Session 7-8 –

Innovation Strategy
Arun Saxena
Define innovation
• Innovation is the practical implementation of ideas that result in
the introduction of new goods or services or improvement in
offering goods or services.
• ISO TC 279 in the standard ISO 56000:2020 defines innovation
as "a new or changed entity realizing or redistributing value".
• Common elements
• Novelty
• Value creation
• Implementation and application (key difference from invention)
Define innovation strategy
• An innovation strategy is a plan developed by an organization
to encourage advancements in technology or services, typically
with the aim of gaining a competitive advantage, meeting
customer needs more effectively, or entering new markets.

• This strategy is a crucial component of a company's overall

business strategy, as it guides decisions on how to create new
products, services, processes, or business models. Key aspects of
an innovation strategy include:
Key aspects of innovation strategy
• Alignment with business objectives
• Market understanding
• Focus areas for innovation
• Resource allocation
• Risk management
• Organizational considerations
• Adapting and learning
Innovation strategy document

Executive Market analysis

Introduction Strategic context
summary and trends

Innovation
Innovation Focus areas for Resource
portfolio
vision and goals innovation allocation
management

Risk Partnerships and Implementation

Review process
management collaborations plan
Inputs and • Market Analysis Data
• Internal Resources
• Innovation strategy
document
Outputs of Assessment • Implementation plan

innovation • Technological Landscape

• Strategic Objectives
strategy
process
Developing an innovation strategy

Routines for
Strategic
Strategic choice Monitoring strategic
analysis
analysis

Portfolio Incorporating
Communication management diverse Implementing
approach perspectives
Strategic Challenges

Vision and Goal Alignment: Market Timing and Acceptance: Balancing Portfolio: Managing the
Ensuring innovation aligns with the Judging the right time to introduce innovation portfolio to balance risk
overall strategic goals and vision of innovations to the market. and reward across incremental and
the organization. radical innovations.
Operational Challenges

Resource Allocation: Allocating Scaling Innovations: Transitioning from Supply Chain and Logistics: Managing
financial, human, and technological prototypes or small-scale projects to the supply chain to support new
resources effectively between ongoing full-scale production and market innovations, particularly when they
operations and innovative projects. introduction. require new materials or processes.
Cultural and Organizational Challenges

Resistance to Change: Collaboration and

Overcoming internal Communication: Facilitating Managing Diversity and
resistance, fostering a effective collaboration and Inclusion: Ensuring diverse
culture that embraces communication within the perspectives are included in
change, and ensuring organization and with the innovation process.
employee buy-in. external partners.
 External and Market Challenges

Regulatory Compliance: Global Market Dynamics:

Competitive Pressures: Navigating the regulatory Understanding and
Responding to and staying landscape, especially for adapting to global market
ahead of competition in innovations in highly trends and cultural
the market. regulated industries like differences in international
healthcare or finance. markets.
Technological Challenges

KEEPING PACE WITH INTEGRATION OF NEW

TECHNOLOGY: STAYING TECHNOLOGIES:
ABREAST OF RAPID INTEGRATING NEW
TECHNOLOGICAL TECHNOLOGIES INTO
ADVANCEMENTS AND EXISTING SYSTEMS AND
DISRUPTIONS. PROCESSES.
Risk Management Challenges

Managing Uncertainty and

Intellectual Property
Risk: Dealing with the
Protection: Safeguarding
inherent uncertainties in the
intellectual property while
innovation process,
fostering an environment of
including market risks and
open innovation.
technical feasibility risks.
 Skill Development: Ensuring the

Human workforce has the necessary

skills and competencies for new
innovations.

