Radical or Gradual Innovation?

“Radical Innovation” refers to high risk, high uncertainty projects which hold the potential to both influence the marketplace and bring high returns to firms. It’s a kind of “promised land” of differentiation, growth and wealth for businesses and nations. Radical innovation is different from gradual innovation, in which small, incremental changes are made to activities in order to create more value with less waste. The focus of this article is how firms can realize radical, or breakthrough, innovation, which is the more difficult type to foster.

A 2007 McKinsey Global Survey revealed that 70 percent of corporate leaders call innovation one of their top three priorities. They believe that breakthrough (or radical) innovation will have the greatest affect on corporate performance. The report shows that these leaders agree – “innovation is the best strategic decision for sustainable competitive advantage.” Yet these same leaders report that strategies for igniting innovation in their companies elude them. Too many barriers exist. Why?

One reason is that radical innovation, while prodigious in its rewards, is also prodigal in it’s demands on resources. Translated: breakthroughs can payoff big, but the process is costly, and the risks huge. While investment and risk cannot be avoided in the rigorous pursuit of innovation, an understanding of what is known about successful innovation strategies can help organizations:

1. Trust in the wisdom of the pursuit
2. Move forward with greater confidence that the steps they are implementing are the right ones to truly foster breakthrough innovation

Another barrier to successful radical innovation initiatives is that the real driver of innovation is culture, and culture is the most difficult layer of the business pyramid to change (Flameholtz & Randle, 2007). When the words “culture” and “innovation” appear together in an article or research study, the discussion will most likely focus on national cultures, emphasizing the belief that nations demonstrating values of individualism, high risk tolerance and power distance are more predisposed to innovation than collectivist cultures that value hierarchy, social harmony and low risk tolerance. New research, however, indicates that corporate culture, not national culture, has the greatest impact on radical innovations.

In January of 2009, Tellis, Prabhu & Chandy released the results of their research into radical innovation across nations. They collected a wide range of data on 759 firms from a cross section of 17 major economies of the world. Their findings are startling. First, in every nation, radical innovation varies a great deal across firms. So, the idea that national culture is the innovation driver appears dubious. What, then, accounts for the difference between firms that innovate radically and those that do not?

No matter what the country, national culture or climate, firms that produce the greatest breakthrough innovations share three attitudes. These attitudes, the study finds, are “the willingness to cannibalize assets, future orientation, and tolerance for risk.” How can corporate leaders use this research to drive innovation in their own firms? They must approach it from the highest level of their pyramid: the corporate culture.

How can firm leadership begin to address the cultural changes necessary to spur breakthrough innovation? They can begin by measuring their own firm’s cultural practices using the diagnostic tool developed by Tellis, et. al. This is a great way for firms to benchmark their cultural practices against others of the same size or industry. Then, they can begin to manage and maintain an innovation-producing culture.

Next, leaders can shift their focus away from the number of patents they produce (numbers of patents to do not positively correlate to innovativeness, oddly enough) and toward cultural attitudes that drive radical innovation. Are they willing to cannibalize current revenue producing successes or do they slavishly protect them? A successful stream of profits from existing products and services generally leads to protective measures, in which the firm attempts to hold onto that revenue, rather than sacrificing profits for future discoveries. Do they rest on their past successes (or worse, romanticize them), or do they stay ever watchful of what the future may hold, what might make current profit streams obsolete, and focus on how to meet new challenges down the road? Finally, can they embrace risk? Radical innovation cannot flourish in a fearful atmosphere where risk avoidance is rewarded. “Dare to fail” is the mantra of the innovator.

Some other keys to innovation success include:

1. Make innovation a core part of your leadership agenda. Start every day with a discussion of innovation and corporate culture.
2. Managers must model behavior that encourages innovation.
3. Top innovators must not be penalized for failures; this will only discourage the risk-taking needed for the next big discovery.
4. Leadership teams must make the time to focus on new topics (future orientation).
5. In larger firms, collaboration between marketing and R & D departments can be essential to successful innovation.
6. Mentor both high performers in the firm to become future innovators, and mentor those who may not share in innovation pursuits but who could become innovation “antichampions” if not taught to value innovation, and tolerate the risk inherent in its development.
7. Accept failures an inevitable.
8. Try to balance your leadership team with people who are abstract thinkers as well as pragmatists. This mix can help move innovations forward with measurable goals.

Finally, team member selection is of utmost importance. Radical innovation teams need folks who are comfortable working on problems for which paths to solutions are unknown. Such people possess high levels of what’s called “associative fluency.” Associative fluency refers to a person’s ability to make connections across a wide range of domains. It allows them to imagine many solutions to problems, and these people are less like to get stuck “narrowing,” or finding solutions only within their domain of expertise. They are multi-dimensional people. So, instead of looking for domain experts for your radical innovation team, look for a mix of people with broad experiences and the ability to see problems from many angles.

Many firms want to create structured, repeatable processes for radical innovation. Instead, the research shows that building cultures and infrastructures that support innovation yield greater returns. In “The Human Side of Radical Innovation” (O’Connor & McDermott, 2004), the authors define radical innovation maturity as “the degree to which the organization has systematically implemented processes for initiating, supporting, and rewarding radical innovation activities.” This is a cultural shift, and it’s not easy. But it may be the key to the kingdom of the future.

References:
Flameholtz, E.G., Randle, Y. (2007). Growing Pains. John Wiley & Sons, Inc., San Francisco, CA.
McKinsy Quarterly (2007). How companies approach innovation: A M
cKinsey global survey. https://www.mckinseyquarterly.com.article_print.aspx?L2&L3+O&ar=2069
O’Connor, G. C., McDermott, C.M. (2004). The human side of radical innovation. Journal of Engineering and Technology Management. 21, 11-30.
Tellis, G.J., Prabhu, J.C., Chandy, R.K. (2009). Radical innovation across nations: The preeminence of corporate culture. Journal of Marketing, 73, 3-23.

Julia Fischer Baumgartner is a founder and principal of art-cm, a consulting firm specializing in helping entrepreneurial stage start-ups move up to the professionally-managed level.