Radical Versus Incremental Innovation

Do you think incumbents and entrants should treat incremental and radical innovation differently? If so why? If not, why not?

Incumbents and entrants must treat incremental and radical differently in order to stay aligned with their company and division’s strategic business goals. Research at the University of California finds that, in the 20th century, small firms produced 2.4 times as many innovations per employee as small firms.

Profits: While incumbents are more likely to have the necessary funding (large research and development commitments) or from other sources (joint ventures), they are less likely to introduce radical innovations to the market because of the large investment it must make in a risk filled environment. Without a guarantee that it will be drive profits and increase shareholder value, incumbents will play in a safe environment, in more cases than not. According to an article by Robert Stringer, large companies may feel they have much invested in the “status quo” within their business or industry and would prefer to focus on incremental roll-outs.

Culture Limitations: Secondly, often many incumbents’ organizational culture prevents them from pursuing radical innovation, so it more likely that they will move slower to launch an innovation, perhaps than entrants. Despite the desire of most large companies to be innovative, most are not equipped to implement a growth strategy based for radical innovation. The may lack the right leadership practices, customer relationships, production capabilities and work force to successfully deliver radical breakthrough and innovation.

Markets and Networks: A Harvard Business Review article by Bhaskar Chakravorti suggests that as markets become more like networks, it will be more challenging than ever for innovation to catch on. He uses an example that a bank is unable to shift to a faster transaction processing system if the change affects how the bank communicates with other banks. Entrants will...