Innovation - The 3 types of innovation and their varying values

Clayton Christensen, author of "The Innovator's Dilemma", describes Innovation to be of "3" Types:

1. Disruptive - Has internal and External Benefits.
2. Sustaining - Has firm related benefits, but minimal external benefits.
3. Efficiency - Has least amount of internal and external benefits.

Below snapshot from the video (also shared here), is a great concise view of the three innovation types and the value they provide.

As a firm grows, so does the type of innovation.  The reason for this can be easily explained using the "Prospect Theory" (See my post on the subject here).

Now if a firm wants to get out of the rut of "incremental or efficiency" innovation, they must take actions to do so.  The "how" depends on the firms war-chest.  For Disruptive innovation, a firm cannot be bogged down with hierarchical bureaucracy that implements too much control.

"Think Big, Start Small, Fail Fast and Scale Quickly" - is a mantra for disruptive innovation, so firms should look into creating a new entity, which may or may not be coupled with existing R&D.  As long, as new entity enjoys autonomy and guidance (think VC), they new entity will flourish.  This is a very simple solution to a very complex problem.  But sometimes the answer is simple and the firms make it complex.  Another approach is to frame the question differently i.e instead of how should I do this, rather ask, "Why" should I pursue this opportunity?

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