The current ability of the organization to execute a capability defines capacity. This is not as complicated as it may sound. Because the organization may have only a limited number of employees qualified to form Red Teams, there is a limited capacity associated with the Red Team capability. Continuous improvement of processes is the systematic upgrading of lower capability means to give higher capacity at a higher capability. To use the prior example, continuous improvement of team capability would be to provide training to Blue and Green Team members so that more Red Teams can be formed.
Innovation is the introduction of new capability.
Again, using the prior example, innovation would be training everyone in a new technique. Everyone, even the Red Team, would have a greater capability to execute the new technique. It is important to note that innovation usually introduces learning curve dynamics and a risk of failure to a greater extent than continuous improvement. Following is another distinction between strategy and process improvement. However, Red Team-caliber candidates are expensive and much harder to find.