Resource
Talent Acquisition and
Challenges Retention: Attracting and
retaining talent that can drive
innovation efforts.
Measurement and Evaluation Challenges

Learning and Continuous

Measuring Success and Impact:
Improvement: Creating systems
Establishing metrics to measure
for learning from successes and
the effectiveness and impact of
failures and continuously
innovation initiatives.
improving innovation processes.
 Strategic analysis

Process Tools Best practices

• Environmental • PESTEL analysis • Inclusive and diverse

scanning • Porter’s five forces perspectives
• Internal assessment • Benchmarking • Continuous process
• SWOT analysis • Competitor analysis • Data-driven decision-
• Gap analysis • Technology road making
• Scenario planning mapping • Stakeholder
engagement
• Balancing long-term
and short-term goals
Strategic choice

Key Approaches and

Process Best practices
considerations tools
• Prioritization of • Market and • Cost-benefit • Inclusive
opportunities customer needs analysis decision-making
• Alignment with • Technical • Scenario • Flexibility and
business feasibility planning adaptability
strategy • Competitive • Portfolio • Clear comm
• Resource advantage analysis • Monitoring and
allocation • Balancing • Decision review
• Risk assessment exploration and matrices • Learning from
• Decision making exploitation failure
• Portfolio management
 • Portfolio management is about balancing the portfolio
on strategic importance of projects, project economic
value, and project risk.
• You are presented with following chart of the project in
your company. Identify which projects you would drop if
the portfolio is unbalanced and why?

Portfolio
Management
Prepare for solving

0.75

0.5

0.25

0.25 0.5 0.75 1.0

Project TYPE Risk Time Value V/R Data for
decision
B Commercial 0.005 1 1 200
K Sustainable 0.2 0.4 0.7 3.5
D
E
Commercial
Incremental
0.1
0.2
0.6
0.2
0.25
0.5
2.5
2.5 making
C Disruptive 0.4 0.5 1 2.5
F Disruptive 0.3 0.6 0.5 1.67
G Commercial 0.2 0.7 0.25 1.25
I Basic Disruptive 0.4 0.2 0.5 1.25
J Basic incremental 0.8 0.1 1 1.25
H Incremental 0.5 0.4 0.5 1
A Disruptive 1 0.25 1 1
Budget Rs.14.5 crores – what projects
company should greenlight?
Method
• Calculate total rating of each project
• Estimate rating numbers from the graph
• Add the customer focus and cost/benefit ratings
• Sort on total rating
• Select projects with highest rating totaling to Rs.14.5 crore
budget
• If more than one projects qualify for selection, but you can
select only one due to budget constraint – provide rationale for
your choice.
Budget Rs.14.5 crores – what projects company
should greenlight?

Project Cust. Focus Cost/benefit Total rating Investment Budget

rating rating
A 0.84 1 1.84 10 10
H 0.26 1 1.26 3 13
B 1 0.1 1.1 1 14
D 0.76 0.14 0.9 0.5 14.5
G 0.8 0.2 1 0.1 14.6
C 0.5 0.6 1.1 4 18.6
F 0.7 0.3 1 1.25 19.85
E 0.2 0.25 0.45 0.75 20.6
•As CEO, you must decide between two technology
projects A and B. What financial measure will you use to
determine which project is more attractive to do? Which
project ranks better on this criterion? You are expecting a
minimum 15% rate of return. (10 marks)
Answer: calculate NPV or IRR – can’t just
do Total Profit – Total Investment

15% NPV IRR

-700000 225000 225000 225000 225000 225000 ₹54,234.90 18% Project A

-400000 110000 110000 110000 110000 110000 (₹31,262.94) 12% Project B

Typology of
innovation
strategy
Types of Innovation
– by impact area

• Product innovations
• Process innovations
• Business Model Innovation
• Service Innovation
Product
Innovation
• involves the development of
new products or significant
improvements in the
performance or functionality of
existing products.
• Examples: iPhone, Tesla Model
S, Dyson V10 cordless vacuum
cleaner
Process
Innovation

• Refers to improvements in the

processes used to produce goods
or deliver services.
• Often focuses on enhancing
efficiency, productivity, or quality.
• Example: The implementation of
lean manufacturing techniques in
automotive production.
Service Innovation

• The development of new or improved

services. It's particularly relevant in sectors
like finance, healthcare, and IT.
• Example: The introduction of online
banking services.
Business Model Innovation

