How the Innovation Cycle Guides Groundbreaking Businesses (2024)

One way of thinking about the past 250 years is as a series of innovation cycles: the industrial revolution, the age of the automobile, the information age, and now what some are calling the generative AI age. Each cycle began with an opportunity, followed by a creative breakthrough, the development and implementation of new technology, its adoption across society, and, in the end, economic growth.

This framework also applies to innovation on a smaller scale. A brilliant business idea might lead to research and development, and the next thing you know, it hits the market and sales skyrocket. Here’s how to map your own endeavors onto the innovation cycle and use it to guide your business growth.

What is the innovation cycle?

The innovation cycle is the series of phases by which ideas are transformed into new technologies, processes, or social structures. It charts the course of innovation from inception to mass adoption. 

Typically, the innovation cycle starts with a problem or opportunity, which is met with creativity, experimentation, and iteration until a breakthrough is realized and implemented. Take the history of rocketry, for example. Rocketry began with the discovery that bamboo tubes filled with gunpowder could blast off into the air. What followed were centuries of creative experimentation, the invention of new rocket designs, and, eventually, space exploration and a major phase of economic development. Within this grand cycle were many smaller cycles—major and minor innovations in their own right. 

Innovation and destruction

The biggest innovation cycles may incur what economist Joseph Schumpeter called “creative destruction”—the process by which an innovation radically reshapes markets and disrupts entire industries. The innovation lifecycle is related to how business cycles operate, contributing to the pattern of boom and crash. 

The economic effects of a major innovation (the steam train, the cotton gin, the personal computer) might appear destructive at first, but they’re ultimately creative in that they reshape the world and challenge the existing order.

Stages of the innovation cycle

1. Opportunity
2. Creativity
3. Implementation
4. Diffusion

The innovation cycle follows a similar pattern to the product development cycle, but it’s broader and can apply to any type of innovation. It can be helpful to break it down into four stages:

1. Opportunity

The innovation cycle begins with a problem that needs to be solved, a brilliant idea that comes seemingly out of the blue, or the perfect confluence of capabilities and resources. 

For example, you might discover, just by messing around in your workshop, that running an electric current through a glass vacuum tube produces light. That’s how Heinrich Geissler contributed to the development of neon lighting and the innovation cycle that culminated in commercially available electric light. But not all ideation is spontaneous—there are proven strategies for brainstorming business ideas.

🌟How to perfect your ideation process. Learn how to improve your problem-solving skills and creative thinking when generating ideas.

2. Creativity

During the creative or ideation phase, the general concept for the innovation is born. If the innovation is an invention or physical product, this phase might involve design and prototyping. If the innovation is a process, it might involve gradual improvement through testing. 

The creativity phase is a time of preparation and experimentation. If you’re a tech company with a new gadget in the works, this might involve developing your minimum viable product (MVP) and sketching out potential business models. If you’re an educator with a new process for teaching math, this phase would involve writing and testing your curriculum.

3. Implementation

The implementation phase is when an innovation is realized in something close to its final form. This doesn’t mean the product won’t still undergo changes; the Model T was certainly not the final form of the automobile. But when an innovation is implemented, it’s irrevocably introduced to the market and begins to change the world—sometimes radically.

The implementation phase might not happen all at once. Sometimes, it requires decades of work before a solution presents itself. For instance, you could argue that augmented reality (AR) is still somewhere in the implementation phase. Although individual versions of the technology have moved through the innovation cycle and are available on the market, none of them have seen true mass adoption. 

4. Diffusion

The diffusion phase charts the spread and adoption of an innovation throughout a society and around the world. The innovation may still evolve. Copycats will likely spring up. New cottage industries will spring up around it, but the innovation in its most influential form has been introduced and embraced. 

This phase eventually feeds back into the first phase of the cycle—opportunity—and the process repeats. New problems must be solved. New opportunities arise. The innovation cycle begins again.

Picture, for example, the era when the great railway monopolies dominated the New York Stock Exchange. These rail networks stretched all across the United States, impacting the lives of nearly everyone, shifting demographics and changing patterns of production and consumption in ways that affected countless industries. For example, telegraph companies set up lines that ran along the railroad tracks, which sped up communication.

Example of innovation cycle in ecommerce

A relatively recent example of the innovation is the sheet mask. Originally developed in South Korea in the 1990s, sheet masks are thin layers of cotton (or other fiber) soaked in hydrating serums. When placed on the face, sheet masks can improve absorption of skin-care ingredients by preventing the evaporation that occurs when a serum is left to dry on the face without a protective barrier. 

As sheet masks gained international popularity (diffusion), the innovation cycle started again when Dieux Skin cofounder Charlotte Palermino recognized a problem. Her daily use of under-eye masks created a lot of plastic waste (sheet masks are typically individually packaged). Enter the Forever Mask, a reusable silicone eye mask. This new innovation arose from Charlotte’s creativity, underwent an implementation period of prototyping and testing, and is now on the market in its diffusion phase.

Tips for navigating the innovation cycle

When you innovate and create new products, your process will likely follow the pattern of the innovation cycle. Gloria Hwang, founder of bike helmet company Thousand, shared a few tips from her own journey on an episode of the Shopify Masters podcast:

Find creative partners you can trust

You don’t have to innovate alone—in fact, you’d probably do well to include others. Once you have your groundbreaking idea, bring on collaborators who can contribute their strengths to the project. If you’re creating a physical product, this goes for your manufacturer. You want someone who grasps your vision and can help you understand what’s feasible and what’s not.

“A manufacturing partner really is a relationship,” says Gloria. “It’s not as oppositional as folks might think. They think they’re negotiating—combating—with their manufacturing partner, but my perspective is, it works best when it really is a partnership.” 

This might mean finding a midsize manufacturer and possibly paying a higher price, Gloria says. Your goal is to find someone who’s willing to work with you through the product design process and help you iterate until the product is just right.

Involve your target market

When you actually begin to work with manufacturers to make your product a reality, you’re the guardian of your target market’s needs.

“The good manufacturers know how to make best-in-class products, but they don’t necessarily know your customer or your market or your vision at the end of the day,” Gloria says. “So being able to speak on behalf of your customer is really important. No one will ever advocate for your customer as much as you do.”

To do this, conduct market research and speak with the audience you want to serve. Use concept testing and conduct surveys to learn what types of products they’re interested in, what they like, and what they dislike. Invite a few of them to try out a prototype and offer you feedback. The end goal of your innovation is to serve a market, and the more attuned you are to that market’s actual needs, the more information you’ll have to guide you.

This continues once your innovation is out there in the world. The early adopters can help you hone your product to the needs of those who love it most, while the so-called laggards (those who are resistant to adopting your product) can teach you where it still falls short. To get it right, you might need to tinker with your value proposition or reframe the way you think about customer priorities.

Embrace the cyclical process

Once your innovation is out there in the market—once it’s reached the diffusion stage—your work continues. Look for new opportunities for disruption within your business model, as well as ways to build on your product.

“It’s a continuous loop,” Gloria says. “We have an orchestrated attempt once or twice a year to get all the feedback from major partners and distributors and customers, and we use that feedback every single year, and we update products or we roll out new products.” 

You might just find that the mass adoption of your product presents a new opportunity that sparks a new idea, and once again you’re up and innovating.