Radical and Incremental Innovations as Critical Leveragers of a Firm's Financial Performance: Best Practices from Tesla and Toyota

Abstract

Even if the rippling effects of radical and incremental innovations often bolster a firm's overall effective financial performance, managing all kinds of innovation activities is often not a linear process that induces the desired outcome and profitability levels. Thus, given the high rivalrism in the global car market, this paper offers a critical analysis of Tesla and Toyota's radical and incremental innovation management strategies so as to extract the best practices that can be emulated by other innovation ventures to bolster their competitiveness and financial performance. Methodology used in such analysis entailed a systematic review and synthesis of the existing online data, academic journals and textbooks on Tesla and Toyota's radical and incremental innovation management strategies. Combined with the interview of twenty personnel from car dealers in Aberdeen, Edinburgh and Glasgow in Scotland about their perceptions of Tesla and Toyota's innovative products, outcomes of such systematic review were triangulated with the core radical and incremental innovation management theories to discern how they offer coherent explanation of Tesla and Toyota's innovation space and management strategies. Though Tesla and Toyota seem to use similar radical and incremental innovation management strategies of search, select, implement and capture, Toyota was still found to have a radical product innovation disadvantage that undermines the development of better EVs to counter Tesla's premium EVs. Similarly, Tesla also has a radical process innovation deficiency that affects the development of cheaper and affordable EVs to further erode Toyota's market dominance. Given such findings, the paper highlights some of the best radical and incremental innovation management practices that can be emulated by different innovation ventures to create, deliver and capture the desired innovation values that can bolster their overall competitiveness and financial performance.