Are you innovating or just dying more efficiently?
Alexander Osterwalder was introduced to me at a time when I felt deeply frustrated with my work in digital transformation. I struggled to convey who/why our goals weren’t big enough to achieve the change we needed. A brilliant colleague shared Alexander’s book, “Business Model Generation: A Handbook For Visionaries, Game Changers, And Challengers” and my work was forever changed. Alexander is of course Swiss, with an impressive career as an author, professor, and public speaker built upon his groundbreaking approach to innovation and remodeling businesses as CEO of Strategyzer. He recently gave a keynote speech in which he quipped that "incremental innovation just means dying more efficiently." WOW. This is an important albeit stark reminder that while optimizing existing processes or refining current offerings can yield short-term gains, they rarely create significant new value or fend off disruptive forces.
Rooted in his work on business model innovation, Osterwalder distinguishes between three core types: transformative innovation, which involves creating entirely new business models, value chains, or revenue streams (think Netflix's shift from DVD rentals to streaming); sustaining innovation, which focuses on expanding existing models by targeting new customer segments, developing new value propositions, exploring new channels, or entering new geographies (like the creation of Amazon Web Services to extend Amazon's infrastructure to a broader market); and finally, incremental innovation, which centers on making existing processes more efficient or slightly improving existing products or services (such as minor software updates or process optimizations within customer service).
The danger lies in over-relying on incremental improvements, as these efforts, while seemingly productive, often fail to address fundamental shifts in the market, evolving customer needs, or the emergence of disruptive technologies. As Osterwalder and Yves Pigneur detail in "Business Model Generation," true competitive advantage often stems from the ability to envision and implement entirely new ways of creating, delivering, and capturing value. Consider the impact of ride-sharing services like Uber and Lyft, which didn't just incrementally improve the taxi experience but fundamentally altered the transportation industry with a new business model. Focusing solely on making current operations slightly better risks missing these larger, transformative opportunities that can redefine markets and create lasting success.
Therefore, while efficiency gains are important, businesses must actively cultivate a mindset and allocate resources towards both sustaining and, crucially, transformative innovation. This involves understanding customer jobs-to-be-done (a concept emphasized by Clayton Christensen, often cited by Osterwalder), experimenting with new business models using tools like the Business Model Canvas (co-created by Osterwalder and Pigneur), and continually challenging underlying assumptions about their industry and value proposition. The goal isn't to abandon incremental improvements entirely, but to recognize their limitations and strategically balance them with bolder, more impactful innovation efforts that ensure long-term viability and market leadership, rather than just a more polished decline.
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Noelle ✨
