For some organizations, competing against the ranks of Apple, 3M, and IBM as cutting-edge companies known for introducing new ideas that completely upend how people live, work, or play may be an aspirational goal.
These companies, and others like them, are important for society and push the industry into uncharted categories by introducing breakthrough innovations. These novel ideas not only alter daily living but carve out new markets or products — think the iPhone, the Post-It note, and the personal computer.
However, most companies do not have the time, money, or ability to compete on the same scale. But that doesn’t mean companies shouldn’t pursue innovation.
“Innovation is not something that is a discretionary activity,” said Sunil Mithas, professor of information systems at the University of South Florida’s Muma College of Business. “If you don't innovate today, chances are that you may not even survive tomorrow. Innovation is extremely important for companies’ long-term survivability, and their long-term prosperity.”
Firms often feel pressure to join the breakthrough innovation space, but there is just as much opportunity for companies to make their own mark in smaller-scale innovations, such as incremental ones.
“There’s pressure to grow, and reputation-wise, it’s much more prestigious to be the pioneer than the follower,” said Erwin Danneels, professor of strategic innovation at USF. “And sometimes the market really gives extremely high valuations to pioneers and innovators.”
Innovation has a huge range: the breakthrough innovation projects are about one edge of the continuum, which is the highly innovative edge, and that's not for everybody. And the other is incremental, and that is for everyone, and should be for everyone.
Sunil Mithas, professor of information systems at the University of South Florida’s Muma College of Business
Breakthrough or Incremental? Strike a Balance
There are breakthrough innovations, and then there are incremental innovations. The latter adds small changes to existing products, such as when the iPhone comes out with a slightly larger screen each year.
Both roles are important, and there needs to be a balance between the two, said Lin Jiang, associate professor of entrepreneurship at USF.
The typical innovation cycle goes like this: there’s the breakthrough innovation, which only a few adopters use. Eventually, it becomes widespread enough that the innovation becomes mainstream, and with that comes the demand for fine-tuning.
Consumers start asking for small improvements — a bigger screen, longer battery life, more app compatibility — and that demand for refinement is where incremental innovation takes over, making the technology friendlier and easier to use over time. making the technology friendlier and easier to use over time. Incremental discoveries can be achievable for companies that may not have the resources to deploy research and development dollars to large, innovative breakthroughs.
But more R&D spending does not necessarily produce better results indefinitely. Mithas’ research has found that while the benefit eventually plateaus, investing in information technology could help bolster earnings.
“Many companies that make R&D investments find that R&D investments have diminishing returns,” Mithas said. “R&D has a positive relationship with patents up to a certain point, and then the effect declines. We found that if you invest in information technology, then it can help you to mitigate those diminishing returns.”
Creating boundaries and a separate unit
It is important to set parameters for innovation, focusing on a domain of intent or a vision of the breakthrough space the company wants to explore.
“That’s extremely important to guide the efforts within the company,” he said. “Then you can justify putting money behind it and have this goal to be part of something emerging, that's an important human need.”
Danneels advised creating a separate unit within the company and providing adequate resources to support it.
Also, companies need a compelling reason to pursue breakthrough innovation. If it is to boost the company out of a bad financial situation, Danneels warns against it.
“It needs to be done while the company is doing well,” he said, pointing toward Kodak, the camera company that filed for bankruptcy in 2012 after refusing to lean into digital camera technology. “It can’t be done as the business is failing; then it’s way too late.”
Surprisingly, Danneels recommends that most companies avoid competing in the breakthrough innovation space.
“I would almost advise companies not to do it,” he said, whose recently published study in Technovation examined the topic.
Companies, instead, can acquire established firms in the industries they want to enter. And while the move carries its own risks, it can offer the business a starting point.
An ‘It’s okay to fail’ culture
If, like at most companies, there is no separate unit for breakthrough innovations, researchers reiterated the importance of creating a culture where employees feel they can take risks in pursuing new ideas, even if they may ultimately fail.
“The question is, can organizations and managers create that culture where people are not afraid of asking questions, and being able to even put in some of their time to try out different ideas,” Mithas said. “It's okay if they fail, but they should learn something from it, and move on to new projects, new experiments. So that's where I think culture has a big role to play there.”
Mithas pointed toward an India-based company that organizes competitions between employees for new ideas, giving cash rewards — including the “Dare to Dream” award, which is given to ideas that ultimately did not pan out.
“Things which may not be successful today might turn out to be successful tomorrow,” Mithas said. “But I think the question is, how do you create this culture?”
Calling the ‘Explorers’
Beyond culture, there is also the type of employee to hire. There are a variety of hires that can be categorized into sections like “explorers” — those who may be open to taking on ideas or projects outside their own industries or disciplines — and others who may prefer a more cautious route.
“I asked my students, ‘Would you want to work through the breakthrough innovations?’ And some wisely said no,” Danneels said. “I wouldn’t. You constantly have to defend your position, your resources, and go against the tide. You have a higher likelihood of failure. But some are attracted to freedom and are entrepreneurial. You need to have the right people in those positions.”
Creating breakthrough innovations often require efforts from explorers, who go beyond their familiar territories to bridge and combine distant ideas in a brilliant way, Jiang said.
However, exploration does not necessarily lead to breakthroughs. Her research paper published in 2023 investigates what work environment can help explorers turn their risky and failure-prone efforts into breakthrough inventions, and they found that the key is breaking down silos.
“We looked at what to do differently to support exploration; it doesn't produce breakthrough innovations on its own, but it’s the supportive environment that helps pay off,” she said. “There are a lot of silos, and managers need to break those down to formally and informally foster communication.”
She pointed to the origin of the Post-It note, where one scientist at 3M heard of a failed experiment from a colleague that resulted in a weak, non-stick glue. That conversation happened outside of the workplace.
She recommended managers create conditions for people from different departments to meet informally, like during lunch or other outings, to further foster communication.
For companies that are exploring new pathways, Jiang said having crossfunctional communications can help explorers identify problems more quickly and move on from ideas that do not work.
And even if teams scrap promising ideas, the right company culture could give that discovery a second life, much like the Post-It note.
“Innovation has a huge range: the breakthrough innovation projects are about one edge of the continuum, which is the highly innovative edge, and that's not for everybody,” Danneels said. “And the other is incremental, and that is for everyone, and should be for everyone.” ROI
Beyond a Big Idea
For established companies, the hardest part of breakthrough innovation may not be finding the next promising technology. It may be building an organization capable of turning that promise into a successful new business.
New research from the University of South Florida identifies three capabilities companies need to do repeatedly: conceptualization, experimentation and scaling.
Erwin Danneels, professor of strategic innovation at the University of South Florida, co-authored the study with Gina Colarelli O’Connor. Published in Technovation, the research draws on 613 interviews with managers at 42 large companies conducted over 21 years.
The researchers found that breakthrough innovation depends on capabilities that serve different purposes. Conceptualization generates and develops potential business concepts. Experimentation puts their assumptions to the test. Scaling transforms validated concepts into businesses that can attract resources, gain traction and move toward profitability.
Companies need all three. Strength in just one is not enough.
The framework offers executives a practical alternative: manage breakthrough innovation according to what each stage requires, with goals, performance measures and management practices suited to conceptualizing, experimenting and scaling rather than treating the entire process like ordinary product development.