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Existing Business or New Future Opportunities?

Written by: Kristian Elmefall, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

Innovation is a complex and broad area. Two categorizations of innovation are whether it is incremental or radical innovation.


Incremental innovation means improving and streamlining existing products and processes. It does not have to be new products or processes but can be efficiencies of the existing.

Radical innovation means creating new services, products, or new information that can change entire industries. McKinsey's frequently cited study from 2016 shows that the average life expectancy of companies on the US list of the largest listed companies, S&P500, has fallen from 90 years in 1935 to 18 years in 2016. The trend continues, and McKinsey predicts that in 2027, 75 % of all companies on the S&P500 list today have been acquired, merged with another company, or gone bankrupt.


The conclusion is that all companies that want to continue to exist must work with both incremental innovation to be profitable now and radical innovation in existing in the future.


However, the working methods for incremental and radical innovation differ widely. When working with incremental innovation, you usually already have a lot of knowledge about what to do because there are improvements to existing activities. The risk is, of course, significantly lower, and the path from idea to implementation is short. It gives a quick success for low-hanging fruits.


When working on radical innovation, the result is unknown. It is a search for new solutions for customer needs, new markets, or new technologies. Not only is the result unknown, but also the final effect of the result is often unknown. Due to its great uncertainty, the work with radical innovation is very much about reducing the risks.


This is done most efficiently through a so-called hypothesis-based approach. Listing which assumptions must be true for the idea to be a successful innovation maps out the project's risks. By obtaining evidence in a systematic way that these assumptions are true, the risk decreases. The result is more successful innovations and less money spent.


Resources should be allocated to incremental and radical innovation, respectively, depending entirely on the industry in which the company operates. A rule of thumb can be 90/10. The figure varies. The recommendation tends to be that more resources should be invested in radical innovation as many industries today are in a situation where the central business will change.


This article is the last of three. To sum up these three articles, you need to decide.

  • When and where should you work with innovation respectively execute your existing business model?

  • Does your work aim to transform the organization to be more innovative and have the required processes and working methods, or does your work aim to create innovation?

  • When and where do you work to improve and streamline existing products and processes, respectively innovation that creates new services, products, or new information, and how much resources do you devote to each?

For more information, visit LEAPS and connect with Kristian on LinkedIn!

Read more from Kristian!

Kristian Elmefall, Executive Contributor Brainz Magazine

Kristian is a Swedish serial entrepreneur and senior management consultant with a double degree in Executive MBA and computer science. Kristian has gathered experience in innovation and business from a large number of industries and companies of all sizes over the last 20 years. As co-founder of the consultant firm LEAPS, is he now helping customers to understand how the industries that the customers are operating in is evolving, how to stay relevant and competitive under those circumstances, and how to set up an innovation process to secure reoccurring innovations in line with the company’s strategy.

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