Leveraging Current Innovation for the Future: Understanding Generative Capability

Firms can leverage current innovations for their next round of innovations. We introduce the concept of generative capability in product innovation to build a sustained innovative organization. Generative capability incorporates iteration and rapid knowledge to a firm's innovation activities. Not only do we find widespread application of the principles of generative capability among China's most innovative companies, but also among the world's innovation leaders such as Toyota, Apple, and Tesla. For example, Toyota gradually iterated its hybrid technology from the Prius I (in 1997) to the luxury Lexus line, the mass-market Camry (in 2006), and the cost-sensitive, subcompact Yaris (in 2012). Given repeated, patterned, innovative activities, generative capability can be a “learning-to-learn” capability that will generate advantages in a highly innovation-driven, competitive market. Managers can build generative capability through a “fail fast, fail often” approach. They can build a new generation of product generativity by applying the principles of leverage, adaptability, ease of mastery, accessibility, and transferability. Managers can also enhance their firm's generative capability through internationalization and enhancing absorptive capacity.