The Innovation Value Breakdown
Innovation is progress, progress is made in different ways
Let’s begin our systematic exploration of what innovation means by deconstructing the notion into its four overarching forms, and organizing them in descending order according to their expected commercial value.
After everything is said and done, the reason for innovation is progress. It is what separates innovation from clever and wishful thinking. The way in which new solutions depart from current ones differentiates each of the separate ways in which innovation takes place. For the purpose of this post, we will reduce solutions to a combination of assumptions and components. Depending on which of these components is improved or which assumptions are revised, different forms of progress will follow; incremental progress, evolutionary progress, disruptive progress and discontinuous progress.
Incremental progress is generally used to refer to improvements made to the components of existing solutions, usually from a technological or consumer appeal standpoint. Depending on the cost basis of those improvements, these new solutions may or may not come to replace previous iterations. But due to its reliance on trends and technology, there is a strong dependence on market research and R&D spending, which means that the resources, distribution channels and market share of an established firm are often required to capitalize on these innovations effectively. Some examples of this are Blue Ray technology, Fuel Injection and Halogen Lamps.
Evolutionary progress represents an incremental refinement of one or more of the assumptions on which the solution rests. The new products that result from this type of innovation are not intended to replace the incumbents, but rather aimed at complementing, extending and conquering new markets. Evolutionary innovations are some of the most ubiquitous and noticeable out there. They represent clearly novel products or services, and yet their adoption feels very natural; think Group Messaging, Mobile Phones, Contact Lenses and Microwaves.
Disruptive progress on the other hand, is made by redefining the assumptions that frame the solutions currently in the market. Disruptive innovation is characterized by lower price points and quality compared to existing solutions, which poses a threat to traditional cost structures and barriers of entry. When they are first introduced, disruptive products gain a foothold by opening new market segments where quality is of secondary importance. However, as incremental innovation takes hold, these products eventually break out of their original niche and come to seriously threaten incumbents. This type of products are rarely introduced by large and well established players, since they often come with lower margins and cannibalize core products. Some examples of disruptive innovations are VoIP (Skype), MP3 (Napster) and Email (Hotmail).
Discontinuous progress on the other hand, requires a fundamental revision of the entire solution. Contrary to disruptive innovations, these products are introduced to the market at a premium and are unambiguously aimed at replacing them almost entirely. Akin to theories of punctuated equilibrium, the relatively sudden appearance of these solutions is usually predicated on important developments in other fields. Such developments are necessary to enable the creation of the different components that make up these products. The invention of the Car, the Light bulb and the Jet Engine are some the most noteworthy examples of this type of innovation from recent history.