**2.7 Transformational innovation**

As already pointed out in the introduction, transformational innovation is of such a nature that it has the power to transform entire industries and society at large. It is

a rare and powerful form of innovation that creates new value for many generations. It can fundamentally change industries, firms, and products completely. Innovation occurs out of necessity; in terms of transformational innovation, this becomes apparent as industries, firms and societies were affected by the COVID-19 pandemic and, as such, the whole had to change globally to adapt to the new way of working.

Transformational innovation seldom stems from existing industries, firms, and products because such entities have vested interests in established innovations; therefore, transformational innovation stems from outside entities that have no vested interest in existing innovation investments and infrastructure. Transformational innovation has both challenges and opportunities. Opportunities lie in that the change that is required does not rely on old ways of doing things, so one is free to innovate without any constraints. The challenges and risks with transformational innovation are so immense that, in essence, it can destroy the innovator; therefore, transformational innovations are scarce and transformational innovation usually stems from start-ups.

Large firms often do not attempt transformational innovation single-handedly. They often rely on technological advancements of start-ups or other partners or suppliers to initiate transformational innovation because the risks associated with transformational are just too high, and often transformational innovation requires capabilities and expertise that the firm does not possess [12]. Therefore, transformational innovation initiatives take an open innovation approach. Open innovation is the preferred approach because it allows for collaboration with external firms and other entities and, as such, is seen as the most effective and efficient way to achieve transformational innovation [12].

Some examples of transformational innovation over the last, say, 50 years include at least the following:

