Strategy for Choosing Incremental or Discontinuous Innovation in Vehicles

Introduction

Nowadays, traditional automobile industry is faced with new challenges due to radical

technological change such as car connectivity, autonomous driving, car sharing, electrified

powertrains and components. In response to a VUCA (volatile, uncertain, complex, and

ambiguous) world, innovation has become a necessity. Therefore, our company has decided

to add Internet of Things (IoT) technology to its vehicles. This section first analyses

incremental and discontinuous innovation strategies, then it gives a recommendation of the

the potential path for the organization.

Types of Innovation

Over the past three decades, sensors have been increasingly integrated into

automobiles. Currently, a typical car has 50–100 sensors (Tyler, 2016), and this is expected to

grow to as many as 200 over the next few years. These sensors measure everything from oil

levels to the distance from the car in front. These sensors currently connect (Computers in

Your Car, 2018). These computer systems can warn of a collision or an engine problem and

communicate the condition to the driver. Moreover, the computers connect to other things

such as a user’s phone for things like remote starting, and to the manufacturers computer to

help generate predictive maintenance recommendations. The commercial term currently used

for this technology is “connected cars”.

Currently, and in the immediate future, connected cars will help the driver navigate,

find the cheapest gas station, locate the nearest Starbucks or parking lot with open spaces,

and allow friends on social media to know when their friend will arrive. As more semi-

autonomous driving features are added over the next few years, these wireless computers will

also talk to other cars to help predict their next move and communicate to road sensors to
monitor conditions (Gossett, 2019). Eventually, enough information will be provided to and

from the connected car that autonomous driving will become commonplace.

Potential Incremental Innovations

When setting up an innovation strategy, there are many decisions to take. And, probably, one

of the first challenges is to choose between two different approaches.

Incremental innovation is a series of small improvements made to a company's existing

products or services. These developments help improve efficiency, productivity and

competitive differentiation. Incremental innovation is parallel to agile innovation, which

includes part of this process.

As long as a change creates value and has some element of novelty to it, it can be classified

as incremental innovation.

A single incremental innovation isn’t usually all that exciting. However, when you combine

the effect of making hundreds or thousands of these incremental changes every year, the

difference is profound.

Companies can use incremental innovation to save costs and differentiate from competitors.

Potential Discontinuous Innovations

Radical innovation often involves achieving major breakthroughs in the form of new

technology, business models, or processes. Such innovations are often disruptive in nature,

resulting in a new category of product, customer market, and innovation management style.
By designing a product that looked and performed completely differently from its

predecessors……

Radical innovation is a complex, ambitious process sometimes referred to as a “blue ocean

strategy" due to its aims of stepping out into uncharted territory to create new products,

concepts, and market demand.

Path for the Organization

Answer

The Incremental Innovation approach would be the best option for the company moving

forward.

Reason 1: Introducing a new product into the automotive industry isn’t a good idea.

Reason 2: The reward outweighs the risk.

Add sales forecast

Compared to radical or disruptive innovations, Incremental innovations don’t require big

leaps in technology and don’t usually have much impact on the market dynamics. On the

other hand, incremental innovations are typically much quicker and easier to implement than

other types of innovations, and there’s also significantly less uncertainty involved, which

makes them much more predictable, and thus safer for the organization to bet on.

Scale- As mentioned before, the bigger your scale of operations, the more financial sense it

makes to do incremental innovation. Let’s say you want to automate an internal process, but
it will only affect a small group of employees. In this case, there may not be enough return on

investment (ROI) to make the change worthwhile (Richards, 2021).

maturity of a specific part of your business- Whenever you launch a new product, service, or

business, there are always a lot of hypotheses and unanswered questions. That means that

there are likely at least a few significant changes that you have to make to the product or

service, the business model behind them, or the way they are delivered, before you’ll be able

to succeed.

At that point, incremental improvement isn’t necessarily the best way to go. Because you

aren’t successful and at scale yet, incremental changes are unlikely to move the needle much

and any time spent on them is away from solving the aforementioned big challenges in the

business.

Pros of discontinuous

 Immediately becoming a market leader in an uncontested field

 Avoiding competition in more mature and saturated markets

 Send product to market faster

 It gives the chance to get a huge win, as long as the innovator will be the pioneer in

the field, with no competitors. A significant advantage for any company.

