Innovation is about knowledge creating new possibilities through combining different knowledge sets. These can be in the form of knowledge about what is technically possible or what particular configuration of this would meet an articulated or latent need. Such knowledge may already exist in our experience based on something we have seen or done before. Or it could result from a process of search – research into technologies, markets, competitor actions etc. and it could not be in explicit form, codified in such a way that others can access it , discuss it, transfer it etc – or it can be in tacit form, known about but not actually put into words or formulae.
The process of weaving these different knowledge sets together into a successful innovation is one which takes place in highly uncertain conditions. We don’t know about what the final innovation configuration will look like (and we don’t know how we will get there) Managing innovation is about turning these uncertainties into knowledge – but we can do so only by committing resources to reduce the uncertainty – effectively as a balancing act. Figure illustrates this process of increasing resource commitment whilst reducing uncertainty.
Viewed in this way we can see that incremental innovation, whilst by no means risk free – is at least potentially manageable because we are starting from something we know about and developing improvements in it. But as the move to more radical options, so uncertainty is higher and at the limit we have no prior idea of what we are to develop or how to develop it! Again this helps us understand why discontinuous innovation is so hard to deal with.
A key contribution to our understanding here comes from the work of Henderson and Clark who looked closely at the kinds of knowledge involved in different kinds of innovation. They argue that innovation rarely involves dealing with a single technology or market but rather a bundle of knowledge which is brought together into a configuration. Successful innovation management requires that we can get hold of and use knowledge about components but also about how these can be put together –what they termed the architecture of an innovation.
We can see this more clearly with an example. Change at the component level in building a flying machine might involve switching to newer metallurgy or composite materials for the wing construction of the use of fly by wire controls instead of control lines or hydraulics. But the underlying knowledge about how to link aerofoil shapes, control systems, propulsion systems, etc and the system level is unchanged – and being successful at both requires a different and higher order set of competencies.
One of the difficulties with this is that innovation knowledge flows – and the structures which evolve to support them – tend to reflect the nature of the innovation. So if it is at the component level then the relevant people with skills and knowledge around these components will talk to each other — and when change takes place they can ingrate new knowledge. But when change takes place at the higher system level – architectural innovation in Henderson and Clark’s terms – then the existing channels and flows may not be appropriate or sufficient to support the innovation and the firm needs to develop new ones. This is another reason why existing incumbents often fare badly when major system level change takes place – because they have the twin difficulties of learning and configuring new knowledge system and unlearning an old and established one.
A variation on this theme comes in the field of technology fusion where different technological streams converge such that products which used to have a discrete identity begin to merge into new architectures. An example here is the home automation industry where the fusion technologies like computing, telecommunications, industrial control and elementary robotics is enabling a new generation of housing systems with integrated entertainment environmental control (heating, air conditioning lighting etc) and communication possibilities.
Similarly in services a new addition to the range financial services may represent a component product innovation but its impact are likely to be less far reaching (and the attendant risks of its introduction lower) than a complete shift in the nature of the service package – for example the shift to direct line systems instead of offering financial services through intermediaries.