Slide thumbnailImprovement vs. InnovationR & D Management

R & D Managers

Perspective in an Innovation Organization

An introduction to BlueCallom innovation for R&D Managers

Since the beginning of the industrial revolution, companies have improved their products and services. Some improvements have been more exciting than others. New companies produce the most successful products in different varieties, giving customers a choice. Only in the past 50 years have some of those market entrants created competing products that were from the ground up different than they became a new market leader, changed the way business is conducted, pricing is structured, products are accessed, and more that we speak innovation.

Innovation can be defined as an

Elevation how people or organizations do things that were impossible before. Mostly paired with a new way of selling and servicing and involving new players supporting the innovation and disrupting an entire market segment.

All successful innovations in the past 25 years meet that criterion. Everything else was an incremental development and improvement of the same thing, offered the same way with the same skillset. Users did not need to change their behavior but did not get to the point where they could do impossible things.

Innovation is pushing existing solutions and thinking to the side. Innovation questions the status quo and embraces an alternative.

This is why R&D centers have the most challenging time innovating – they need to question their work and embrace a competing solution. This is a function that our brain has not developed.

The consequence is that an Innovation Team will be competing with an R&D team. However, the good news is that the R&D team will make an existing improvement even more robust, and the competing innovation team will make their innovation even more disruptive. Regardless, when the company turns into an agile and innovative company, both groups win.

Making a difference

You are making a difference by understanding the value of innovation and its profound difference in objectives, timeline, management, financing, and execution to existing product improvements. From a finance point of view, the R&D department will always be more extensive and has more financial responsibility than the innovation department. Keeping an eye on innovation and watching it for about five years may be the time that R&D will get involved in improving what was an innovation five years ago. At that stage, the former innovation has a significantly bigger potential for improvement, and R&D would now even have an interest that the challenger will be successful.

Process Comparison

When comparing Innovation with Improvement, you will find some significant differences:

Innovation has a constantly changing budget line based on the various episodes innovation goes through. An ROI is expected between 7 to 15 more years.
Improvement has a budget often based on revenue and an ROI expectation of fewer than three years.

Innovation takes about one year to launch, three years to see market acceptance, and 10+ years to have scaled globally. During that time, the team grows with its revenue, typically exponentially from a handful of people to the thousands.
Improvements have only up to two years unless it is an all-new car, train, airplane, etc.

Improvement processes have been well-understood for over a hundred years now. The product is known, the customer base exists, marketing and sales only need to explain the differences to previous versions, and production and logistics need to adjust based on what they have.
Innovation processes are very new. The product from the innovation process is still being determined when the team starts. There has yet to be a customer base for the Innovation, so sales and marketing need to build it up from scratch. 90% of existing customers are skeptical and will buy slower than they used to buy an improved product. Manufacturing needs to be built from scratch and scaled in many dimensions of time, budget, manufacturing technology, etc. Innovation is such a novelty that the market adopts it very slowly for the first two to three years. Improvements are made daily but for a minimal quantity of products. Then the so-called jockey sticks effect kicks in, and scaling needs to be done at light speed.

Improvement teams must be very cautious about any change as it will impact a large population of products. It’s a near-zero risk tolerance operation. Teams must follow quite a set of rules, regulations, and processes to ensure that the next generation is flawless. And there is no way to loosen up such a structure.
Innovation teams must be open-minded, and risk-takers. They must be aware of the risks and make their customers aware of them too. Mistakes only affect a tiny population of products and can be fixed or replaced much more accessible. The innovative product is a market-born product that lives and grows as it goes. Teams need to be able to question every step in a process, any rule, and any regulation. They build a new production suited exclusively for innovation. They do the same for logistics, sales, and marketing to be a perfect fit for the innovation and its market.

Mixing the teams and their different abilities, mindset and behavior would jeopardize both operations.

Knowledge Base

The BlueCallom Corporate Innovation Framework (BCIF) is an important basis for almost all general innovation understanding. The corresponding education programs include the Innovation Executive Workshops and the BlueCallom Corporate Innovation Framework training. You find some more helpful educational material in the Learning Videos section or under white papers.