Innovation can be categorized in several ways. For example, you can define innovation based on the tool, or means of solving the problem, or based on the problem itself. Innovation also can be categorized based on its effect on your organization or the market. Finally, innovation can be based on business model
Why do we need to continuously look for new ways to do things if the traditional methods work? And what is the drive for big companies to prioritize innovation and make changes to their vision and to the products they sell? The answer is simple. Everyone is pursuing growth!
Why innovation?
We live in an era of rapid technological progress. Market dynamics and consumer behavior keep changing continuously. Those changes have made innovation the only way to stay in the game.
In an interview with John Chamber, Cisco Chairman, he stated that all businesses need to figure out how to change their entire company to accommodate new technologies; otherwise, he clarifies that 40% of them will not survive ten years from now.
Based on a study by lab25, an innovative company, from a consumer’s perspective, is a company that comes up with new ideas for its products, listens to customers, and keeps improving its services. It also states that 83% of customers say that it is essential that the company they buy from is innovative; hence innovation drives consumer decision-making.
The 4 Types of Innovation
The four types of innovation are:
- Sustaining Innovation
- Breakthrough Innovation
- Disruptive Innovation
- Basic/Incremental Innovation
To distinguish between the four types of innovation, we need to understand 2 main factors that determine which type of innovation to seek:
- How well-defined is the problem we’re tackling?
- The necessary knowledge domain or field of experience required to find a solution.
In the following part, we are going to explain each innovation type based on those 2 main factors:
1. Sustaining Innovation
Parameters:
- Well defined problem
- Defined domain for the solution.
- No new technology is required to solve the problem.
Sometimes called continuous innovation, sustaining innovation means creating, amending, and experimenting continuously to maintain your presence in the market. It is important to keep improving your company’s operations, products, and market position.
Tools:
- Traditional R&D
- Design thinking processes.
- Brainstorming and road mapping.
- Acquisitions.
Acquisitions or collaborative models outpaced traditional R&D in sustaining innovation. Based on PWC’s re-inventing innovation publication, companies embrace open innovation by 61%, design thinking by 59%, and co-creating with customers, partners, and suppliers by 55%. Then comes traditional R&D by 34%.
Sustaining Innovation Example:
An excellent example of sustaining Innovation is Pfizer, the largest pharmaceutical company by revenue. The company expanded to be a research-based company through innovation acquisitions.
2. Breakthrough Innovation
Despite the importance of sustaining innovation, it is not enough to create a significant change that gives an advantage over competitors. Alternatively, breakthrough innovation gives the highest advantage for the innovating organization that might even set new rules in the market.
Parameters:
- Defined problem but creates a paradigm shift in seeing the problem.
- Wide range of domains
- Uses new technology
Market dynamics in breakthrough innovation
The new technology can sometimes create a new business model to change a product or a process; this change usually results in a shift in the market. Competitors can take quite some time to catch up. Breakthrough innovation usually takes an unprecedented direction for solving the problem to the extent that it sometimes fulfills a need that the market never knew existed.
Like anything new, breakthrough innovations usually need some time to be understood and adopted by the market. However, when it does, it starts a series of changes in the market that reshapes the consumer behavior.
Tools:
Open innovation is a perfect tool for creating breakthrough innovations, as it allows for a wide range of expertise and skill domains to work together on the problem. And usually results in the most novel and original solutions for a persistent problem.
Breakthrough Innovation Example:
An example of breakthrough innovation is Dyson’s bagless vacuum, adopting new technology to create the first bagless vacuum cleaner, which significantly improved its market position.
3. Disruptive Innovation
Parameters:
- The problem is not well defined.
- The solution lies within the company’s domain.
- Introduces a new technology
The concept of disruptive innovation was introduced by Professor and business consultant Clayton Christensen, who defines it as an innovation that creates a new value network either by creating a new market or entering an existing market and changing it by eliminating existing players.
Disruptive innovation doesn’t disrupt the market overnight; it usually gets introduced to the market as a minor product without getting much attention from existing players or consumers. However, as non-consumers start adopting this innovation and regular consumers switch to it, a new market is created, fundamentally affecting the existing market and usually replacing it.
Tools
One tool to be used for disruptive innovation is innovation labs, where you engage your employees in creative collaboration to work on the problem on a long-term basis. Other tools are VC models or lean launchpads. Also, 15% 20% rule, where you make your employees spend 15-20% of their time creating and experimenting with new projects.
Disruptive Innovation Example:
A famous example of disruptive innovation that uses a new business model is Netflix. Netflix changed the home entertainment industry, as they disrupted the existing model of DVDs, introducing subscription-based streaming services. And later on, producing content themselves. Airbnb is also a great example of disruptive innovation, disrupting the hotel industry by introducing a brand-new business model.
4. Basic Innovation
Parameters:
- Not specific problem to be solved.
- The solution can potentially come from any domain or expertise.
Basic or incremental innovation is the continuous research effort done when you are not solving a defined problem, and the skill domain of the potential solution isn’t specified.
Basic innovation is as vital as other innovation types since continuous research protects your organization’s ability to innovate. It could also be the starting point of many significant innovations.
Tools:
The good thing about basic research is that you can plan it based on your organization’s resources; it can take different forms as attending conferences, holding internal seminars, or investing in a lab if you have the resources.
Basic innovation examples:
Amazon, for example, established a perfect model for basic innovation on its website interface. Amazon amends, tests, and optimizes its interface on a daily basis.
In conclusion, innovation has become an integral part of company growth and even survival. Fortunately, innovation works in many directions; you can start from inside your company or outside your organizational boundaries. Whichever way you choose, you need to be continuously innovating and experimenting.
One way to start is to reach out to solutions that make managing innovation programs simpler, easier, and more streamlined for you.
Feel free to contact us to book your demo to talk more about your innovation needs and what we can do to help.
