First part of a larger paper on the topic of incremental vs. radical innovation. The paper is based on extant research and tries to answer a very simple question: how to innovate? Marketing literature is used in order to provide a deeper understanding of the topic.

1. Giant leaps or small steps
Prepared for: MMA033, Dr. Bas Hillebrand
Prepared by: Andreea Dicu | Jaap de Groot | Rob Kuit | Raquel Gonzalez Martin | Carmen Neghina
December 1, 2009
Assignment 1: Paper Outline

2. 1. Introduction
The typology of innovations has received great interested in the academic literature, as researches attempted to
unveil the strategies that can lead to sustainable competitive advantage through product innovation. Arguably,
radical innovations should pave the managerial road to success. However, some organizations, through their
structure, capabilities, market or industry position might be more equipped to “leap” than others. The purpose of
this paper is to offer an overview of the extant literature while trying to investigate under what conditions a
radical or incremental innovation strategy is more suitable. In the quest to answer some of the most intriguing
questions in the field of product management, we will compare the either/or view with a more flexible
perspective on innovation, the what? and when?. The literature chosen for review comprises of both conceptual
and empirical papers that bring different perspectives on innovation classification. First, the paper by Garcia and
Calantone (2002) offers a good overview of the many studies that deal with this topic and addresses the issue of
the lack of consistency in current literature by proposing an alternative method of classifying innovation and
innovativeness. Secondly, we selected articles that address solely incremental innovations (Brown & Eisenhardt,
1997; Banbury & Mitchell,1995) as well as radical innovations (Chandy & Tellis,1998, 2000; Veryzer, 1998). Lastly,
we wanted to identify key articles that offer a parallel between these types of innovations and connect them to
their impact on performance (Kleinschmidt, & Cooper, 1991), managerial and organizational characteristics, as
well as the external environment in order to gain a complete overview.
2. Research perspective: timid steps or radical leaps?
Extant literature provides a wide variety of categorization possibilities for various types of innovation ranging
from a dichotomous to an eight-categorical classification. In their overview, Garcia and Calantone (2001) noticed
that the most popular classification is the dichotomous differentiation between discontinuous (radical) and
continuous (incremental) innovation. This dual perspective stems from the punctuated equilibrium model of
change, which “assumes that long periods of small, incremental change are interrupted by brief periods of
discontinuous, radical change” (Brown & Eisenhardt, 1997, p. 1).
2.1. A dichotomous perspective on innovation
Incremental innovation pertains to an advance stage in the product lifecycle, when a product design becomes
widely accepted in a market and constitutes of “products that provide new features, benefits, or improvements
to the existing technology in the existing market.” (Garcia & Calantone, 2001, p. 123). The resulting innovations
can refine an existing design in terms of either marketing or technological performances. They can prove to be a
source of competitive advantage especially in mature markets, as suggested by Garcia and Calantone (2001)
who also see the strategy as a means of identifying possible “threats and opportunities associated with the shift
to a new technological plateau” (p. 123). Similarly, Brown and Eisenhardt (1997) also believe that multiple-
product innovations can be transformed into core firm capabilities, contributing to the overall organizational
success. When looking at the internal characteristics that might influence the success for firms that focus on
continuous improvements, Brown and Eisenhardt (1997) identified limited structures, communication and
experimentation into the future, low-cost probes and a rhythmically choreographed transition between the
present and the future to be the key success factors for incrementally innovating firms. In their study of the effect
of incremental innovation on market share, Banbury and Mitchell (1995) indicated that such products are
designed to satisfy changing consumer needs, and are thus very customer focused. They also observed that if
incumbents are the first in their market to introduce an important incremental product improvement, this will
translate into a stronger market position. Moreover, the study showed that these results hold even when
competitors try to imitate the incumbent’s products.
Causing discontinuities at macro and micro levels alike, “discontinuous innovation refers to radically new
products that involve dramatic leaps in terms of customer familiarity and use” (Veryzon, 1998, p. 305), combining
marketing and technological changes. Such innovators are believed to take the game to the next level, and are
presumed to offer “5-10 times improvement in performance compared to existing products, to create the basis
for a 30-50% reduction in costs, or to have new-to-the-world performance features” (Garcia & Calantone, 2001,
p. 123). Although radical innovation can have long-lasting, large and positive effects on a firm’s financial fitness,
they can also be dangerous due to the inherent high risk. Similarly to incremental innovation, radical innovation
can also become a valuable competitive advantage contributing to a firm’s growth and profitability (Veryzer,
1998). Unlike the customer-led view of incremental innovation, radical innovation adopts a future-market
orientation, with firms focusing on future rather than existing customers needs.
Product Management | Giant leaps or small steps | 1

