Focusing on High Impact Innovations

When people talk about innovation, they sometimes reaUy mean invention. Inventions may yield a patent, but do not necessarily create economic or social value -they may never go beyond an interesting description or a first prototype. To become an innovation, a new development has to do much more it has to have a tangible impact on companies and consumers. 

Depending on their impact, we can distinguish three different types of innovation at the corporate level. 

Substantial innovation. These are new generations of products, services, or processes that significantly change the balance of power between competitors in a given industry. Examples are the introduction of Plexiglas in the fifties/sixties and DNA purification in the eighties. 

Incremental innovation. This is a natural part of the continuous improvement process in corporations - traditional product development efforts leading from one product to its next generation. Here we can cite various specialty chemicals, such as de-watering agents, coating materials, or colorants whose product characteristics such as stabihty, color, and solubihty can be improved by further modification of the existing molecule or by mixing different substances. 

For example, pharmaceutical companies spend between 10 and 20 percent of their total sales on R D chemical companies often spend less than 5 percent. As incremental innovations have much less impact, they provide poor fuel for corporate growth. This is supported by the fact that there appears to be no correlation between chemical companies R D spend and increases in sales (Fig. 9.1). 

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