• Involves changes in the way a

business operates, often creating
new revenue streams or
restructuring the value chain.
• Example: Netflix’s shift from DVD
rentals to streaming services.
• Also known as paradigm
innovation
Organizational
Innovation
• Changes the way an
organization operates.
• Structural
• Cultural
• Ex. Holacracy, flat
organizational structures,
remote work policies
 Innovation – by impact area: a comparison

Domain of Innovation Description Examples

iPhone, Tesla Model S, Dyson V10 cordless vacuum
Product innovation Creates new or improved products.
cleaner
Improves the way products or services are created Toyota's Kanban system, Amazon's one-click
Process innovation
or delivered. ordering system, Google's PageRank algorithm
Service innovation Creates new or improved services. Uber, Airbnb, Netflix
Holacracy, flat organizational structures, remote
Organizational innovation Changes the way an organization operates.
work policies

Freemium business model, subscription business

Business model innovation Changes the way a company makes money.
model, advertising-based business model
A few definitions

• A product is an item created through a manufacturing

process and offered in the market to satisfy a
customer need or want. It can be tangible, like goods,
or intangible, like software.
• Examples:
• A smartphone, such as the iPhone.
• A dishwasher, like those manufactured by Bosch.
• A process is a sequence of actions or operations
conducted to produce an outcome, which can be the
creation of a product or the provision of a service.
• Examples:
• The assembly line process used in automobile
manufacturing.
• The process of pasteurization in the dairy
industry.
A few definitions
• A service is a non-tangible action or performance one
party can offer to another that does not result in the
ownership of anything. Its production may or may not
be tied to a physical product.
• Examples:
• Consulting services provided by firms like
McKinsey & Company.
• Streaming services such as Netflix or Spotify.
• A business model is a company's plan for making a
profit, identifying the products or services to sell, the
target market, and any expected costs. It outlines the
way the company runs its operations to generate
revenue.
• Examples:
• The subscription-based model used by Adobe for
its Creative Cloud software suite.
• The freemium model utilized by companies like
Dropbox, offering a free basic service with the
option to pay for advanced features.
Types of Innovation
– by nature of
change
• Incremental Innovation
• Breakthrough Innovation
• Disruptive Innovation
• Radical Innovation
Incremental
innovation
Incrementalist Strategy in Innovation
• Incrementalism in innovation strategy involves
• making small, deliberate steps towards an objective,
• evaluating the effects, and then
• adjusting the strategy based on new information and understanding.
• This approach acknowledges the limitations in predicting and
understanding complex and rapidly changing environments.
• Characteristics:
• Recognizes limited knowledge of the environment and internal capabilities.
• Emphasizes adaptability and continuous learning.
• Follows a process of deliberate steps, evaluation, and adjustment.
• Often more efficient under conditions of uncertainty and complexity.
Incrementalist Strategy in Innovation
• Honda's entry into the US motorcycle market in the 1960s is an
example of an incrementalist strategy. Honda adapted its
strategy based on market responses, shifting from initially
targeting large motorcycles to smaller ones, which
unexpectedly found a significant market in the U.S.
Radical
innovation
Blue Ocean
Strategy in
Innovation
Blue Ocean Strategy –
Kim and Mauborgne, 1997
• Seeks to gain a dramatic, durable
competitive advantage by

• Abandoning efforts to beat out

competitors in existing markets and

• Inventing a new industry or distinctive

market segment to render existing
competitors largely irrelevant and

• Allowing a company to create and

capture altogether new demand
Red Ocean and Blue ocean Strategy

Red Ocean Blue ocean

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value-cost trade-off Break the value-cost trade-off

