More often than not, senior management and the C-suite assume that exploring disruptive innovation is incredibly risky, and it is. It’s often a key bugbear to getting senior management buy-in for corporate innovation initiatives.

However, that high risk doesn’t necessarily need to translate to high cost, especially not in the early stages of the innovation lifecycle (below). In fact, the cost of not exploring disruptive innovation can be much higher with countless companies having paid the ultimate price in recent years for neglecting it.

Similarly, the cost of exploring purely safe, predictable and incremental innovation can be exponentially greater in the early stages and often offer little reward.

Clearly articulating and communicating these facts to senior management up front can go a long way towards getting and maintaining top-down support for your corporate innovation strategy.

Getting senior management buy in can be challenging.

I’ve developed the following chart to help drive conversations with senior managers and clearly articulate the risk and reward profiles of the two key types of innovation that large organisations are talking about today.

Let’s explore further.

Certainty and Risk

Incremental innovation: Certainty is high when exploring incremental innovation because for the most part, we’re dealing with many known variables. There is less ambiguity about who our customer is, how much it will cost to build and take a product to market, which distribution channels we’ll use to get the product in customer hands, what features customers want, which relationships we need to tap and so on.

Think about EA Sports releasing yet another version of its prized FIFA video-game series - something it has been doing every year since 1993’s FIFA International Soccer (I still remember playing this on my 486 PC!).

This takes me back to Grade 6.

Disruptive innovation: In the early stages, disruptive innovation is plagued with ambiguity, uncertainty and is characterised by many untested assumptions. This ultimately underpins the high risk profile of disruptive innovation and also why, on average, 95% of startups fail and why venture capitalists usually hit home runs on about 10% of their investments, despite the fact that investing in early stage innovation is pretty much their entire job.

Time

Incremental Innovation: Such innovation lends itself to the nearer term and aligns with both senior executives and shareholder demands for short-term returns. Apple CEO Tim Cook has done a fantastic job at focusing on short-term wins and incremental innovation since the passing of Steve Jobs, however many pundits such as Steve Blank, suggest that this may be coming at the expense of long-term sustainability and growth.

“Apple under Cook has doubled its revenues to $200 billion while doubling profit and tripling the amount of cash it has in the bank (now a quarter of trillion dollars). The iPhone continues its annual upgrades of incremental improvements. Yet in five years the only new thing that managed to get out the door is the Apple Watch. With 115,000 employees Apple can barely get annual updates out for their laptops and desktop computer.”, writes Blank. He goes on to compare the head of Apple to Steve Ballmer, who optimised short-term gains by squandering long-term opportunities.

Disruptive Innovation: Overnight success usually takes years but comes into public consciousness seemingly ‘overnight’.

Success with disruptive innovation.

Disruptive innovation by nature finds a foothold in the market with early adopters which usually makes up about 5% of the eventual market and can take years to cross the chasm to the mainstream.

Airbnb made $200 a week in its first year before growing to become the US$30B company that it is today. At one point, Airbnb’s founders went as far as selling their own brand of US Presidential Race inspired cereal just to pay off their credit cards and stay afloat for just that little bit longer.

This also explains why senior managers tend to shy away from disruptive innovation, because it can take years to generate a return, if at all.

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