Companies understand the importance of innovation. Business literature, both academic and popular, provides plenty of evidence that “stay ahead or be disrupted” is not an empty slogan.
Organizations also understand the criticality of continuous improvement. Approaches such as Kaizen, Six Sigma, and Lean have been embedded in training programs, operational plans, and centers of excellence.
However, in an effort to stay ahead and to drive efficiency, companies often conflate innovation with continuous improvement. This is easy to do as improvement efforts often inspire innovation ideas, and the innovation process usually identifies opportunities for improvement in related areas. But this conflation leads to setting confusing and sometimes conflicting goals, and to suboptimal business outcomes.
While reflecting on innovation versus improvement, we have come to think that they differ along four crucial dimensions: context, aim, value, and key outcomes.
• Finding novel ways of solving known problems
• Finding new problems to solve
|New value created||
• Accelerated growth
• Removing friction or defects
• Finding a better way of solving the problem
|Existing value increased||
• Efficiency gains
• Productivity gains
Innovation is about fundamental, and often radical, change and transformation. It is about the exploration of the problem space, about reframing the problem, and looking at it through a new lens, with the goal of finding a new way to solve it. It could also be about a discovery of a new problem to solve.
For companies that build products and deliver services, answers to questions about the causes of human behavior lie at the heart of innovation. Why are people making the choices they make; what’s causing people to do x; how are people making decisions?
The key outcomes of innovation are disruption and accelerated growth.
Improvement is about getting better at what’s already in place. It’s an exploration of the solution space with the goal of enhancing and refining what we do and how we do it.
Improvement begins with an identification of friction or defects. That’s a diagnosis, a starting point of an improvement process. But identification alone is insufficient. We cannot eliminate friction or defects without understanding what’s causing them. Finding the root cause helps us discover effective ways to eliminate friction and defects.
The key outcomes of improvement are efficiency and productivity gains.
Both innovation and improvement lead to progress. Innovation helps spur and accelerate growth; improvement makes growth sustainable. Innovation leads to a fundamental (and often radical) change, while improvement drives change incrementally over time.
Companies need both. By drawing a clear distinction between innovation and improvement efforts, they can increase their ability to set clear goals and drive predictable outcomes.
- Competing Against Luck: The Story of Innovation and Customer Choice by Clayton M. Christensen, Karen Dillon, Taddy Hall, David S. Duncan
- Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone by Satya Nadella