2 different approaches to innovation: Which is right for you?

innovation strategies: incremental or radical

As a CEO, having choices can be both a blessing and a curse. Even once you decide where to focus your growth, how do you know which innovation strategy is the right one?

While new research by my team at Vistage shows that high-growth companies are more engaged in innovation than no-growth companies, something else is equally clear: Small and midsize companies don’t all approach innovation the same way.

Often, decisions become clearer when we see how other business leaders are tackling similar challenges. So, let’s take a look at two innovation strategies and how you can leverage them to outpace your competition.

1. Incremental innovation

Definition: The process of improving existing products or services.

Insight: It’s the route most small and midsize businesses are familiar with: 74% primarily depend on it, according to our study.

Benefits: It’s less risky, easier to fund and can see quicker results.

Drawbacks: Although “incremental” doesn’t necessarily mean “small,” that is often the reality. 3% annual productivity gains offer little competitive advantage when competitors are doing the same.

Advice: This approach works best when the same people manage both existing business and its innovation. The key here is to make sure that innovation is measured and rewarded.


For years, Margaret Mitchell, CEO of San Francisco-based The Epi Center MedSpa, ran her skincare clinic like most others in the industry. But she recognized that her business would never outperform her competitors until she decided to do things differently.

For Mitchell, the solution was a simple shift in customer service. She reasoned that she could increase profits by devoting more time to each visit. The clinic would see fewer customers but be able to recommend a sequence of more personal, tailored therapies.

The result of this innovation? Huge growth in repeat business and referrals. Without spending more, the company has seen revenue increase by around 40% year-on-year.

2. Radical innovation

Definition: The process of creating new products or services, or major technical breakthroughs.

Insight: High-growth companies are 37% more likely to rely on radical innovations than no-growth companies, according to our study.

Benefits: The rewards are far greater, with the potential to disrupt an industry and force competitors to play catch-up.

Drawbacks: It’s riskier, usually requiring a larger investment of resources for uncertain, future returns.

Advice: This approach works best when handled by people who don’t also have responsibility for existing business. Give them resources and freedom to set up their own structure, processes and culture, and to think “outside the box.”


Frank Sciarrino, COO of European Wholesale Countertops, recognized that marketing and sales had stagnated in his family business. Its brick-and-mortar showrooms were simply unfit for the digital age, and customers couldn’t even do basic online shopping. Sciarrino wanted to solve that problem.

After discovering that nobody had created a viable customer app, he decided to create one himself. Partnering with a software developer, he launched Quote Countertops — a software-as-a-service (SaaS) that allows customers to preview countertop materials in virtual interiors and get 90-second price quotes.

The result of this innovation? Demand has surpassed expectations and the expanding software service is now a profitable venture in its own right. Customers who shop with the app spend around $1,000 more than customers who only visit the showroom, as they are exposed to more quality options to suit their needs and budget.

While Mitchell and Sciarrino ran two very different businesses, a closer look reveals they had two important things in common: the ambition to grow their business in an industry of “me too” players, and a nagging suspicion that customers wanted something better. As both their stories demonstrate, innovation requires leaders willing to break the status quo to build a better business. The key is to figure out which approach is best for you and your company. 

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Category: Innovation

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About the Author: Joe Galvin

Joe Galvin is the Chief Research Officer for Vistage Worldwide. Vistage members receive the most credible, data-driven and actionable thought leadership on the strategic issues facing CEOs. Through collaboration with the Vistage community of…

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