Align the whole system of a firm’s Align the whole system of a firm’s
activities with its strategic choice of activities in pursuit of differentiation
differentiation or low cost and low cost
Type of Markets: Blue Ocean Strategy
Typical Market Space Blue Ocean Market Space
• Industry boundaries are defined and • Industry does not exist yet
accepted
• Industry is untainted by competition
• Competitive rules are well understood
by all rivals • Industry offers wide-open
opportunities if a firm has a product
• Companies try to outperform rivals by and strategy allowing it to
capturing a bigger share of existing
demand • Create new demand and
• Avoid fighting over existing
demand
Blue Ocean
Strategy in
Innovation
• Characteristics:
• Focuses on creating uncontested market
spaces.
• Aims to make competition irrelevant.
• Seeks to break the value/cost trade-off.
• Encourages innovation that aligns with
differentiation and low cost.
• Examples
• Amul
• Tata Nano car
• Yellow tail wine
• Nintendo Switch
Your view please

Which of the following is an example of a blue ocean

strategy and why?
Apple’s entry into MP3 players with its iPod models
Dell’s entry into LCD TVs
Audi’s recent move to bring out a luxury SUV
ASPECT INCREME NTALIST
RADICALIST INNOVATIO N BLUE OCEAN STRATEGY
INNOVATIO N

Definition Involves small, continuous Entails significant, groundbreaking Focuses on creating new market spaces
improvements to existing products, changes that can create new markets ('blue oceans') that are uncontested,
services, or processes. or disrupt existing ones. making competition irrelevant.

Nature of Change Innovative and strategic, often

Evolutionary and gradual. Revolutionary and often abrupt. combining different aspects of existing
markets in a new way.

Competitive Can provide a significant and

Offers a unique competitive advantage
Advantage Sustains and incrementally improves sometimes sustainable competitive
by creating and dominating a new
competitive advantage. advantage by altering the competitive
market space.
landscape.

Customer Can be mixed; while some customers

Generally positive, as changes are Often very positive, as it offers a
Response embrace radical innovations, others
usually in line with existing customer unique value proposition that was
may resist due to the significant
expectations. previously unavailable in the market.
changes involved.
Aspect Incrementalist Innovation Radicalist Innovation Blue Ocean Strategy
Creates new demand in an
Can create entirely new markets or
Impact on Strengthens and extends the uncontested market space,
render existing products or services
Market current market position. thereby avoiding direct
obsolete.
competition.

Long-term focus, with benefits Medium to long-term focus, as it

Time Frame Short-term to medium-term focus. often realized over a more involves not only creating but
extended period. also sustaining new markets.

Cirque du Soleil's reinvention of

Incremental improvements in Introduction of the first
the circus industry, combining
Examples smartphone features, such as smartphone, which revolutionized
theater and circus to create a new
camera quality or battery life. the mobile phone market.
entertainment experience.

Moderate to high, as it involves

Generally low, as changes are High, due to the uncertainty and
venturing into untested markets,
Risk Level minor and build upon existing complexity of introducing
but with strategic planning to
knowledge and structures. fundamentally new ideas.
minimize risks.
 INCREMENTALIST RADICALIST
ASPECT BLUE OCEAN STRATEGY
INNOVATION INNOVATION

