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How to Balance Incremental & Breakthrough Innovation

One question I get a lot in my consulting work is how to balance incremental and breakthrough innovation investment.  Since striking the right balance is critical to speed-to-market in execution, I thought it was time for an article on the subject.

The answer to Eric’s question depends on many different factors. But innovation and development projects can be classified in many different ways. So it’s useful to go deeper than incremental vs. breakthrough. Here’s one way I find helpful:

  1. Platform Development – New product lines offering significantly different benefits and maybe even using different technology than you already offer.
  2. Line Extension – New products extending your existing platform into new market segments or adding features and benefits for the existing segments. Line extensions can be critical to realizing all the value created by your platform developments.
  3. Cost Reduction – Projects to lower the cost of production through some combination of design, material, and process work. Some cost-reduction projects will be invisible to the end user. Others are borderline line extension projects and may actually be marketed as bargain versions of your main products.
  4. Tactical Customization – Tweaking existing products for specific customers or market segments.
  5. Line maintenance – support required to maintain quality and supply.
  6. Product Renovation – changes needed to remain relevant with changing trends or regulations

The right balance of incremental and breakthrough innovation requires different levels of focus depending on your company’s specific situation and the strategy you have chosen to address it. For example, if your main product line is in a mature or stagnant market, you will probably focus on cost reduction and capacity rationalization to maintain margins against eroding volumes. At the same time, part of your resources should also be directed towards new platforms for adjacent markets with new growth potential.

However, after launching a new platform your efforts may be more focused on line extension and tactical customization work. To realize your platform’s full value, you need to extend it out to reach all the target markets that make sense.

Once the product is established and has the attention of competitors, line maintenance will likely be part of the mix to defend your cost position as time goes on.

So the answer to Eric’s question is that it’s all a matter of balance and the only right balance is the one that best addresses your current strategic position.

Of course, there’s also the matter of execution, without which no strategy can ever succeed.  There I suggest establishing a prioritized backlog.            More on backlogs…       More on priorities…

Then only release work to execution as capacity allows in a cadence that meets your desired balance of sustaining and breakthrough innovation.    More on WIP limits…

For example, let’s say that you have decided that 1/3 of your resources will go to platform projects, 1/3 to line extensions, and 1/3 to cost reduction and line maintenance. Further, let’s say platform projects are 3 times as long as line extensions and 9 times as long as cost reduction and line maintenance.  So the required cadence to achieve the desired 1/3-1/3-1/3 balance is:

  • Platform
  • Cost Reduction or Line Maintenance
  • Cost Reduction or Line Maintenance
  • Cost Reduction or Line Maintenance
  • Line Extension
  • Cost Reduction or Line Maintenance
  • Cost Reduction or Line Maintenance
  • Cost Reduction or Line Maintenance
  • Line Extension
  • Cost Reduction or Line Maintenance
  • Cost Reduction or Line Maintenance
  • Cost Reduction or Line Maintenance
  • Line Extension
  • Platform
  • And so on

The cadence is a guideline, not a hard and fast rule. It can flex with your priorities. But deviate too often and it will be tough to maintain the desired balance.

So Eric – thanks for your question. Balancing incremental and breakthrough innovation is a matter of strategy and achieving the right resource allocation for your situation. But as with any strategy, execution is critical, so you must also prioritize your backlog and create WIP limits for maximum speed and productivity.

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