Disruptive innovation. Breakthrough innovation. Transformational innovation. How many times did you say or hear these phrases today? Those three terms are often used interchangeably to describe anything more than a line extension, a new package, a tweak to a store format, or some other type of incremental improvement. And many authors and innovation gurus have used them in varied, often overlapping ways.
Does it matter? If it matters how we tackle innovation challenges, how we staff and fund and defend projects within our organizations, and the strategic role each initiative plays, then our business results likely depend on how we define the innovation we’re undertaking. So it’s crucial to give distinct meaning to these frequently-conflated innovation terms in a way that clearly communicates what we seek to accomplish.?
Nearly twenty years after Clayton M. Christensen explained disruption in “The Innovator’s Dilemma,” it’s possible that disruptive innovation has become the most over-used term among innovation practitioners today. Disruptive innovation disrupts a category, market or industry. Unlike more linear types of innovation and improvement, which add features in a natural progression, disruptive innovation often applies technology to better satisfy the low-end of a market. It disrupts with a cheaper or less complex offering, creating a market out of people who aren’t buying yet, or converting people down to a simpler or less expensive solution. One example is home teeth whitening kits, which made teeth whitening available to millions more people at a much lower price point than in-office professional teeth whitening services. Another example is the transportation app Uber, which is far more convenient to use, not to mention cheaper, than town car services or other chauffeured vehicles.
If disruptive innovation disrupts markets — often by leveraging emerging technologies — then we can reserve the term breakthrough innovation for genuine inventive breakthroughs: innovation that redefines the state of the art. Truly breakthrough innovation must be more than the kind of ah-ha moments inherent to all innovation. A good litmus test is that a breakthrough innovation should meet the core criteria of patentable inventions: it should be useful, novel, and non-obvious to a person skilled in the art. In addition, breakthrough innovation should be more than a new discovery or a new version—it has to offer new and better value for which customers are willing to pay. Hybrid-electric passenger cars are a breakthrough innovation that many car buyers prefer. However, most models still tend to be premium-priced with a total ownership cost that is similar to comparable gas-only cars, so for the average driver, they are not (yet) disruptive innovation.
Breakthrough innovations, while dazzling, can usually be distributed through existing channels. Hybrid-electric vehicles are sold through the same dealerships as gas vehicles, by the same sales staff. On the other hand, teeth whitening kits (a disruptive innovation) are sold through drugstores and retailers instead of provided by dental professionals.
If we use disruptive innovation for innovation that disrupts markets, and breakthrough innovation for truly new art, then we can choose to give the term transformational innovation distinct meaning by reserving it for efforts that transform the company’s primary business model. Many businesses have innovated to simultaneously transform what they do and for whom they do it. Johnson & Johnson started out selling surgical dressings for use by 19th-century doctors. Gradually, the company added new product lines and customer channels, ultimately transforming itself into a global leader in consumer health products, pharmaceuticals, and medical devices. More recently, IBM sold off divisions that made computer hardware as profit margins began plummeting in that business, transitioning to a software and services company.
Why It Matters
So, we have the definitions. Now what about the power? Specifying which type of innovation you are pursuing will focus your approach — and help ensure you are on the same page as other stakeholders. Are you developing a disruptive idea that will undercut existing solutions and attract all kinds of new customers? Then you should seek to understand the pain points of new customers and their must-have features, conduct business experiments, and initially expect to operate under the radar with a modest budget. If you seek to disrupt a market your company already operates in, then you’ll need to work extra hard to overcome internal resistance. Are you transforming your company? Then you should study emerging business models and the companies you will soon compete with, consider new talent and M&A options, and enlist top executives to lead the charge. Are you after breakthrough innovation? Then dedicated people and resources, sustained patience from leadership, and links to external expertise are needed most.
These differences are dramatic, and affect every aspect of how we frame and approach an innovation challenge. Used this way, these terms are also not mutually exclusive, so some projects could be classified as multiple types, and thus require a blended approach.
Delivering anything other than incremental innovation is tough enough. Innovation practitioners need to efficiently communicate both within our organizations, as well as with each other for insight and inspiration. Let’s make it easier to have an impact by committing to use the term that most accurately describes the type of innovation result we’re trying to achieve.
|Disruptive innovation||Disrupt a market by applying technologies to meet the needs of under-served or un-served customers at a much lower cost, or with more convenience/accessibility, than current options||• Understand the pain points of new customers and their must-have features|
• Conduct business experiments
• Initially expect to operate under the radar with a modest budget
|• Watching out for possible cannibalization of existing revenue streams|
• Needing to create new distribution systems and market in new ways
• Potential channel conflicts
|Breakthrough innovation||Redefine what is state of the art||• Dedicated people and resources|
• Sustained patience from leadership
• Links to external expertise
|• Fluctuating R&D funding|
• Balancing open innovation versus what should be completely “owned” internally
• Getting to market before nimbler competitors
|Transformational innovation||Transform your company by developing a different business model||• Study trends, your future competitors, and different business models|
• Consider new talent needs and M&A opportunities
• Top executives must lead the charge
|• Simultaneously developing new offerings and new customers|
• Balancing investment and focus on the new, with the current core
Erik M. Falck is the Director of Innovation and Growth Platforms at Johnsonville. He previously served in senior management roles at Hershey and Johnson and Johnson.
(Photo credit: Robert Hoover.)