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Radical innovation

Updated Wednesday 18th January 2006

Sometimes a new idea changes the landscape, and even well-established companies struggle to cope. This course extract from Managing Knowledge explores how DVDs, digital cameras and Google are all examples of radical innovation

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Innovation literature, drawing on the work of Joseph Schumpeter, the economist who is most associated with the key role of innovation, draws a conceptual distinction between incremental and radical innovations. Incremental innovations result from linear progression where each innovation can be to some extent predicted from innovations that precede it, such as the sequences that make internal combustion engines more efficient.

In contrast, radical innovation results from discontinuous change – that is, the innovation could not result from a linear extrapolation or progression from the initial conditions. For example, incremental innovations in coal-fired power generation could never have led to nuclear power, nor could incremental innovations to cathode-ray tubes lead to flat plasma screens.

"this radical innovation results in 'gales of creative destruction'"

Radical innovation implies non-linearity and discontinuity. Radical or discontinuous innovations result in fundamental changes to practice and markets, or indeed their replacement. Such 'difference' can be traumatic. For Schumpeter, this (radical) innovation results in 'gales of creative destruction' that wipe away the old while creating new opportunities.

In late November 2004, Dixons, a major UK electrical retailer, announced that they would no longer stock VCRs (video cassette recorders) because these have been outmoded by DVDs (digital versatile disks) and digital hard-disk storage products.

The familiar but bulky cathode-ray tube (CRT) televisions and PC monitors are being replaced by flat-screen technology. The manufacture of flat screens is a completely different process from the manufacture of cathode-ray tubes. So when this transition happens it is likely to destroy manufacturing plant and machinery and make CRT design and manufacturing skills redundant.

"services under threat need to develop strategies to cope"

In services, we are currently seeing the decline of photographic film development and printing services, as photographers switch to digital cameras and home printers. The postal service for letters and cards is being replaced by e-mail and mobile telephone communications. Clearly, organisations that have developed core capabilities in the technologies or services under threat need to develop strategies to cope with changes driven by these innovations.

Thankfully, for those under threat, radical innovations with this destructive potential are rather more rare than incremental innovations. However, sequences of incremental innovations can accumulate to have significant impact, particularly in the area of knowledge innovation.

An essential part of any organisation’s activity is related to integrating its sense of self and the wider environment in which it is embedded. This can be approached from many different 'knowledge angles'. Schumpeter’s concept of 'gales of creative destruction' referred to the idea that more advantageous technologies sweep aside established ways of doing things. Perceptions that one technology embodies a potential to become more advantageous disrupt the status quo and create uncertainties.

In his earlier work, Schumpeter emphasized the importance of entrepreneurial firms coupling technological opportunities with emerging market demand for particular performance characteristics. However, the increasing importance of science-related technology during the first half of the twentieth century prompted Schumpeter to pay greater attention to the role of large firms. These had surplus internal capital to invest in R&D and thereby create knowledge that would underpin competitive advantage.

Small firms occasionally 'come out of nowhere' to dominate a technological advance – Google is an example. However it could be argued that the internet and search engines are the invention of the US Government and large corporations, and Google’s innovation is the way in which these have been used.

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About this article

This article is based on extracts taken from the Open University Business School course Managing Knowledge.

 

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