Innovation versus improvement

In one paragraph

Improvement makes the existing thing work better in small steps. Innovation changes what the thing is. Both are needed and they compete for the same attention, so one usually starves.

Improvement is incremental, low risk and cumulative — the [kaizen] end. Reliable, and it cannot save a business whose market has moved.

Innovation is a step change: a new product, a new model, a new way of delivering. Higher risk, occasionally transformative, and it looks like a distraction while it is happening.

Why improvement always wins the argument

Improvement has a measurable return this quarter and an obvious owner. Innovation has an uncertain return, no owner, and it competes with the day job. So the business optimises itself steadily towards a market that may be shrinking.

This is the trap [disruptive innovation] describes, at small-business scale: doing everything right and getting steadily better at the wrong thing.

How to actually use it

• Separate the budget and the time. Innovation funded out of whatever is left after operations gets nothing, permanently.
• Ask once a year what would put you out of business, and whether you are working on it or on making the current thing three per cent better.

Where it breaks down

• The distinction is cleaner in theory. Many real changes are somewhere in between, and calling routine work 'innovation' is a common way to avoid doing either properly.

If you are being examined on it

Links to research and development, to the product life cycle, and to Ansoff's product development quadrant.

More on strategy