Many business leaders have dreams of transforming their business through innovation labs, new processes built around innovation, or developing a new innovation team. They all want to turn their business into the next Apple, however the problem is that many don’t actually know what innovation is.

Innovation is much more that just creating something new. History will show us that instead, innovation is all about tearing down the existing order of things. This is why many organisations are “innovation-averse”, as innovation can be a threat to their existence. It’s important that you understand innovation so that you can put together a strategy for your business to move forward. Even if you have no plans to innovate, you can bet that your competitors do. Change is inevitable; the question is whether you are going to lead the change or simply react to it. There are pros and cons to both approaches which we’ll look at in this article.

The scary thing about innovation is that no-one knows what will be disrupted by new innovation until its released. Sometimes innovation can result in a completely new line of business being created, or it can destroy another line of business completely. The result depends on how your business acknowledges and then reacts to the change.

It’s extremely hard to create something new without embracing change and sacrificing some of your existing investments. A complete refusal to embrace change altogether is the biggest risk of all. It can be easier to simply reject change as opposed to embracing it. Real innovation involves strong processes and culture, which is supported by visionary management. Unless you’re willing to restructure your business, then you’re not ready for the radical change that comes with innovation. Instead you are better suited to incremental change, known as incrementalism. While you won’t be completely revolutionising your industry, you can still create significant value with small incremental changes.

Innovation vs Incrementalism

More often than not, the innovation that companies want isn’t actually innovation. It’s simply incremental improvements on an already existing process, system, product or service. This is still a form of innovation, and is a good way to generate value while making the most of existing systems. Incrementalism is the best approach for many organisations and is arguably where most of the value we see from organisations comes from. Incrementalism provides a way to make small improvements, which gradually can lead to significant value improvement. If there is a way to achieve your vision through an incremental approach, then it is often the best path to take.

The downside to incrementalism is that the value creation will only work as long as the business unit is stable and doing well. Some markets can stay stable for long periods of time, however change is always inevitable. You can either lead the change or be surprised by it when it occurs. The problems is that many businesses are too slow to adapt and suffer the consequences.

The Various Types of Innovation and the Cost Involved

A common misconception is that innovation should always be desired. However in reality, innovation comes with a cost, and that cost is on the rise. When you innovate, you’re inevitably disposing of something else – products, infrastructure, time – in the hope that your innovation initiative pays dividends. No-one in their right mind would want to do an organisational restructure just for fun. There are two key reasons to pursue innovation:

1. You have no choice
2. The upside of innovation is far greater than the cost of potential failure

Managers and business owners often get pressured into innovation out of fear, or they dive head first into something new because they love a new technology on the market. Regardless of the reason, it’s common for people to move forward with innovation with only a half-baked plan in place, and this often does not end well. The outcome can often depend on the type of innovation you pursue, usually it’s one of the following:

• Defensive vs. offensive innovation
• Considered vs. rushed innovation

Final Thoughts

Innovation is a difficult concept to grasp and many have it misunderstood. Incremental change is often confused with innovation, where a transformational change disrupts an industry. It’s not always clear when or how disruption will occur, so organisations need to put themselves into the position where they can best drive the change, as opposed to reacting to it. It’s important to remember that incrementalism is an overlooked strategy for value creation that many organisations have great success with. Regardless of your approach, it’s important too differentiate yourself by embedding innovation within your management, culture and processes.