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Innovation contains four dimensions: (1) product versus process; (2) radical versus incremental; (3) competence-enhancing versus competence- destroying; and (4) architectural innovation (Datta et al. 2015). Product innovation results in the outcome of an improved or new product or service proposition. Process innovation is an internally oriented activity aiming to improve the effectiveness and efficiencies of production, such as reducing costs or improving the quality of output, with the added benefit that it may facilitate future product innovation (Schilling 2006).

Radical innovations are totally different from any previous offerings because they create very different new products, services, processes or delivery systems. Radicalness is a function of uniqueness when compared with current offerings or processes. The most radical innovations are new, exceptionally different products, services or processes. In contrast, incremental innovation involves adaptations and refinements of existing products, services, processes or delivery systems (Burgelman et al. 2006). It is often the case that once a radical innovation has created a unique competitive advantage, the entrepreneurial organisation may then seek to sustain market dominance by engaging in incremental innovations. An example is provided by Microsoft which, having radically altered the approach to the provision of computer software for PCs, has sought to retain market leadership through successive releases of its new Windows operating system and its suite of Office software products.

In competence-building innovation, an organisation’s existing knowledge base can usually be exploited to develop an improved or new proposition. The attraction of this approach is that the activities provide an incremental financial return on existing competences. In the case of radical innovation, the organisation often lacks certain key knowledge and competences to effectively complete the development project. Consequently additional investment will often be necessary to acquire new capabilities. This activity may be accompanied by existing competences being rendered obsolete. An example of this outcome in the field of consumer electronics was the industry’s move from transistors to printed circuit boards.

Organisational architecture is based upon the relationships and interactions which a firm has created to optimise performance within a supply chain. A new firm will encounter obstacles becoming accepted as a member of an existing sectoral architecture. One way of overcoming this problem is to create a new, innovative alternative architecture. Such was the case with Michael Dell. At a time when other PC manufacturers were using either a sales force or a network of distributors to generate sales, he entered the market using direct marketing and mail order to service customer needs. Over time Dell has continually sought to add competitive advantage by further architectural innovation and has created a distinctive global, virtual supply network (Lawton and Michaels 2001).

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