarily need to be new – they could make improvements in established ways where the risk is low and the outcome is fairly predictable. A good example is reducing the price on an existing product – it improves the value for money for the customer but there’s nothing new about it and hence it has little to do with innovation.
Innovation on the other hand is all about new – it’s about creating a new idea or method that creates and captures value in a whole new way. Importantly, because innovation is all about new and there is no certainty of the outcome, it is inherently risky and unpredictable – there are no guarantees that an innovation will lead to improvements. In fact, the majority of innovations fail because they fail to improve the product/process on dimensions of value that matter to customers – they fail to make the product or process ‘better’. This is why (unlike improvement initiatives) a best practice innovation process is designed to minimise the risk of investing in something that ultimately doesn’t create sufficient value to drive the customer to choose the new over the old.
Having called out the differences between ‘improvement’ vs ‘innovation’, it is worth examining innovation in more detail as not all innovations are the same. One important distinction is whether an innovation will create value from incremental improvements to the existing business or will it come from a whole new business model that radically changes the way your business creates and captures value. Are you looking to generate an incremental or radical innovation?
There are many ways to analyse the differences between incremental and radical innovations, however, Abernathy-Clark did some pioneering work in the 80s which led to a simple model which classifies innovations according to their impact on the existing technological and market knowledge:
- Incremental innovations are where the knowledge required to develop/implement the innovation builds on existing knowledge within the organisation
- Radical innovations are where the knowledge required to develop/implement the innovation is very different from the existing knowledge within the organisation.
Importantly this distinction is made from the perspective of the knowledge that exists within the innovating organisation – building the Apple Watch was considered to be incremental for Apple but the SmartWatch was a radical innovation for Pebble when a whole new business was created to target the wearable technology sector.
This distinction between incremental and radical innovations becomes important for a couple of reasons. Firstly, it needs to be aligned with your organisations’ appetite for risk. Radical innovations are inherently more risky but can also have significantly bigger upsides if they work. Secondly, the way radical innovations are managed is quite different from the way incremental innovations should be managed so distinguishing between the two has important consequences for the design and leadership of your innovation program.
So, when considering whether something is an improvement or an innovation, consider a few of the determining factors:
- Is it new or is it just making an improvement to an existing product or process
- If its new, is it an incremental innovation that builds on the knowledge that currently exists within the organisation
- If it’s a radical innovation with high risk and high reward, how will it be managed and evaluated outside the constraints of the profit formula of the existing business model.
If you would like some more information on this topic, I’d love to hear from you! Drop me a line at chris@orangequid.com.au.