The Innovation Wheel | By Paul Miklautsch
Innovation: It’s the keystone needed to secure a future of growth and profitability for any company. That word gets tossed around a lot when talking about product development, but what does it really mean?
Simply put, innovation is creating something new. Through our work, we’ve observed that there are different levels of innovation that determine just how “new” it is, so we’ve created the Innovation Wheel to demonstrate these different levels of innovation. This tool is used by organizations to communicate around innovation, discuss life cycle changes of their products, and measure ideas in a brainstorm session.
Reactive Innovation: Replicating the success of someone else
There is a section on the McDonald’s menu that provides an example of Reactive Innovation. In it’s “McCafe Frappe” section, there is an imitation of the enormously popular Starbucks Frappuccino. McDonald’s didn’t invent the drink category, but now the fast-food company has a stake in the iced coffee market that will entice more customers.
Incremental Innovation: Updating or improving a product that already exists to meet customer expectations
Historically, the automotive industry has delivered incremental innovations. New features like a backup camera, push-button start, or heated seats are updates made to keep customers’ attention. Customers feel that these new features have elevated the product to a higher level.
Transformative Innovation: Introducing a breakthrough product that forces the competition into reactive innovation
The iPhone completely disrupted the market by reinventing how we engage with our cell phones. It was a transformative innovation that forced the competition to react. This gave Apple a window of time while competitors worked on a solution and allowed for strong growth and profitability.
Pioneering Innovation: Delivering something never seen before that creates a new ecosystem to support it
The airplane and the ability to fly was a Pioneering Innovation that changed our world. It has changed the way people work, and connected travel between cities, states, and countries. The sole creation of the airplane created a need for jet fuel, mechanics to work on them, pilots to fly them, and infrastructure to support transportation between locations.
Think of examples in your industry where you see the Innovation Wheel at play. Companies need to be investing in multiple levels of innovation across Reactive, Incremental, Transformative, and Pioneering to stay relevant.
Investing in Reactive and Incremental Innovation is sustaining efforts for the business. This effort keeps the core business moving forward and generates cash for the business to invest in future growth. Transformative and Pioneering Innovation lead to new growth. This can be measured by your Product Vitality Index.
The Commodity Fall
So you’ve released a Transformative product. This disrupts the market and is forcing your competitors to react and create something that can rival it.
The commodity fall is the deprecation of your product over time as competitors release similar solutions. The speed of the commodity fall is relative to your industry and the pace at which new solutions are delivered to the market.
Delivering Transformative or Pioneering Innovation allows your business to have time in the market without direct competition. This will feel great and deliver revenue and profits, but it may be short-lived as your competitors start to react and deliver their own version.
Innovation: A New Corporate Value
Historically, innovation has typically been just for the Research and Development teams to deliver new products. Innovation is now becoming a corporate value, forcing all departments to define and discuss what this means. For example, there is a lot of innovation occurring in manufacturing and operations with robotics and automation. This is exciting and changing the way products are produced and delivered to customers.
Innovation can also occur with your product, your business model, your pricing structure, and your service model. Use the Innovation Wheel in these discussions to map each area so you can start to see unique value propositions that you are delivering to customers.
There isn’t one definition of innovation that everyone needs to align with and start using throughout the company. However, it needs to be discussed and pursued so your employees understand how to behave. At the same time, your customers are going to be watching how you continue to grow, where you choose to innovate, and how you stay ahead of the competition.
Innovation Conversation Starters:
- Has our organization defined what innovation means?
- Will your current Research and Development activities fulfill your revenue goals for the next five years?
- How much of your time, resources or budget is focused on the different parts of the Innovation Wheel? Are you over-invested in one area?
- How capable are you at delivering transformation ideas and products to the market?
- How much revenue is expected from transformation projects and how soon can you realize that revenue? Be BOLD with your Product Vitality Index.
- How quickly will your products’ value be reduced based on the commodity fall?
- What new products are positioned to deliver that the competition can’t?
- How can departments within the organization be innovative?
By Paul Miklautsch - February 05, 2020