Demands a creative,
Requires a culture that open-minded culture
Often thrives in
embraces risk and that is willing to
Organizational risk-averse cultures
supports radical explore new
Culture that value steady
thinking and possibilities and
progress.
experimentation. challenge industry
norms.
Breakthrough Innovation
• Significant leaps in ideas, technology,
products or processes
• Represent a substantial departure from
existing practices in a technology
trajectory
• Significantly enhances performance or
efficiency within existing markets,
meeting customer needs more
effectively.
• Ex: Development of OLED displays and
transistor, Advancements in genetic
editing technologies like CRISPR;
Creation of high-efficiency solar panels
Disruptive
innovation
• Introduces new products or services that
eventually overturn existing market
leaders, often starting in lower-end or
niche markets.
• Initially targets overlooked segments,
eventually disrupting the entire market
by offering better value
• Ex: Digital cameras disrupting film
photography; Streaming services like
Netflix disrupting traditional cable TV,
Sony Walkman disrupting portable music
industry
Some differences
Aspect Radical Innovation Breakthrough Innovation Disruptive Innovation
Introduces new products or
Introduces a fundamentally new
Represents a significant leap or services that eventually overturn
technology or concept that
Definition advancement within an existing existing market leaders, often
changes the existing technological
technological trajectory. starting in lower-end or niche
landscape.
markets.
Creates new industries or Significantly enhances Alters market dynamics by
Impact and fundamentally transforms existing performance or efficiency within targeting initially overlooked
Market Dynamics ones, leading to new markets or existing markets, meeting segments, eventually challenging
redefining current ones. customer needs more effectively. established practices and leaders.
Digital cameras disrupting film
Development of OLED displays
Invention of the internet photography
Advancements in genetic editing
Development of the first PC Streaming services like Netflix
Examples technologies like CRISPR
Introduction of blockchain disrupting traditional cable TV
Creation of high-efficiency solar
technology Low-cost airlines disrupting
panels
traditional carriers
Some differences
Aspect Radical Innovation Breakthrough Innovation Disruptive Innovation
Often long-term, as it may take Can be medium to long-term, as it Varies, can be rapid in some
Time Frame for
time for the market and builds upon and evolves existing industries (e.g., tech) but slower in
Impact
infrastructure to develop. technologies. others (e.g., automotive).
High, due to uncertainty in market Moderate to high, depending on Moderate, often starts low in niche
Risk Level acceptance and technological the degree of advancement and markets but increases with market
feasibility. market readiness. expansion.
High tolerance for risk and Continuous improvement mindset Agile and flexible organizational
uncertainty Incremental yet significant R&D structure
Organizational Significant investment in R&D investments Customer-centric approach
Characteristics Strong visionary leadership and a Collaboration across departments Ability to identify underserved or
and Processes culture that embraces change and with external entities new markets
Often relies on breakthroughs in Emphasis on both market trends Often leverages existing
fundamental research and technological capabilities technologies in innovative ways
Types of Innovation – by source of inspiration
• Technology-Driven Innovation:
• Innovations primarily driven by
technological advancements,
where the solution leads to the
identification or creation of new
market opportunities.
• Market-Driven Innovation:
• Innovations primarily driven by
existing or anticipated market
needs or customer demands.
• Design-Driven Innovation:
• Innovations that are driven by
changes in design that alter the
user experience or product
perception, not necessarily
linked to technological or
market changes.
Technology Driven Innovation
• primarily driven by technological advancements. This type of innovation often
leads to identifying or creating new market opportunities. Here are some
examples of technology-driven innovation:
• Ex: The Invention of the light bulb
• Ex: The development of artificial intelligence
• Ex: The development of the Internet
Market-Driven Innovation

• primarily driven by existing or

anticipated market needs or
customer demands. This type of
innovation often focuses on solving
specific problems or meeting
unmet customer needs. Here are
some examples of market-driven
innovation:
• Example: Plant-based meat
alternatives, financial products –
microfinance, telemedicine.
Design Driven Innovation
• Driven by changes in design that alter
the user experience or product
perception, not necessarily linked to
technological or market changes.
• This type of innovation often focuses on
creating products or services that are
more aesthetically pleasing, user-
friendly, or functional. Here are some
examples of design-driven innovation:
• Ex: The design of the Apple iPod was a
key factor in its success
• Ex: The design of the Dyson vacuum
cleaner was a major innovation
• Ex: The design of the Nest thermostat
was a breakthrough in home automation
Competence-Enhancing
versus Competence-
Destroying Innovation
Competence-
Destroying
Innovations:
Competence-
Enhancing
Innovations
Architectural versus Component Innovation

• A component innovation
• An architectural innovation
Component
innovation
• Involves changes or improvements to
individual parts of a product or system,
without altering the overall design or
architecture
• Enhance the performance or capabilities
of the component itself.
• Example: Smartphone Camera
Improvements
Architectural
innovation
First Mover vs. Fast Follower Strategy

Aspect Innovation Leadership Innovation Followership

Focus First-to-market with new technologies Entering market after leaders, focusing on imitation

- Technological advancement<br>- Creativity and risk- - Learning from leaders<br>- Competitor analysis and
Key Characteristics taking<br>- Close ties to knowledge sources and reverse engineering<br>- Emphasis on cost-cutting and
customer needs efficiency

