Adjacent Innovation (AI)

Understanding Adjacent Innovation

Adjacent Innovation is a growth strategy that involves expanding into new business areas that are ‘adjacent’ to, or close to, a company’s existing business. This could mean new geographies, new customer segments, or new technologies, but the key is that these areas leverage the company’s existing capabilities and strengths.

The Role of Adjacent Innovation in Business

Adjacent Innovation plays a critical role in business growth and sustainability. By focusing on areas close to the company’s existing strengths, it allows the company to leverage its knowledge and resources, reducing the risk associated with expansion. At the same time, it enables the company to explore new opportunities and keep up with changing market trends.

Adjacent Innovation vs Core and Transformational Innovation

Adjacent Innovation is one of the three types of innovation, along with core and transformational. Core innovation involves improving existing products for existing customers, while transformational innovation involves creating new products for new markets. Adjacent Innovation sits in the middle, leveraging existing capabilities to create new value.

1. A software company that traditionally serves the finance sector could use Adjacent Innovation to expand into the healthcare sector, leveraging its existing knowledge of data security and compliance.

2. A car manufacturer could use Adjacent Innovation to move into electric vehicles, leveraging its existing manufacturing capabilities and brand reputation.

3. A retail company could use Adjacent Innovation to launch an e-commerce platform, leveraging its existing supply chain and customer base.

The concept of Adjacent Innovation emerged from the recognition that companies often struggle to innovate outside their core areas of expertise. It was popularized by the Boston Consulting Group in their innovation strategy framework.

• Adjacent Innovation is not about completely new markets or technologies, but about leveraging existing capabilities in new, yet related areas.
• Adjacent Innovation is not a less important form of innovation. In fact, it often provides the best balance between risk and reward.

• Adjacent Innovation vs Core Innovation: While core innovation focuses on improving existing products for existing customers, adjacent innovation leverages existing capabilities to enter new, but related areas.
• Adjacent Innovation vs Transformational Innovation: Transformational innovation involves creating completely new products for new markets, often involving significant risk. Adjacent innovation, on the other hand, involves less risk as it leverages existing capabilities.

• Core Innovation
• Transformational Innovation
• Disruptive Innovation
• Market Penetration
• Product Development