Innovation Matrix (Incremental, Disruptive, Architectural, Radical) | From A Business Professor

Summary

The video classifies innovation using a 2×2 matrix based on two dimensions: whether it uses existing or new technology, and whether it serves an existing or new market.

Type Technology Market Core idea Incremental Existing Existing Gradually improve an established product or service. Disruptive New Existing Use new technology or a new offering to serve an existing market. Architectural Existing New Reconfigure or repurpose known technologies to reach a new market. Radical New New Introduce new technology to create or serve a new market.

1. Incremental innovation

Incremental innovation builds on existing knowledge and makes continuing improvements to current products or services. Examples include successive iPhone models and updated Gillette razors.

It is common in business and offers several advantages:

• Reduces risk: Companies can make smaller investments rather than betting heavily on unproven technologies.
• Supports gradual product development: Customers may be more willing to adopt updates to familiar products.
• Helps maintain competitiveness: Ongoing improvements can retain customers and market share.
• Costs less: Smaller changes are generally more affordable than major innovation efforts.

The video also identifies two risks:

• Feature overload: Adding too many features can make a product complicated or more expensive than some customers want.
• Missing major market shifts: Companies that focus only on incremental improvements may lose their advantage when disruptive changes reshape the market.

2. Disruptive innovation

Disruptive innovation uses new technology or offerings to serve an existing market, often with a more convenient or affordable alternative.

Examples include:

• Netflix: Used streaming to change how people accessed video. The video contrasts its convenience with Blockbuster’s focus on its established customers and notes that Blockbuster later went bankrupt.
• Uber: Used a phone app to arrange rides, offering an alternative to traditional taxis.

3. Architectural innovation

Architectural innovation rearranges or adapts existing technologies to serve a new market.

Examples include:

• Smartwatches: Adapt mobile-phone technology to a watch format.
• Canon: Redesigned large, expensive copiers into compact machines suited to small businesses and households, opening up a new market.

4. Radical innovation

Radical innovation combines new technologies with new markets. It may rely on new methods or materials, a different knowledge base, or existing knowledge combined with new information.

Examples cited include mass-produced automobiles, airplanes, X-rays, the Internet, artificial intelligence, blockchain, and genome sequencing. Radical innovation can face early resistance and often requires extensive development before reaching mass markets. However, successful examples can transform industries and regions.

The video suggests that radical innovations often come from new entrepreneurial companies rather than established firms, for three reasons:

1. Economic incentives: Established companies may prefer incremental changes that protect their market position. New entrants may see radical innovation as their route into an industry with high barriers to entry.
2. Organizational inertia: Large, successful firms can become tied to formal processes and existing power structures, making them resistant to major change.
3. Innovation ecosystems: Established firms depend on networks of suppliers, buyers, and partners. Incremental changes can preserve those relationships, while radical changes may disrupt them. New entrants can build a new ecosystem around their innovation.

Speakers and sources featured

• Speaker: An unnamed narrator presenting as Business School 101.
• Sources or examples mentioned: Apple, Gillette, Netflix, Blockbuster, Uber, Canon, and general references to business researchers and economists. No individual researchers or economists are named.