Researchers William Abernathy and Kim Clark developed a descriptive framework, based on the capacity of an innovation to influence the established systems of production and marketing to categorize innovations and analyze the varied role they play in competition.
Different kinds of innovation require different kinds of organizational environment and different managerial skills. Each represents a different challenge: incremental innovation challenges the company’s traditional controls, whereas revolutionary and architectural innovation challenges the company’s strategy and controls.
Depicting the effects of an innovation on markets and technology (systems of production) as the axes of a two-dimensional diagram, four quadrants representing a different kind of innovation is created. This map allows one to examine the relationships among innovation, competition and the evolution of industries and develop insight about the strategies of specific competitors. It also implies that the successful pursuit of different kinds of innovation will require different kinds of organizational and managerial skills.
Architectural innovation involves new technology that departs from established systems of production, and in turn opens up new linkages to markets and users. It is characterized by the creation of new industries as well as the reformation of old ones. Innovation of this sort defines the basic configuration of product and process, and establishes the technical and marketing agendas that will guide subsequent development. In effect, it lays down the architecture of the industry, within which competition will occur and develop.
Architectural innovation involve a process and an organizational climate that is distinctive. Prior research work suggests that entrepreneurial action occurs in a unique managerial climate and with firms whose organizational structure is not bureaucratic and rigid. The potential for stimulating architectural innovation seems to hinge on the juxtaposition of individuals with prior experience in relevant technologies and new user environments latent with needs. It is the insight and conception about fresh roles for existing inventions and technologies that market this kind of innovation. For these reasons, existing companies generally do not create architectural innovations.
Revolutionary innovation disrupts and renders established technical and production competence obsolete, yet is applied to existing markets and customers. This mode of innovation is dominated by “technology push” and often follows on the heels of architectural innovation. Vacuum tubes, mechanical calculators and the Disk Operating System (DOS) are examples of established technologies that have been overthrown through a revolutionary design.
However, not all revolutionary innovations have a profound competitive impact as some have failed to meet market needs while others encounter problems in production. Senior management must be capable of sustaining a consensus about long-term goals through investments in new technology and innovation. The task is to focus technical talent toward specific markets and to marshal the financial resources for this purpose. Good technical insight is needed to break established conventions and foster closer collaboration between product designers, process designers, and market planners.
Regular innovation involves change that builds on established technical and production competence and that is applied to existing markets and customers. The effect of these changes is to entrench existing skills and resources. Although the changes involved may be minor when examined individually, their cumulative effect often exceeds the effect of the original invention.
Regular innovation can have a significant effect on product characteristics and thus can serve to strengthen and entrench competence in production, and linkages to customers and markets. As these effects tend to take place over a significant period of time, they require an organizational environment and managerial skills that support the dogged pursuit of improvement. Methodical planning, stability and consistency seem to be key managerial factors to succeed.
Incremental change in process technology tends to both raise productivity and increase process capacity, often through mechanization. This has the indirect effect of increasing economies of scale and the capital to compete. In addition, refinements in product design and in processes reinforce increases in scale economies by enlarging the amount of product variety that a given technology can support.
Though the changes imposed by a given innovation in the regular mode may not be dramatic, a sustained pattern of such change can transform the business, substantively strengthening competitive advantage. Incremental innovation is continuous and associated more with continuity. It is therefore more a part of operational excellence than of technological discontinuity.
Niche market innovation uses existing technology to open new market opportunities. Here, stable and well-specified technology is redefined, improved or changed in a way to support a new marketing thrust. These changes build on established technical competence, and improve its applicability in the emerging market segments.
Successful niche creation innovation requires the matching of customer needs with refinements in technology. Such an innovation in itself is however not sufficient to establish a long term competitive advantage because its competitive significance may be diminished if the innovation can be readily copied. Therefore, no matter how well the new design meets the current demands of the market, the lasting significance of an innovation will be greatly reduced if the new technology is insufficiently unique to defy ready acquisition by competitors. This suggests that the advantage derived from a given innovation will be temporary, and that long-term success in this mode will require a sequence of new products and processes to counter the moves of rivals.
In niche creation innovation, therefore, timing, quick reaction and responsiveness are critically important.