3. Internal factors influencing incremental vs. radical innovation
Internal factors such as existing knowledge structures or resources within a company can influence the choice of
one of these two types of strategy. While considering both an organizational structural and strategic focus, Ettlie,
Bridges and O’Keefe (1984) discovered that centralization and informal structures are more likely to result in
radical innovation, whereas incremental innovation is characterized by a decentralized structure and high
degrees of formalization. Brown and Eisenhardt (1997) propose semi-structures as means of promoting
continuous innovation, an architecture that combines both order and chaos. Because radical innovations require
high levels of centralization, more power is given to the top management of the firm, who needs to initiate and
sustain these radical departures. On the other hand, managers can successfully implement incremental
innovation “by combining clear responsibilities and priorities with extensive communication and
freedom” (Brown & Eisenhardt, 1997, p. 25). An intensively researched dimension has been that of organizational
size, although Chandi and Tellis (1998) observed that organizations of various sizes are able to either radically or
continuously innovate. Their paper suggests that a cultural trait, namely the company’s willingness to
cannibalize, may be more relevant given that incremental innovators are usually refusing to sacrifice previous
investments. This inclination is defined as “the extent to which a firm is prepared to reduce the actual or
potential value of its investments” (p. 475).
External factors influencing incremental vs. radical innovation
Agreement on whether incumbents or new market entries are more capable of radical innovation has not yet
been reached, with researchers identifying other factors, such as market stability, technological development, or
market structure more relevant for understanding the adoption of innovation techniques. Stable markets require
firms to engage in continuous innovation, an area where industry incumbents have a better chance of adapting
(Banbury & Mitchell, 1995). For competing in technically sophisticated industries, introducing incremental
innovations before competitors can result in significant market share advantages, which in turn can protect
incumbents from new entries (Banbury & Mitchell, 1995).
2.2. Alternative multi-dimensional perspectives
An argument can be made that innovation typology is not best described by the previously discussed two
dimensions. One of the main sources of disagreement in extant studies is the conceptualization of what
constitutes radically new, really new, or continuous innovations, as different researchers use different
terminologies and definitions. Kleinschmidt and Cooper (1991) utilized a three dimensional perspective, by
reducing a previous six item scale developed by Booz-Allen and Hamilton to include highly innovative products
(30.2% of the cases), moderately innovative products (47,2%) and low innovativeness products (22.6%). This
three dimensional classification revealed an interesting aspect: highly innovative products did have a significant
impact on different performance measures, and this effect was in all instances U-shaped, with moderately
innovative products unexpectedly having the worst performance. Other researchers have adopted an even more
complex classification, as in the case of Veryzer (1998), who used a matrix approach based on two dimensions
(product capability and technological capability) that resulted in four degrees of innovation, one continuous
(similar to the incremental definition) and three discontinuous that varied on the two above-mentioned
dimensions. The product capability dimension was defined from the end user’s perspective, thus incorporating a
customer-orientated approach. As the examples provided by Garcia and Calantone (2002) suggest, these
different perspectives can provide mixed results, as a certain product innovation can fall under different
categories due to different interpretations. To address this ambiguity, the authors present an alternative that
distinguishes between radical, rather new and incremental innovations, based on the interaction between micro-
and macro- level changes and marketing and technological discontinuity.
3. Conclusion
After we will identify the aspects that benefit from consensus and will carefully consider the points of
dissimilarities between different studies, we will be more equipped to provide our personal perspective on the
topic at hand. One could argue, based on theories such as the punctuated equilibrium model of change, that
organizations could and probably should engage in both radical and incremental product innovations in order to
succeed throughout the innovation cycle that according to Anderson and Tushman (1990) starts with an “era of
ferment” and continues with a longer “era of incremental change”. This suggestion will however have to stand
the test of a more careful consideration from our side.
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4. References
Anderson, P., & Tushman, M.L. (1990). Technological Discontinuities and Dominant Designs: A Cyclical Model of
Technological Change. Administrative Science Quarterly, 35(4), 604;
Banbury, C.M., & Mitchell, W. (1995). The effect of introducing important incremental innovations on market
share and business survival. . Strategic Management Journal (1986-1998), 16(SPECIAL ISSUE), 161;
Brown, S.L. & Eisenhardt, K.M. (1997). The art of continuous change: Linking complexity theory and time-paced
evolution in relentlessly shifting organizations. Administrative Science Quarterly, 42(1), 1-34;
Chandy, R.K. & Tellis, G.J. (1998). Organizing for radical product innovation: The overlooked role of
willingness to cannibalize. Journal of Marketing Research, 35(4), 474-487;
Chandy, R.K. & Tellis, G.J.. (2000). The incumbent's curse? Incumbency, size, and radical product
innovation. Journal of Marketing, 64(3), 1-17;
Ettlie, J.E., Bridges, W.P., & O’Keefe, R.D. (1984). Organization strategy and structural differences for radical
versus incremental innovation. Management Science (pre-1986), 30(6), 682;
Garcia, R. & Calantone, R. (2002). A critical look at technological innovation typology and innovativeness
terminology: A literature review. The Journal of Product Innovation Management, 19(2), 110-132;
Kessler, E.H., & Chakrabarti, A.K. (1999). Speeding up the pace of new product development. The Journal of
Product Innovation Management, 16(3), 231-247;
Kleinschmidt, E.J., & Cooper, R. G.. (1991). The Impact of Product Innovativeness on Performance. The Journal
of Product Innovation Management, 8(4), 240;
Veryzer, R.W. (1998). Discontinuous innovation and the new product development process. The Journal of
Product Innovation Management, 15(4), 304-321.
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