Different Levels of Innovation

Grant Leboff: Costas, I’m interested in the different types of innovation. I think incremental is something that people understand because it says what it is, but then we talk about stretch innovation and game changing. What’s the difference between the two and when are they applicable?

Costas Papaikonomou It’s probably not enough to just think about what the impact is for your customer or consumer, but it’s equally important to think about what is the impact for my business across these three levels of innovation?

‘Incremental innovation’, the small tweaks, is probably just going to fit in your operational ecosphere, just like your existing products.

‘Stretch innovation’ is slightly different because you’re probably stretching into a new target audience, maybe into new formats, maybe into new sales channels. If you are changing a little bit more than what the original product was all about, and that has an impact on your business as well. This is because you may need to find new buyers, you may need to change a whole communication program to say, switch from talking to women to talking to men, for example, which is a typical stretch you would see.

Then ‘game changing’, changes even more. That’s, literally, starting from scratch and saying; ‘I’ve got an idea for an opportunity – I think there is something that we can do for a particular new group of people we not serving at all yet, and we have to start from a clean slate’. So the impact to your operational business is huge, because everything changes, you need to do everything from scratch and the question is; when do you do which? And that’s a very simple thing.

Incremental; you do all the time. Whether you’re still making prototypes, almost, and you’re at the very start of the S curve, going up, you have to make small improvements all the time, but you do that all the way through to the moment the product goes extinct, basically at the very end of its life cycle.

Stretched innovation; that’s probably something you start looking at when you find you’re losing on price, when all of a sudden the competition around you is stronger than it used to be and it’s not obvious that you’re winning every single battle. That’s probably the moment for you to start growing your market into, let’s say, new dimensions, new target audience, new channels, etc.

Game changing innovation; because it’s so difficult and such high risk to your own business, that’s something you start looking at the moment you realise that the business you’re in, the market you’re in, is at complete commoditisation. It’s at a complete end of its maturity S curve, at the top end. It’s when the Zig Ziglar people come in! If all your innovation projects seem to be about cost saving, that means you actually need a game changer, because you’re going extinct, basically. So when your back is against the wall, you could say that’s really when you need a game changer. It’s the place when you know when the product is ended or has come to the end of its life cycle.

Grant Leboff: And how do you build that into an organisation? There are so many organisations we can give where intransigence; whether it’s political, whether it’s because they don’t understand the market properly – but you can think of companies like; Yellow Pages were in the business of search right, and yet the search engines came and killed them and they almost didn’t notice. Amazon was selling books online and yet Barnes and Noble, the biggest bricks and mortar bookstore in the world, didn’t react until quite late. So how do companies build-in something to start to understand the market and know when they’ve got to stretch or completely game change, or whatever it is?

Costas Papaikonomou I guess there are two answers. If you are a well oiled machine as a business and you are a truly successful operational system, then you probably don’t want to do any game changing at all, because that’s just not going to work. You’re just not set up to do this, and if you did set yourself up to do it, you would become a less efficient operational machine. But what you can do, is a lot of incremental and good, let’s say, stretched innovation, because that can still fit in to the operational system. But if you do it often enough, all the time, you don’t need the game changer because, rather than having to do big leaps every, say, five years, you can do smaller leaps every year. You can maintain your relevance, and you can basically, incrementally, work your way through, let’s say, into the new product formats that would otherwise require a game changer.

On the other hand, if you are a not such an operationally well oiled machine, you might as well be that disrupter, and then focus on the game changer and see if you can disrupt some of those big blue-chips and some of the big market leaders who are raking in all the cash that you want.

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