Improvement and innovation. In today’s business world these two terms are used almost interchangeably. It’s a trend that’s been promoted the business press; by companies large and small who profess to be in the innovation business; and even by the myriad “innovation consultants” out there. But the problem with equating improvement with innovation is that does a disservice to innovation and the truly successful innovative strategies used by some of the leading firms.
Improvement is NOT innovation. And here’s why.
First, an improvement that only meets the market standard or reacts to innovation that your competitors have already introduced into the market is NOT innovation. It’s playing catch-up.
Second, introducing an improvement that does not significantly differentiate you from your competitors is NOT innovation. It’s simply just an improvement—evolutionary, not revolutionary.
And finally, introducing improvement that may give you a competitive advantage but also can be easily copied by your competitors is NOT innovation. It’s just a temporary advantage.
Innovation does include improvement—it has to, but improvement is just a small part. Innovation is much more. Innovation is about creating that breakaway differentiation; it’s about creating superior economic returns; and in the end, it’s about creating what author Geoffrey Moore describes as “an outcome competitors are either unable or unwilling to match.”
When Toyota introduced the Toyota Production System (TPS) and radically changed the way manufacturing and supply logistics were previously organized by automobile manufacturers, the company demonstrated innovation. More than any other aspect of the company, TPS allowed Toyota to ascend from its humble beginnings in Japan to become recognized as a leader in the automotive manufacturing and production industry. All attempts today by other automobile manufacturers to emulate the Toyota Production System are simply a strategy of playing catch up.
When Southwest Airlines changed the existing airline model in the 1970s by focusing on point-to-point round-trip flights to avoid the capacity inefficiencies of the hub-and-spoke model used by the rest of the industry, and then monetized that new model into becoming the industry profit leader, that was innovation. When JetBlue tried to emulate that same model years later, it was a good business strategy—but it wasn’t innovation.
When Sony introduced the first Walkman in the late 1970s, they changed the music-listening habits of millions of people worldwide and became the industry leader making hundreds of millions of dollars in the process. That was innovation. When competitors raced to match their offering—albeit without the resulting outcome of huge profits—it was improvement and a good product strategy. But it was not innovation.
Geoffrey Moore says it best in his highly influential book Dealing with Darwin by explaining innovation this way:
“Focusing on our chosen innovation…[so that] we will so outperform our competitors that prospective customers and partners will cease to entertain them as legitimate alternatives.”
Here’s the takeaway: It’s easy to confuse improvement with innovation. But only innovation creates a unique outcome that, despite the superior financial returns resulting from the action, competitors are either unwilling or unable to match.