The Four Quadrants of Innovation: Disruptive vs Incremental
December 1, 2009 29 Comments
I recently wrote up a post, Most Dangerous Innovation Misperception – The Silver Bullet Approach. In it, I discussed the issue of organizations myopically focusing on only disruptive innovations to the exclusion of more incremental or sustaining innovations.
In doing more research on the subject, I began thinking about the dynamics that apply when a firm pursues different kinds of innovation. A post by Venkatesh Rao, Disruptive versus Radical Innovations, was very useful for distinguishing between disruptive and radical innovations.
Building on that, I wanted a framework for delineating innovations based on their technology and business impacts. Because they’re not necessarily the same. The four quadrants below describe the dynamics for innovations according to their technology and market impacts:
In each quadrant, there are different rationales and issues that apply. Let’s take a look.
Existing Tech, Manage Existing Market
The lower left quadrant represent innovations that leverage existing technology, and service existing customers. This is every day innovation. The block-n-tackle innovation that keeps companies nimble and operating at rates above industry averages.
Example? See how Walmart improved the fuel efficiency of its vehicle fleet:
Wal-Mart has taken a number of steps, including the installation of diesel Auxiliary Power Units on all its trucks, and applying aerodynamic skirting. On the tire side, Wal-Mart is working with super single tires. and is testing nitrogen-filled tires and an automatic filling process to maintain constant tire air pressure.
Improving the customer experience is also a critical opportunity. In an era of social-media empowered customers impacting your brand, the consequences of failing to improve the customer experience are higher than ever.
But this quadrant is the one often pooh-poohed by many in innovation. I like the way PriceWaterhouseCoopers puts it in this blog post:
An unintended consequence of the Innovators Dilemma has been that companies have begun believing that unless they were pursuing a strategy of seeking disruptive innovations, they were somehow losing out.
Walmart’s efforts have paid off. The retailer has held relatively strong during the Great Recession, as seen in its stock price. And Toyota famously gathered over million ideas a year from its employees to emerge as a global leader in the automotive industry.
Existing Tech, Create New Market
In this quadrant, existing technology is leveraged to create a new revenue streams. This is the quadrant where the following phrase applies:
Good artists borrow. Great artists steal.
The simple application of a technology that serves one purpose toward a different purpose can be disruptive from a market perspective. It’s not a large technological leap. It’s the intelligent application of what’s already at hand.
Twitter is a great example. The technology itself is…simple. Web form. Subscription model. Limit to 140 characters. Yet it’s revolutionized the way people share and find information, causing Techcrunch’s MG Siegler to compare it to a modern day Walter Cronkite. All for a simple little web app. Here’s what WordPress founder Matt Mullenweg says about Twitter:
Whether the Twitter team intended it or not, they’ve built a killer and highly addictive reader platform with dozens of interesting UIs on top of it.
The thing with these innovations is that they are very much a market-determined disruption. This isn’t some sort of EUREKA! the moment the technology is rolled out of the labs. It takes the market to say that it’s disruptive.
Clayton Christensen (Innovator’s Dilemma) types of innovation will often fall in this quadrant. Existing technologies applied in new ways to address the lower end of the market.
Venkatesh Rao has a great perspective on this quadrant:
In fact, in most documented cases of disruption, the disruptive innovation was a minor/incremental change and well within the technical capabilities of the incumbent (and was often taken to market by a renegade spin off from the original company).
This quadrant is the best one for producing organic growth for companies. It has lower risk, but produces meaningful revenue growth.
Radical Tech, Create New Market
If any one quadrant defines the popular view of innovation, it’s this one. And that’s not without good reason. In the previous quadrant, existing technologies are applied to new markets. Well, existing technologies have to come from somewhere. That’s this quadrant.
This is the cool stuff that the press writes about. Check out AT&T’s Technology Showcase for a great example of some of these new technologies.
Amazon’s Jeff Bezos has done well in this quadrant. His latest innovation, the Kindle, is an example. It includes a new “electronic ink“. Ability to read text aloud. It’s incredibly thin profile.
And it’s paying off. Amazon reports that the Kindle set a new sales record this November. Which points to the Kindle as a strong new revenue stream down the road, and a new source of sales for Amazon’s book sales. A home run in this quadrant.
These types of innovations are important for maintaining the long-term growth rates of companies. They provide needed growth, replenishing changes in existing markets.
