Types of innovation: knowing where to pinpoint your efforts

Defining Innovation

We all know businesses that invest in innovative practices are able to stay one step ahead, and therefore generate more profit and revenue for their company. The concept feels relatively straightforward, and a universally agreed upon method of success. But what exactly is innovation and why is it such an important principle to dissect and understand?

Abstractly, innovation is defined as ‘the introduction of something new,’ which we tend to link with grander ideas of invention and technology; things the world has never seen! While this is one aspect, it could also mean radical changes resulting from small enhancements that are ongoing over time. Whether you want complete transformation or incremental change, knowing exactly where to pinpoint your efforts is crucial.

For more clarity on the subject, we’ve outlined a brief introduction to the many shapes of innovation, starting with the different levels of impact, and then zooming in on the more practical details from business model through to product creation, marketing and customer relations.

Impact Levels of Innovation

Like any new project or idea, it is important to understand how it sits within the bigger picture. Taking the film industry as an example, ideas are often formulated in tandem with a distribution plan, i.e where will this film be shown, who is the target audience and what does it hope to achieve? It might seem strange to begin with an endpoint, but it is not so much of an end point as it is a framework. Knowing these details allows the director to understand its purpose, which affects everything from funding, who to work with and how to carry out the creative vision.

Broadly speaking there are four main classifications of impact, which is often referred to as the Innovation Matrix and helps to define the strategy:

Incremental

This is the most common form of innovation, and is used to describe slow, gradual changes to a product or service that already exists. Being the most conservative option, it is the most widely used and accessible. Large scale change often requires a large budget, which is risky and not always accessible to smaller businesses. It does not create a new market, but rather builds on the core product. Take Cadbury’s or Coca Cola as an example — they do not need to reinvent the wheel of their product, but rather introduce new flavours or concepts as an addition to keep themselves fresh.

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Incremental innovation straddles a fine line: adding unnecessary extras to an existing product for the sake of newness can risk over complication, while letting products that sit stale for too long can get left behind.‍

Sustaining (or architectural)

Similar to incremental, sustaining innovation also stays in line with the core function of the product, while slowly improving it. This time, think of smartphone technology — the core function of the product remains the same, but every year a new and improved version is released, and customers look forward to and expect the constant change to the existing product. This type of innovation is seen to be the most profitable form of low-risk change.

Disruptive

Completely opposite to the previous two, disruptive innovation introduces an entirely new value network. Like the stock market, if successful the rewards have huge payoff, but can also risk huge failure if unsuccessful. This process works by creating a brand new market, or entering into an existing one and completely changing how it functions. Streaming services such as Netflix are one of the most widely used examples to show the complete transformation of an industry.

Radical

Radical innovation is true to its name — it is revolutionary, inventive and changes the way society functions. Examples could include the steam engine, the telephone, the automobile, electricity, with computers arriving on the scene in the 1980s, and then the internet. Our near future will see enormous leaps forward in revolutionary technology, such as artificial intelligence, the way we store energy, genome sequencing and blockchain. While rare, this form of innovation not only changes markets but has the potential to change entire economies as well.

Types of Innovation

Now that we’ve outlined the larger frameworks, it’s time to get practical and zoom in on the spectrum of business organization. Drawing from Doblin’s Innovation Framework, innovation within a company can be divided into three main categories, and then further subdivided within those. Like any task, you need to be realistic about where to focus — what needs the most attention? Are you analyzing the right area for your current competition? Knowing whereinnovation is needed is fundamental.

The Business

Internally focused, the business — or configuration — is the umbrella for the profit model (how you intend to make money), the network (how you will collaborate to create), the structure(how you organize) and the process (the method for carrying out the work). Perhaps a new technology is needed to save time and money, or serve customers better in the long run. It could also be how you improve on collaboration or communication, using a service like Pondr to bring fundamental change to how your company makes decisions.

The Product

Focusing on the product is a common way to envisage and implement innovation, and is the area where you focus on your products performance (its features and how it functions), as well as the product system (products and complimentary services offered). This is often the most straightforward and visible area that gets the most attention.

The Market

The market, or how customers experience the product, is where you focus on service (improvements that add value to what you are offering), your channel (how you are delivering your product), your brand (how you represent who you are) and customer engagement (how you interact with your clientele). Maybe the focus is on upgrading to a more user friendly interface, or focusing on new technologies in marketing to promote your services.‍

The Importance of Innovation

As you can see, understanding the word ‘innovation’ isn’t just a matter of knowing terms and definitions, but is a tool for creating strategic goals across the spectrum of an organization. It isn’t a concept you invest in for the short term and abandon once you feel you have achieved your initial purpose. It is an ongoing journey which not only maintains a company’s relevance but presents new opportunities to harness.

Due to the rise in new technologies, our environment demands continual change and new value to keep up with competitors. So, investing in the promotion of new ideas and innovative practices is not only a good idea, but a lifeline.

Like any smart investor or trade savvy person will say, it is all about mixing! Introduce different levels and increments of change across a broader area of the business, rather than putting all your eggs in one basket.