The 3 Types of Innovation and How You Can Implement Them

Incremental, Transformational and Adjacent Innovation

The overwhelming majority of enterprises acknowledge that they need to innovate, but there is still a gap between what companies know they should be doing and what they are actually doing.

Nearly 85% of companies say that innovation is very important, yet 75% of the world’s 1,000 largest publicly listed corporations report that they are failing to out-innovate their competitors, and 42% of companies fear they are at risk of being disrupted.

This paints a picture of large companies with ample resources acknowledging that innovation is important, but not knowing how to get started.

Innovation as a dedicated discipline is a relatively new concept, so part of the problem may be a lack of information about different types of innovation and how to shape an effective innovation strategy.

To help you gain more insight into how innovation works at the enterprise level, here is an overview of the three main types of innovation along with helpful examples and tips.

Incremental Innovation

Incremental innovation involves making smaller upgrades to existing products or services. The goal is to improve on tried-and-true products or services and renew interest in the marketplace.

Improving upon an existing core product helps firms stay competitive in the short term, but it is important to keep in mind that being too localized can limit your long-term growth and clip your innovation wings.

Incremental innovation carries relatively low risk, which is why 78% of companies focus their efforts on this type of innovation. However, staying only with incremental innovation can also keep you in a continuous game of catch-up, with your company trying to stay up-to-date with the latest trends and customer expectations, rather than setting them.

Business Example

JetBlue used incremental innovation to improve the user experience. Instead of putting customers on hold, the airline’s call-in customer service system now takes their number and calls them back later. This small upgrade effectively addressed an immediate problem of phone call wait times and provided a new level of convenience for JetBlue customers and employees alike.

Pro Tip

Incremental innovation should focus on your customers. Think about their experience with your company and your product to identify where their pain points might be, and what problems you can solve.

Transformational Innovation

When most people think of innovation, they picture transformational innovation, which has the power to completely transform, create or eliminate entire industries. It involves one-in-a-million ideas that change the way the entire world lives and works.

Transformational innovation, which shoots for long-term results, is high risk and high reward.

The biggest advantage is the opportunity to truly achieve on a different level and reshape the entire market landscape. This kind of innovation increases sales with new market exposure, new revenue streams and improved processes.

Today, companies dedicate 23% of their innovation efforts to pursuing transformational innovation.

Large companies often rely on technological advancements of startups or other software vendors to see transformational innovation through because realizing such visions requires capabilities outside of the company’s core expertise. That is why open innovation by way of collaborating with external companies is the most effective and efficient way to achieve transformational innovation.

Business Example

Apple has mastered transformational innovation. The iPhone has become a ubiquitous accessory around the world and changed the way we communicate, connect, create and much more. The company continues to be a disruptor and pace-setter that competitors are constantly chasing.

Pro Tip

No company should dedicate 100% of their resources to pursuing transformational innovation. The goal should be finding the right balance among the different types of innovation to promote both short-term and long-term growth.

Adjacent Innovation

Adjacent innovation involves entering a new market and connecting with a new audience by leveraging something the company already does well.

To reach new audiences, the company partners with new technology solutions in order to re-shape its existing offering to serve the needs and expectations of new users.

Experts recommend allocating 20% of their innovation efforts to adjacent innovation.

The biggest advantage to this approach is that there is little risk involved. While adjacent innovation won’t have the same impact as transformational innovation, it can still support growth and create a more dynamic company that can better weather evolving markets.

Business Example

While Uber is considered transformational for the way it changed how we travel and share resources, it is actually a perfect example of adjacent innovation at work. The company combined geo-location technology, digital payments and data analytics to break into a new market and transform an industry.

Pro Tip

Focus on the deliverables and identify exactly what your product or service does for customers. Taking a step back can help you start to think beyond the confines of your existing industry and pursue adjacent innovation.

Final Thoughts

Understanding which type of innovation best aligns with your company’s strategic goals will help you form a clear innovation approach.

When you know how you want to approach innovation, you will be more prepared to take the first step beyond acknowledging the importance of innovation, toward getting your innovation process started.

No matter what approach you choose — whether it be incremental, transformational or adjacent — testing and evaluating technologies is a central part of the process.

Companies have gotten used to this being a long, difficult and dreaded endeavor, but with a streamlined proof-of-concept platform, it doesn’t have to be that way anymore.

Make sure that when you pursue innovation, you are optimizing your proof-of-concept process for the 21st century.

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