Radical versus incremental innovation: The time for change is now
- Posted by Gerhard Pramhas
- On 22. November 2017
Will your company still be in existence in 10 years or more? The trend shows that company owners are asking themselves this question with increasing frequency – and for good reason! All it takes is a quick look at the automotive industry to see: ongoing development and product improvement are not enough in themselves. The fast-acting and technology-oriented era we live in demands a great deal more. Specifically, it demands investment in radical innovation and the development of new technologies and products.
Innovation based on the example of the automotive industry
The invention of the motor vehicle, powered by a combustion engine, was one of the most important radical innovation of the 20th century for the automotive industry. New industry sectors, new processes, new technologies and new professions were created. Indeed, before 1900, there were no panel beaters, no mechanics and no filling stations. Since that time, the automotive sector has thrived on incremental innovations. Our vehicles are becoming faster, more comfortable, safer and, above all, they are getting sold in ever greater quantities. It proved possible to cut development costs, and functions were improved on the strength of in-depth knowledge. However, the integration of a navigation device in a vehicle does not constitute the invention of a new product. These two types of innovation can therefore be defined in the following terms:
- Incremental innovation involves the changing of existing systems, products or services. An example of this is the expansion of memory capacities in the ‘smartphone’ product.
- Radical innovation involves the development of entirely new systems, products or services, of a kind that has never existed before. One example of this would be the invention of the iPhone and the associated revolution on the mobile phone market.
“Innovation is a process of creative destruction”
The irresistible rise in electrical mobility, essentially an ancient concept, is going to travel through the automotive industry like a tornado. Manufacturers who fail to participate in this process of technological change will leave the market, following the principle of “Innovation is a process of creative destruction”. Mind you, radical innovation does not only affect manufacturers. It also has an impact on all professions associated with innovation: suppliers, car dealers, filling station operators, public-sector entities, … They all need to take care not to miss the boat, or when the chips are down, to seek out new business sectors for themselves. If they fail to do so, then their businesses will go under, regardless of their size and the success of their track record. The past can provide us with plentiful examples of cases where this has happened: Of the 12 largest industrial corporations in the USA that were listed on the first Dow Jones Index back in 1896, General Electric is the only one that still exists today as an independent corporation. All of the others have either disappeared from the market or have been swallowed up by what started out as smaller competitors.
One fact that we need to take on board from these examples provided by the automotive industry: Companies must change. If you are ready for this, contact me, call me on +43 676 956 0164 or schedule a Skype meeting. A free-of-charge initial discussion lasting 30-45 minutes is all it takes to clarify this sector-specific subject matter with you, and to define the first steps to take.