- Potential for market dominance<br>- Higher profit - Reduced market entry risk<br>- Learning from leaders'
Advantages margins<br>- Setting industry standards<br>- Attracting mistakes<br>- Cost efficiency<br>- Exploiting market
top talent and investment gaps

- Limited influence on market trends<br>- Lower profit

- High risk of failure<br>- Significant resource
margins due to competition<br>- Perception as non-
Disadvantages investment<br>- Uncertain market reception<br>- Risk of
innovative<br>- Dependence on leaders for innovation
rapid obsolescence
cues
Aspect Innovation Leadership Innovation Followership
Limited, often adapting to established
Market Influence High, often shaping market trends
trends

Investment in market analysis, process

Investment Focus Heavy investment in R&D and innovation
improvement, and cost reduction

Lower risk due to market validation by

Risk Profile High risk due to uncertainty and investment
leaders

Brand Perception Seen as pioneers and innovators May be seen as imitators or latecomers
Advantages of a Follower
• Technological Improvements
• Customer Feedback and Product Refinement
• Market Uncertainty and Evolution
• Better Market Understanding
• Brand Positioning and Marketing
• Resource Optimization
• Distribution and Supply Chain Efficiencies
Miles and Snow’s Strategic Orientations

Defender e.g., Prospector e.g., Analyzer e.g.,

Reactor
McDonalds Tesla Samsung
• Focus on existing • Constantly seek • Adept at • Lack consistent
products and new analyzing market strategy
processes opportunities trends • Slow in innovation
• Incremental • Willing to be first • Refine existing and often act in
innovations – mover and take products reaction to
reducing cost, risk (incremental) market
improving • Adopt successful • Potential
efficiency, innovations vulnerable in
• Often have a loyal introduced by dynamic
customer base prospectors marketplace
• Innovation networks
Networks

• Networks, in a broad sense, are systems or

groups interconnected for a specific
purpose.
• Innovation networks, are a subset focused
on the collaborative efforts to innovate,
encompassing various stakeholders like
firms, individuals, universities, and
governments.
• These networks are not just about creating
knowledge, but more about the flow and
exchange of knowledge.
Advantages of
networks
• Collective Efficiency
• Enhanced problem-solving capabilities
• Speed to market
• Leveraging scale and resources
• Collective Learning
• Access to diverse knowledge
• Networking and relationship building
• Enhanced learning and skill development
• Collective Risk-Taking
• Cost and risk sharing
• Support for startups and innovators
• Intersection of Different Knowledge Sets
• Access to new markets and technologies
• Facilitation of cross-sector collaboration
• Creating standards and ecosystems
Challenges to innovating in network
• Balancing openness with protection
• Early-stage vulnerability
• Diverse interests and goals – risk of opportunism
• Cultural and organizational barriers
• Managing IPR
• Asymmetry in contribution and benefit
• Coordination costs
• Legal and regulatory hurdles
Characteristics of great
innovation networks

• Diverse and Complementary Expertise

• Clear and Shared Goals
• Open and Trusting Environment
• Effective Communication Channels
• Balance of Competition and Collaboration
• Strong Leadership and Governance
• Adaptive and Flexible Structure
• Effective Knowledge Management
Procter & Gamble's Connect + Develop
(C+D) program
• An open innovation approach launched in early 2000s
• Systematic collaboration with individual consumers, small
businesses, and suppliers
• Key features
• Open innovation approach: The program is open to anyone with an
idea that could help P&G develop new products or services.
• Global reach: The program has a global presence, with a network of
technology entrepreneurs based around the world.
• Focus on speed and agility: The program is designed to help P&G
develop and bring new products to market quickly and efficiently
Procter & Gamble's Connect + Develop
(C+D) program
• Benefits
• Access to P&G resources – financial support, technical expertise, consumer
insights
• Opportunity to commercialize ideas
• Recognition and rewards
• Examples
• Pringles Prints: A line of potato crisps printed with entertaining pictures and
words.
• Ariel Lift & Clean: A laundry detergent that uses enzymes to lift dirt and stains
from clothes.
• Olay Regenerist Micro-Sculpting Serum: A skincare serum that uses micro-
sculpting technology to reduce the appearance of wrinkles.
Open innovation elements of Olay
Regenerist Micro-Sculpting Serum
• Nanotechnology Collaboration
• The development would require collaboration with specialists in
nanotechnology and dermatology.
• Anti-Aging Market Trends
• Catering to the growing market demand for advanced anti-aging
skincare solutions.
• Technological Convergence
• Combining biotechnology, nanotechnology, and skincare.
Miscellaneous Innovation Types
Innovation
Description Example
Type