Which leads us to the final quadrant…
Radical Tech, Manage Existing Market
There are times a company’s business is under attack, and it needs to address changing behaviors in its market. Innovations in this quadrant share the high risk profile of the previous quadrant, but they have a defensive nature to them. They don’t seek to find new opportunities, they seek to address changes in customer behavior.
Hulu strikes me as an example of this. A joint venture of NBC, Fox and ABC, Hulu lets users view shows on computers. This initiative addresses the emerging market shift away from televisions to viewing on all sorts of devices. It’s a better answer for this shift than the music industry initially had for the proliferation of MP3 songs on various P2P sites.
Gary Hamel has noted the increasing volatility of markets across the globe. Customers have better access to information about new options, and are willing to shift their spending more quickly. With this dynamic, expect some increase in activity for innovations in this quadrant.
Companies Need a Portfolio of Innovation Opportunities
In a recent Accenture survey, 58% of executives said their organization is looking for the next silver bullet rather than pursuing a portfolio of opportunities. When I hear that, I think first of the upper right quadrant (radical tech, create new market). These types of innovations are incredibly important, and should be part of a company’s innovation efforts.
But there’s really a good basis for expanding that view to look at the other types of innovation: technology vs. market, disruptive vs incremental.
I’m @bhc3 on Twitter, and I’m a Senior Consultant for HYPE Innovation.
About Hutch Carpenter
I'm Not Actually a Geek 
Great map. You might also want to look at this one: http://www.slideshare.net/sniukas/the-innovation-map-a-framework-for-defining-innovation-outcomes
Great presentation Marc. Love the breakdwon of different types. Favorited it on SlideShare.
This is a fantastic map. I like the simplistically. Its amazing to me that there are so many incremental falsities out there that describe the nature of the beast and the notion of calmness in the futuristic being that is mana.
Hi,
It is interesting for me to view your map with reference to technology and the low risk nature of customer experience.
In some of my experience working with companies the biggest innovative change they have done is to be truly customer service orientated and create deep relationships with clients. They often find this risky since they have lost contact. Of course, they use technology to grow the relationship but personal contact can still be revolutionary for them (I have recommended hand written cards to special clients – once this concept seen as a waste of time and now really valued.) Perhaps I am off topic but managing customer experience can be a risk for example, getting customers to opt in for permission based email scares some companies since they can lose clients who do not opt in (probably not clients anyway) I recently wrote a note on my site to help encourage people to use opt in email showing my experience. http://www.thewondertechnique.com/email-marketing.htm
Perhaps, I am again off topic but you made me think more about ideas and I appreciate that
Enjoy a great day,
David
http://www.TheWonderTechnique.com
For example,
Why does everything have to be an innovation?
Not everything does. But if that’s an area of interest, this post was written for you.
I want to be in the upper left-hand quadrant where disasters occur. This is the place where apocalypse happens and we eat cake. http://apocalypsecakes.wordpress.com
Disasters occur?
I think your grid is very good. I wonder if you have considered further delineating companies who fit in on this grid based on size, maturity, new market entrants versus existing market entrants – instead of using assignments that might fit for most companies. I think they all can fit on the same grid pattern; however, the switches and knobs (drivers) might be different for each. Other thoughts: Agile thinking has certainly changed many organization’s thinking with respect to the concepts of disruptive and radical and as a result, many smaller companies are coming up with highly agile yet radical and incremental ideas – a good example, I believe is squareup.com (by the co-founders of twitter.) The key to all of this is the concept of whitespace – which is what MIT has sought to analyze.
Thanks John – much of the grid applies regardless of company size or age. Perhaps the lower right quadrant is more applicable to older, bigger firms.
The first that caught my sight was the chart and once I saw it, I knew what it was about it and all I can say is, that is so true. Some people, I think, need to understand this when they’re talking about business, money, and the economy. Lately, I’ve been hearing a bunch of crap about how markets are this way and now, I can basically refer them to this and it will explain most of it. Thanks for the useful post! Will read more!
Thanks – glad you like it.
Your first paragraph is the most provocative for me. We are living in a time where everybody invent a new and and virtual scenario, based only upon a web 2.0 description.
I wish you were an evangelist in my country, Spain, where so many people come from yours to tell us scenarios that Alvin Toffler, among others, described many years ago.
