When defining and implementing an innovation approach in the new year, enterprises need to consider what kind of impact they want their ideas to have and what their main idea engine will be.
In practice, that means innovation executives need to decide between incremental innovation — a series of small improvements to existing products, services or processes — and radical innovation — bringing market-altering changes to life.
They additionally need to decide between internal innovation — centralizing innovation in-house — and external innovation — partnering with other companies that have complementary expertise.
We researched the approaches of the top ten corporate innovation spenders and found a clear common thread:
The most effective approach to corporate innovation combines radical and external innovation.
The Impact of Radical Innovation
Radical innovation means pursuing novel breakthrough ideas or developing new products that will keep the company competitive in the long-term.
This type of innovation is unique because it involves finding ways to commercialize new knowledge that is usually heavily steeped in technological advances. It relies on changing organizational cultures and utilizing social and human capital for the maximum impact.
Incremental innovation like updating offerings or processes by implementing new technologies may spark interest, but it won’t have the same kind of lasting impact on the market that radical innovation does.
For example, John Deere has effectively used radical innovation to capitalize on the power of big data by connecting their equipment to software and an open platform, myJohnDeere.com.
In this case, the John Deere team knew they needed to respond to a more connected world with digital transformation, and they were able to implement radical innovation that definitively separated them from the competition.
The Impact of External Innovation
Often times, bringing these visionary ideas to reality requires resources outside the company’s existing capabilities. That is where external innovation — collaborating with other innovative companies — becomes necessary.
For enterprises, outside resources rank among the top three catalysts for transformational innovation, yet many businesses are slow to seek out new partners.
This slows down innovation to the point that a full 60% of companies said it takes a year or longer to create new products, making them more vulnerable to competition.
External innovation can significantly reduce the time to market by leveraging the existing expertise and resources of two complementary entities.
External innovation is especially influential for an enterprise striving for radical innovation because it brings in new knowledge and technology that is not already central to the company.
Turning to external resources to complement the company’s core areas of expertise can open the door to radical innovation.
Even retail giants like Walmart often rely on external innovation to move ideas and products to market faster. Most recently, Walmart partnered with Postmates in an effort to fast-rack grocery delivery services.
While Walmart certainly has the resources to build their own delivery service from the ground up, that process would be time-consuming. By turning to a smaller company with more targeted expertise when it comes to delivery services, Walmart will be able to beat the competition to the punch.
Embracing Radical and External Innovation
If enterprises truly want to experience radical innovation, they will have to overcome any resistance to external innovation and realize that quickly implementing long-term solutions requires collaboration. Incremental innovation may keep things afloat in the short-term, but it can’t effectively address the demands of a competitive marketplace.
Only by investing time and resources into the combination of radical and external innovation will companies experience a truly winning and forward-thinking innovation strategy for lasting success.