Network Innovations that arise from collaborative networks, Joint ventures in the development of electric
Innovation often spanning different organizations and sectors. vehicle technology.

Innovations that require changes across an entire

Systemic
system, including infrastructure, regulations, and The shift to renewable energy systems.
Innovation
user practices.

Innovations that involve changes within the

Introducing a new product line within the
Core Innovation existing business model and core capabilities of
company's existing product portfolio.
the company.

Innovations that require the company to venture

Transformational A company transitioning from traditional
into new areas, often requiring new capabilities or
Innovation manufacturing to digital manufacturing.
altering the core business model.
Miscellaneous Innovation Types
Innovation
Description Example
Type

Closed Innovations developed internally within a Developing a new product within the company's
Innovation company, using internal resources and capabilities. R&D department.

Innovations developed through collaborative

Collaborating with universities to develop new
Open Innovation efforts with external entities, like other companies,
technologies.
universities, or the public.

A new software application that can be used in

General Applicable across multiple industries without
various industries, such as healthcare, finance, and
Innovation significant modification.
retail.

Industry-Specific Highly tailored to the needs, regulations, and A new medical device specifically designed for a
Innovation characteristics of a specific industry. particular medical procedure.
Types of Innovations (Tidd)
Type of Innovation 'Do Better' – Incremental Innovation 'Do Different' – Radical Innovation

Modified/improved version of an established

service offering (e.g., customized banking
Product Radical departure (e.g., online retailing)
products, add-on features in travel, enhanced
telecom services)

Lower-cost delivery through back office Radical shift in process (e.g., moving online,
Process optimization, waste reduction (e.g., lean, six self-service shopping, hub-and-spoke delivery
sigma approaches) systems)

Radical shift in approach (e.g., low-cost travel

Opening up new market segments (e.g.,
Position innovation, shifting healthcare provision to
specialist insurance products for students)
communities)

Rethinking the underlying business model (e.g.,

Radical shift in mindset (e.g., moving from
Paradigm migrating from insurance agents to direct and
product-based to service-based manufacturing)
online systems)
Organizational Implications of the Three
Strategies
Aspect Incrementalist Innovation Radicalist Innovation Blue Ocean Strategy

Continuous improvement, High-risk tolerance, Strategic innovation, market

Culture
detail-oriented embracing disruption creation

Strategic market research,

Resource Consistent, moderate R&D Substantial upfront
cross-functional
Allocation investment investment, long-term focus
collaboration

Risk Lower risk, based on proven High risk, potential for high Moderate risk, exploring
Management models failure rate untested markets

Flexible, adaptable Structures that support

Structural Traditional structures with a
structures for disruptive cross-functional
Needs focus on efficiency
projects collaboration and innovation
Managerial Implications of the Three Strategies

Aspect Incrementalist Innovation Radicalist Innovation Blue Ocean Strategy

Leadership Operational efficiency, Visionary, inspiring through Creative and strategic

Focus incremental improvements uncertainty thinking, market exploration

Encouraging staff Tolerance for failure, Leading change,

Employee
contributions, recognizing fostering a culture of encouraging innovative
Engagement
improvements experimentation thinking

Strategic decisions to
Decision Focus on refining existing
Bold, disruptive decisions identify new market
Making products/services
opportunities

Risk Cautious, incremental risk- Willingness to embrace Balanced approach to

Approach taking significant risks exploring new markets