Achieving performance excellence through an integrated strategy of radical innovation and continuous improvement

Innovation is a complex process, one easily identified as being of critical importance for organisational success yet not easily managed. As international competition intensifies and product life cycles shorten, the pressure to innovate heightens. This paper compares the effectiveness of radical, incremental, and integrated innovation strategies on performance excellence. Hypotheses are tested in a cross‐sectional study of Australian and New Zealand manufacturing companies. Quantitative data was gathered from a large sample in a mail survey of manufacturing site managers and analysed using multivariate analysis techniques. Three performance excellence outcomes (customer satisfaction, productivity, and technological competitiveness) were used as dependent variables in the regression models. The major finding of the study is that a “bottom‐up” continuous improvement strategy is the preferred strategy to improve customer satisfaction and productivity in Australian and New Zealand manufacturing firms. On the other hand, a “top‐down” strategy is considered appropriate for increasing relative technological competitiveness. Surprisingly, an integrated strategy had the least explanatory power on performance excellence. This is consistent with the literature perception that firms have not reached a stage of systems integration and networking. The main implication of the study for practicing managers is that a continuous incremental improvement strategy is the major driving force behind any improvement effort, and that radical innovations should be used to “jump start” critical products, services, and processes intermittently. Once these strategies are in place, managers will be well on their way in achieving systems integration.