 This advantage could give the chance to own an entire market, at least during the first

stages, setting up the rules for the own profit.

 New markets are wide open to further development and innovations. Once you have

created a new one, the options for further innovations are usually very high. This

means that capturing value will be much easier than in mature markets.
Yet, the downside of radical innovation is that it requires a larger investment of time and

resources than other types of innovation.

Nevertheless, creating a new blue ocean is not easy, in fact, it is quite risky. Timing should be

perfect, in order to deliver your brand-new product to the right people at the right time. Slow

market adoption is a clear possibility, hindering market growth, and the investment needed is

usually quite big, without clear return perspectives.

On the other hand, pursuing a strategy of incremental innovation allows companies to

experiment with less risk and lower cost.

Some benefits of incremental innovation include:

 The usability of scientifically novel inventions is greatly enhanced, which expands the

number of potential adopters

 Helps companies remain competitive. While profiting from a product they are already

developing the next generation. we expect to grow at 3.1%, about 1% less than the

industry. Our growth projection for connected cars is 10.2%—less than the industry at large.

We must speed up our innovation or risk losing market share.

 Ideas are easier to sell. When customers are used to a type of product or service they

find easier to understand and buy new improvements.

 Affordability. The development process is not unsurmountable, as long as the

company already have all the capital and infrastructure needed to keep innovating on

the same kind of products and services.

 The knowledge gained often provides the basis for the eventual development of novel

innovations
 Reduce risk- However, with an incremental strategy, making small, continuous

advances without putting the company's budget or sustainability on the line is possible

(Richards, 2021).

 Increase product diversification- If a business focuses more of its efforts and R&D

budget on incremental innovation, the shift towards new concepts is more gradual.

Consumers are more open to adopting familiar products with new upgrades (Richards,

2021).

 Stay competitive- By continually iterating on existing ideas, you can develop newer, better

versions of your products while simultaneously generating profit from the current versions

(Richards, 2021). It is estimated that the market for IoT-connected cars will grow from $54

billion in 2019 to over $510 billion by 2030 at a 25% compound annual growth rate (CAGR)

(Meola, 2020).

 This incremental innovation strategy enables companies to retain their market share

and current customers by always staying top-of-mind in the industry with another

update or new feature (Richards, 2021).

 Sell into existing markets- it’s much easier to innovate with a recognizable product

than a completely new product (Richards, 2021).

 Lower innovation costs- incremental innovation is its relatively manageable impact on

the company budget since it allows a business to make minor enhancements without

allocating a considerable amount of financial resources.

Testing new features and concepts with users as soon as possible helps to quickly validate

crucial assumptions, and focus on features that will genuinely benefit them.
 For many companies, this involves creating a minimum viable product (MVP) - a basic

version of the new product. The MVP typically contains enough features for early

adopters to use and test.

To be able to test as quickly as possible, we recommend to instead conduct Riskiest

Assumption Tests. These should happen even before constructing a MVP.

The key difference is that a RAT involves building just enough of a concept to test the

biggest unknown at the time, rather than creating a complete prototype. This helps to

identify and invalidate key misconceptions as quickly as possible and determine whether

customers are fundamentally interested in the concept before building anything.

It’s important to not only test new concepts early, but to pivot quickly based on generated

insights.

Being able to quickly pivot based on these insights helps to ensure that any new concept

developments truly reflect the needs of your customers.

Communicate Constantly With Customers

Finally, it is crucial to maintain regular contact throughout the other stages of the product

innovation cycle. This helps you to gain a better understanding of:

1. Current customer experiences and needs with the existing technologies or product

2. Customer needs and responses towards new concepts and features

Conclusion
Is far easier to introduce new improvements in your products to keep being competitive,

rather than try to create a whole new market with some brand new thing. But bears the risk

that a (new) competitor arises with a radical innovation that we did not foresee.

just like deliberate practice for individual improvement, incremental innovation is how your

organization can become slightly better every day, as long as you take a very deliberate and

focused approach to it.

References

Richards, R. (2021, April 8). Incremental innovation: What it is, benefits and best practices.

MassChallenge.

https://masschallenge.org/article/incremental-innovation

Gossett, S. (2019, August 13). IoT in vehicles: A brief overview. Built In.

https://builtin.com/internetthings/iot-in-vehicles