Innovation is about building new levers

Last night, I was at dinner with an innovator from another large company involved in financial services. We were discussing the optimum mix of incremental, disruptive and breakthrough innovation. In common with so many other people I’ve spoken to, it became apparent quickly that the feeling was that incremental was not necessarily the sort of things an innovation team should be working on. Big, bold disruption, that’s what innovation teams should be doing!

But the real question comes down to one of risk: with a dollar to invest, do you take a gamble that might pay off hugely, or a more cautious approach where returns will be way more modest, but much more certain? My view is the younger the innovation programme, the less risky you can afford to be with the money you have. Get some runs on the board before you try for the big stuff. And, as I’ve said here for ages, make sure you can pay the bills. Incremental does that.

Anyway, the discussion swiftly moved to the regularly recurring old chestnut: is  incremental innovation or optimisation? In this case, my companion’s thought was that incremental was very much business as usual, and therefore ought to be part of the work we all do every day. Optimisation, in other words. I disagree with this.

Optimisation is the process of moving various levers in a business process to get a better result. You decide where to set the levers by watching whatever measures you have on the process.

Innovation is quite different though, because the goal is almost never to move levers. The goal is to create new levers altogether, or to extend the range of movement of existing ones. The actual moving is best done by the business owners of whatever-it-is.

Conceptualised in this way, one no longer thinks about the mix of incremental, disruptive and breakthrough. The key strategic question is about the size and range of levers you decide to build.

2 Responses to“Innovation is about building new levers”

  1. May 8, 2008 at 10:55 am #

    I think that what you call disruptive innovations could also in fact be called quantum-leap innovations. So between increment and quantum-leap, the size of the lever do matter.
    I’m not sure what you categorize under breakthrough, but if this is something that Clayton Christensen does call disruptive (cf “The Innovator’s dilemma”) I think this is more a question of angle than size of the lever. Just like with judo, the right angle of an attack can make a giant fall on his back; disruptive innovations – in Clayton’s sense – make nimble organizations prevail over established giants. My take is that the market has shown a strong capacity to nurture this kind of innovations. I don’t know how much an organization can develop the capacity to give birth to breakthrough innovations that completely turn the business models on their heads. And in this later case, this is probably more the agility of the organization than the size of the lever that would probably make this possible.

  2. May 10, 2008 at 4:38 am #

    You’re right I think. Building more levers is innovation, while optimization is using the levers you’ve already built.
    How to build more of the breakthrough types of levers? Thats the million dollar question. Some companies seem to have a knack for it and it shows in their growth.

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