The Innovation Wheel

Let's be clear...

Innovation means a lot more than simply "creating something new." There are different levels of innovation that determine just how “new” a product really is. The Innovation Wheel demonstrates the differences between these levels.

Viewing your organization through this lens is the first step on your innovation journey.

For an overview, keep reading.

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Replicating the success of another company’s innovation by creating your own version of the product.

If your product is an example of Reactive Innovation, then it isn’t new or unique, but it does grab a piece of that market for your company.




Updating or improving a product that already exists to meet customer expectations.

Focusing on Incremental Innovation is great if you’re just looking to sustain your company, but too much of it will hinder any true progress your company might have the potential to make.




Introducing a breakthrough product that forces the competition into Reactive Innovation.

Having a solid focus on Transformative Innovation is what will ultimately keep your company ahead of the competition and continue its growth.

This focus may not be a majority of your company output, but determining just how much emphasis your specific company needs to put on Transformative Innovation is key in fostering profitability.




Producing something never seen before which creates both a new market and an ecosystem to support it

It’s not every day that we see a Pioneering Innovation take off, so dedicating too much focus to developing such innovations probably isn’t conducive to maximizing growth.



So you’ve released a product of Transformative Innovation. You’ve disrupted the market and forced your competition into Reactive Innovation as the competitors try to create something that can rival your product. Over time, as these rival products are released, your product’s value is going to lessen from dollars to cents. This is what we call the Commodity Fall — the depreciation of your product over time as competitors release similar products.

Knowing that other companies will be releasing comparable products, how do you maintain the high value of your product? How do you fight the Commodity Fall? Well, first, it’s important to recognize that the Commodity Fall happens at different rates for different industries. For example, a consumer product’s value will fall much more quickly than the value of a product in the industrial or medical fields, so knowing the typical length of the Commodity Fall relative to your industry is a big step toward fighting the depreciation of your product.

Commodity fall

For innovative companies to stay relevant, something unique needs to be delivered to the market by creating a product pipeline that obsoletes existing products and creates new value.

The iPhone, a product that didn’t exist ten years ago, now brings in two thirds of Apple’s total revenue. So in order to reach the goals you’ve set for your company, you have to figure out what percentage of your business needs to be products that you didn’t have five years ago and use that formula to measure your progress.

Formulating Growth

Where to Start

Planning for a meaningful discussion with your team about what innovation means to you? Try these:

  • Have we as an organization defined what innovation means to us?
  • How would you describe the startup that could put us out of business?
  • Will your current R & D activities fulfill your revenue goals for the next 5 years?
  • How much of your time, resources, or budget is focused on the different parts of the Innovation Wheel?
  • How capable are we of delivering Transformative ideas and products to the market?
  • How much revenue is expected from Transformative projects and how soon can you realize that revenue?
  • How quickly will your product’s value be reduced based on the Commodity Fall?
  • What new products are we positioned to deliver that our competition can’t?

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