To tell you someting about me; in May 1977 I coined the name for a new technology,TELEMATICA, that I described as the total integration of informatics and telecommunications.
Thanks Luis – this post is a reaction to the drumbeat of calls for disruptive innovations. They are valuable, and are critical for companies long term success. But lower level types of innovations are quite valuable as well.
This is really interesting, but needs to be pursued thoroughly. I think I will check your site more closely, while I’m here, maybe I will get some new tricks and tips for my own LinkedIn Blog. Thanks so much! You’re doing great!
I hate Hi-LOW quadrants. But like this one!
Very nicely summarised. An interesting parallel of “Existing Tech, Manage Existing Market” like WalMart are Indian IT Services companies Infosys, Wipro, Cognizant (I am not in one).
Inspite of being Pooh pooed for yrs by analysts for being too stuck in a tactical layer and lacking “non-linear” services … they keep toiling away at day2day delivery excellence. Now with their enviable size, margins and cash balances … they have are respected first citizens in the IT Industry.
Thanks Sridhar – I wanted to avoid declaring “good” or “bad” with these axes. Rather, they are simply characteristics, with their own dynamics.
Actually, Norwegian publishers tried to launch ebook-readers as early as year 2000. Back then, the marked didn’t respond very well and the innovation failed.I guess part of the technology hadn’t been developed enough to make ebook-reader a killer product. I should also add that the global english-speaking market is a way easier target than a small fragile Norwegian(-speaking) market.
I guess this also applies to digital cameras. There is nothing new with taking pictures, but the digital storing have made it disruptive. It has affected other businesses as well.
Can we put touch-screen gadgets in the same category?
The grid representation certainly bring clarity to concepts relating to different types of innovations. As one who has been working in the top right quadrant, it has been very frustrating at time to explain to people why our work is different from the rest.
These are certainly very important distinctions to be recognized as each of these quadrants require different strategies for success.
No doubt there are quadrants within these quadrants. I am sure as delve in to the details, we would be able make the necessary distinctions while working out innovation promotion, facilitation and funding initiatives
This matrix apart from being decades old leaves one thinking in boxes.
In this case a description of what it is like to be at the centre of the box (the intersection of all thge boxes) would seem the perfect place to be. Or would it?
I do not believe you CAN sit in the middle of the grid. Rather, you place chips (resources) in more than one of the quadrants that make sense for your strategy. I recently worked for a furniture company that wanted cutting edge technology, but was not prepared to introduce it into the marketplace. In that case, those resouces would be wasted, and would have been better spent in a quadrant where the comfort level was much greater.
Hi Hutch,
interesting post, but I don’t agree with all.
I agree with you that the upper part of your map is about disruptive innovation (such as defined par C. Christensen).
Where it seems that we disagree is when you mention that in the “Existing Tech, Create New Market” part, there is “low risk,many competitors”.
I think that the risks are very high; they’re not technological, but they are about market, potential customers : is there a market for your innovation, who will be interested by the usage provided by your innovations (given the “performance” are valued as low by customers of existing markets).
I also disagree about the number of competitors : I think that if you managed to offer a disruptive innovation, and if you have identified some kind of niche market who is valuing your innovation for the usage that it’s providing you ‘re in a sweet spot 😉 Even though, at some time, you’re going to attract competitors, that we’ll be after crossing the chasm, and all of your competitors will be “MeToo”. And, as you know, it’s very easy to manage “MeToo”… you only need to be professional and execute at the highest level…
Best Regards
This is really a visual representation to help manage resources and risk. Technology will develop as the future unfolds. The trick is to hook up your company’s cart to the technology that will drive its strategic business. Wal-Mart’s business model makes it a less than ideal place for some new, disruptive technologies (think first generation microwaves, with high costs and high margins); but when the costs come down to make the margins attractive, BINGO! Companies really need to look inward to find what they do well, and what they have the personnel to pull off. Mapping past successes on such a map will give an indication of which technologies fit your business. After all, risk to AT&T is different than risk to Wal-Mart!
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Hi,
I think the lines move about depending on the viewpoint of the individual and group and various influences. And changes in such areas over time. Packaging jet tech in a buggy whip will probably miss creatives and traditionals, but high tech processed-preserved Mongolian tomatoes might well sell as traditional Western products to modern Beijingers.
Hello I am very interested to use this framework for my studies. How can I make the reference for this ?
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