Many people confuse innovation with Improvement including some innovation managers, Business leaders also tend to use the two terms interchangeably, They would talk about improvement projects and describe them as Innovative ones. Such poor understanding of the innovation concept by senior leaders usually confuses employees, set lower expectations and define the wrong innovation metrics across the organization. This will also add to the challenge of creating the right culture for innovation, which is the prime responsibility of the leaders inside any organization.
Innovation requires a different level of thinking, a different set of behaviors and different way of management than improvement. Those leaders, who confuse the two terms, need to understand the difference between the two processes if they are serious about innovation in their organization.
Before we go over the differences, let’s define the two terms first. We can clear half the confusion with the following simple definitions:
Improvement is the process of making an existing value better, Including better product, better service, better place, or even better humans. The key here is the value already exist and it is not new.
Innovation is the process of creating new value, This could be a new product, a new service, or an entirely new business model.
So if the definitions didn’t clear all the confusion, the following should further help explain the difference between the two Innovation and improvement in more details:
Outcomes: The outcome of the Innovation process results in a completely new value to customers, something that hasn't been introduced in the market before. On the other hand, improvement offers an update to existing values, this update comes in the form of extra capacity, functionality, speed, shape, safety or new fixes. Think of the first iPhone generation, that phone and despite its limited capabilities and functionality compared to today's phones, was an innovative product, It brought many new values to customers, starting from touch screen phones, to new platform for small screen apps that allowed users to enjoy unlimited number of applications on their phones to a new business model that connected developers with users in a marketplace that brought significant return to Apple and the developers community. The rest of the new iPhones from 2nd generation to the latest model (iPhone 7s) were pure improvements. Remember, Every innovation brings improvement but the opposite is not true.
Intentions and focus: The intentions of any improvement process is to extend the life of an existing products or services and save them from becoming obsolete, by making them more appealing to customers in order to continue drives sales. In continuous improvement, the focus is always on enhancing the current existing business model. However, the intention of Innovation is to sustain the whole company and save it from becoming history by creating new values to achieve a significant financial return. The focus of Innovation is not limited to existing business model but it could extend to a completely new business models. When Borders, the giant bookstore, focused on enhancing its physical stores, adding music CDs and racking more books using its smart inventory system, Barns and Noble, the competitor that had the same business model at that time, focused on digital books and developed its first e-reader "the Nook". Borders completely ignored the internet sales by outsourcing its online business to Amazon, while Barns and Noble invested heavily on its website and focused on online sales. The end story, Borders lost and disappeared because the company was focusing on enhancing its existed values "size, shape, look, etc.." and Barns & Noble still exist in the market because it was creating new values "e-reader" and new business model.
Risk and Ambiguity: Perhaps the main difference between innovation and improvement lies in this area. Innovation comes with a high risk that is inherited from working under conditions of extreme uncertainty and ambiguity. Companies that innovate work against many unknowns, things that have not been tested before, this situation creates many failures that build experience for future movements and decisions. However, improvement projects mostly deal with known issues that can be predicted and controlled and results depend on execution that is mostly based on past experience. Project managers always define the project's time frame, cost, and outcome upfront. In Innovation, time can't be estimated, cost can't be controlled, and results can be completely different from the initially planned goal. Paypal originated with a vision to exchange money via palm pilot (handheld devices) but end up transferring money online before eBay acquire them for $1.5 billion. Odeo, a startup that had a podcast service as vision, but ends up becoming Twitter the company we know today.
Management: The uncertainty and complexity that come with innovation make the management of the process completely different than managing the improvement process. You can’t manage unknowns the same way you manage known issues. For this, Innovation process involves a lot of search and learning before execution and learning come through a build-measure-learn cycle that usually produces many failures. These failures are accepted in the innovation world, It’s part of clarifying the uncertainties. However, failures are considered bad management in improvement projects and top management do not tolerate such failures. Improvement projects depend on detailed planning before execution.
Traditional project management tools and improvement frameworks such as Lean Six Sigma and Plan-Do-Check-Act (PDCA) are used to plan and manage improvement projects. On the other hand, Innovation requires different tools to cruise through many unknowns and mitigate the risks, tools, and methods such as Lean Startup and Business Model Canvas help guide and manage the innovation process effectively and efficiently.
Both Innovation and improvement are critical for today's business success, and companies have to master the two processes in order to thrive and stay ahead of the competition. Senior leaders must understand the importance of the two methods and know how and when to use each of them, they also need to have the skills and level of thinking to create and manage a culture that supports Innovation and continuous improvement within their organizations.
Mohammed Alomairy, PhD. MBA, MSIE, CLSSBB, PMP.
Innovation & Performance Excellence Researcher, Consultant & Judge.