Have you ever wondered why value propositions don’t improve despite all the efforts that go into innovation for large restaurant brands?
These companies are investing significant resources to try and improve their sales and profits.
Often, I see companies fail to realize these benefits at the planned levels for two reasons:
– They failed to account for competitive activity that is also resetting consumer expectations
– They didn’t allocate adequately to the types of innovation that would help them reach their desired goals
Innovation can be grouped into four types:
1. Incremental
2. Next generation
3. Transformational
4. Disruptive
Each has different types of risk, return, time horizon, and effort profiles.
Companies run into problems when they expect a return profile from an activity different from what it will likely generate.
The problem becomes even more magnified if much of the benefit is already installed in the sales and profit line.
Think of the incremental innovation here.
At that point, the more significant benefit is protecting what is in your P&L rather than realizing incremental benefit.
Thinking about innovation efforts with a portfolio mindset helps to focus attention on whether there are adequate bets into the different types of innovation to reach financial goals.
Other benefits of classifying include matching the development process and governance to the type of innovation.