Models of Innovation

Innovation refers to the process of introducing new or significantly improved products, services, processes, or business models that create value. It is not limited to technological change but also includes managerial and organizational improvements. Innovation helps firms respond to changing customer needs and competitive pressures. It is considered a key driver of productivity, growth, and long-term sustainability (OECD, 2018).

Need for Innovation Models in Management

Innovation models provide structured frameworks to understand how innovation occurs within organizations. They help managers analyze technological change, allocate resources, and reduce uncertainty in decision-making.

1. Incremental vs. Radical Innovation

Innovation differs in terms of the extent to which it changes existing products, technologies, or markets. Understanding this distinction helps organizations choose suitable innovation strategies based on risk, resources, and competitive conditions.

Incremental Innovation

Incremental innovation involves gradual improvements to existing products, services, or processes. These changes are usually predictable and based on customer feedback or operational learning. Firms adopt incremental innovation to enhance efficiency, reduce costs, and improve customer satisfaction without altering the core technology.

Such innovations carry lower risk and are easier to implement because they rely on existing capabilities and market knowledge. Most innovations in mature industries fall into this category. Examples include regular updates to mobile applications, improved safety features in automobiles, and better packaging of consumer goods.

Radical Innovation

Radical innovation represents a significant departure from existing technologies or business models. It often introduces entirely new products or creates new markets. These innovations demand substantial investment, new skills, and organizational flexibility.

Although radical innovation involves high uncertainty and risk, it can offer long-term competitive advantage and market leadership. Organizations that successfully manage radical innovation often redefine industry standards.

Examples include the shift from landline phones to smartphones and the rise of digital streaming platforms replacing DVDs.

2. Disruptive Technological Change Model (Christensen)

The disruptive technological change model explains why leading firms often fail, even when they are well managed and customer-oriented. This failure occurs because they focus excessively on sustaining innovations while ignoring disruptive ones.

Sustaining Technologies

Sustaining technologies improve the performance of existing products in ways that mainstream customers already value. These innovations help established firms strengthen their market position and are usually aligned with existing business models.

Examples include faster processors in computers or higher camera resolution in smartphones.

Disruptive Technologies

Disruptive technologies initially perform worse on traditional performance measures but offer other advantages such as lower cost, simplicity, or accessibility. They typically begin in niche or low-end markets that are unattractive to incumbents.

Over time, as these technologies improve, they move into the mainstream and eventually displace established products. This gradual progression often catches dominant firms unprepared.

Examples include digital photography replacing film and online banking disrupting branch-based banking.

3. Teece Model: Imitability and Complementary Assets

The Teece model focuses on the question: Who profits from innovation—the innovator or others? It emphasizes that innovation success depends not only on invention but also on commercialization capabilities.

Imitability

Imitability refers to the ease with which competitors can copy or replicate an innovation. Innovations that are protected by patents, tacit knowledge, or complex processes are harder to imitate and offer stronger competitive advantage.

When imitation is easy, innovators may struggle to earn profits, even if they are technologically superior.

Complementary Assets

Complementary assets are the supporting resources required to bring an innovation to market. These include manufacturing capacity, marketing channels, customer relationships, and after-sales service.

Often, firms that own strong complementary assets capture most of the value, even if they are not the original innovators.

Strategic Implication

For sustainable profits, firms must either protect their innovation from imitation or control key complementary assets. Without these, innovators risk losing value to competitors or partners.

4. Foster’s S-Curve Model

Foster’s S-curve model illustrates how technological performance improves over time with increasing effort and investment.

Early Stage (Emergence)

At this stage, performance improvements are slow due to limited knowledge and experimentation. Considerable effort yields small results.

Growth Stage

Once the technology becomes better understood, performance improves rapidly. This is the most productive phase, where innovation investments yield high returns.

Maturity Stage

Eventually, the technology approaches its natural or physical limits. Further investment results in diminishing returns, indicating the need to search for alternative technologies.

Managerial Insight

Organizations should avoid over-investing in mature technologies and instead shift focus to emerging S-curves to maintain competitiveness.

5. Tushman–Rosenkopf Technology Life Cycle

This model explains technological evolution as a process of variation, selection, and stabilization within industries.

Era of Ferment

During this phase, multiple competing technological designs coexist. Firms experiment with different solutions, and innovation is largely radical. Market uncertainty is high, and no clear standards exist.

Dominant Design

Over time, one design gains acceptance due to efficiency, customer preference, or standardization. Once a dominant design emerges, competition shifts from innovation to cost reduction and process improvement.

Incremental Innovation Phase

After the dominant design is established, firms focus on refining the product and improving operational efficiency. Radical innovation becomes rare, and industry structure stabilizes.

6. Integrative Innovation Framework

The integrative innovation framework connects creativity, technological change, and value capture into a unified process.

Idea Creation

Innovation begins with creative thinking and problem identification. This stage focuses on generating novel ideas through research, collaboration, and experimentation.

Innovation Development

Ideas are transformed into usable products or processes by applying technological knowledge. This stage aligns closely with S-curve and disruptive innovation concepts.

Commercialization

The final stage involves bringing innovations to market and capturing value. Success here depends on strategic positioning, market access, and ownership of complementary assets, as highlighted by the Teece model.

References

1. OECD. (2018). Oslo Manual: Guidelines for Collecting, Reporting and Using Data on Innovation. OECD Publishing.
2. Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
3. Schumpeter, J. A. (1934). The Theory of Economic Development. Harvard University Press.
4. Tidd, J., & Bessant, J. (2020). Managing Innovation: Integrating Technological, Market and Organizational Change. Wiley.
5. Christensen, C. M. (1997). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business School Press
6. Foster, R. N. (1986). Innovation: The Attacker’s Advantage. Summit Books.