Stepping Forward: Why Incremental Innovations are Important

If you are like us, you have heard a lot about radical innovations and how while they are important for the economy and society they are challenging for managers. Look at the smartphone, look at the digital camera, look at mobility as a service, and they say you will learn how businesses move ahead. It makes sense and it is also wrong.
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Why is it wrong? Radical innovations are eye-catching, but they are also rare. Most progress is through incremental innovations. Also, many of the stories told about how firms respond to radical innovations are exaggerated to the point of being mostly untrue. Have you heard the story of Kodak ignoring digital camera technology? Funny thing is that the first professional digital camera and the first consumer digital camera were both Kodak cameras.

Why does it make sense? It is important to understand how firms respond to innovations so we should do systematic research and teach the results. But because incremental innovations are more common than radical ones and represent the bulk of technological and product progress in the world, let’s look at them too!
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In a paper published in Industrial and Corporate Change, Marc-David Seidel and I compared two incremental and one radical innovation in the airline industry. And to make the comparison interesting, one of the incremental innovations required reorganizing the business to fully exploit, making it organizationally complex. The other incremental innovation and the radical innovation (technologically) were organizationally incremental.

So what did firms do? I like to think of us as one of the first diffusion studies finding no imitation of others, because the innovation that was incremental technologically and organizationally (Airbus A320neo) spread purely based on its commercial benefit. 

But we also found that firms imitated each other, and it did not matter whether the innovation involved radical technology or need to reorganize. They copied the leaders, and they also committed to the innovation after first trying it out. This was true for composite-hull jets (radical technology) and regional jets (reorganizing required).
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So, what does this mean? There is a lot of research and a fair amount of teaching and managerial talk about how firms imitate each other, and how that means that leadership is about choosing when to go first. All of this is true, but it is conditional on innovations having a lot of uncertainty – either technological or organizational. Lots of the literature focuses just on that technological uncertainty, but we must also consider the organizational uncertainty. For other innovations where the technological and organizational uncertainty is lower, firms are quite capable of assessing the value without looking at their peers. They are smarter than we think. This simple and intuitive insight has major implications for how innovators can get their creations adopted, as well as how regional ecosystems can help their innovators thrive.

Greve HR, Seidel M-DL. 2025. Innovation diffusion uncertainty: incremental and radical innovations compared. Industrial and Corporate Change.

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