424 Part 3: Strategic Actions: Strategy Implementation
tested on city streets. The company also
noted that the cars are very safe. At present,
one of the biggest obstacles to introduc-
ing the vehicles to the consumer market is
convincing regulators on their safety and
ability to adhere to the rules and laws of
operating automobiles on public streets and
highways.^65 Because they establish new func-
tionalities for users, novel or breakthrough
innovations have strong potential to lead to
significant growth in revenue and profits.
For example, Toyota’s innovation, embod-
ied in the Prius, “the first mass-produced
hybrid-electric car,” changed this segment
of the automobile industry.^66 Developing
new processes is a critical part of producing
novel innovations. Both types of innova-
tions can create value, meaning that firms
should determine when it is appropriate to
emphasize either incremental or novel innovation. However, novel innovations have the
potential to contribute more significantly to a firm’s efforts to earn above-average returns,
although they also are more risky.
Novel or breakthrough innovations are rare because of the difficulty and risk involved
in their development. The value of the technology and the market opportunities are
highly uncertain.^67 Because novel innovation creates new knowledge and uses only some
or little of a firm’s current product or technological knowledge, creativity is required;
creativity is as important to efforts to innovate in not-for-profit organizations as it is in
for-profit firms.^68 Creativity is an outcome of using one’s imagination. In the words of Jay
Walker, founder of Priceline.com, “Imagination is the fuel. You’re not going to get innova-
tion if you don’t have imagination.” Imagination finds firms thinking about what custom-
ers will want in a changing world. For example, Walker says, those seeking to innovate
within a firm could try to imagine “what the customer is going to want in a world where,
for instance, their cellphone is in their glasses.”^69 Imagination is more critical to novel
than incremental innovations.
Creativity alone does not directly lead to innovation. Rather, creativity as gen-
erated through imagination discovers, combines, or synthesizes current knowledge,
often from diverse areas.^70 Increasingly, when trying to innovate, firms seek knowl-
edge from current users to understand their perspective about what could be benefi-
cial innovations to the firm’s products.^71 Collectively, the gathered knowledge is then
applied to develop new products that can be used in an entrepreneurial manner to
move into new markets, capture new customers, and gain access to new resources.^72
Such innovations are often developed in separate business units that start internal
ventures.^73
Strong, supportive leadership is required for the type of creativity and imagination
needed to develop novel innovations. The fact that creativity is “messy, chaotic, some-
times even disgusting, and reeks of failure, experimentation, and disorganization”^74 is one
set of reasons why leadership is so critical to its success.
This discussion highlights the fact that internally developed incremental and novel
innovations result from deliberate efforts. These deliberate efforts are called internal
corporate venturing, which is the set of activities firms use to develop internal inventions
and especially innovations.^75David Paul Morris/Bloomberg/Getty Images
Google’s self-driving car is an example of a novel innovation.