Global
01 September 2021

5 Main Types of Innovation: Which Is Right for Your Business?

Written by Robbie Richards

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Corporate innovation is no longer optional. 84% of corporate executives claim that innovation is a critical driver to their growth strategy. But the conversation is no longer about whether you should innovate—it’s now about finding the best types of innovation

Years ago, a company could rest on its previous success, allowing one "golden goose" product to generate almost all its revenue. Now, technological advances and digital disruption pressure all businesses with traditional models into a simple choice:

Adapt or fail.

75% of Fortune 100 companies now invest in startups through accelerators or internal venture capital arms. But that’s just the beginning of what’s on offer.

In this article, we’ll see an innovation component is crucial to your business, and we’ll explore different types of innovation strategies to lead your company forward.

Let's get started.

Innovation is More Important Than Ever

The COVID-19 crisis forced corporations to innovate whether they wanted to or not. As the dynamics of global business reshuffles to embrace remote work, e-commerce, and the latest technologies in automation and artificial intelligence, there has never been a better time to add an innovation component to your business. 

Even when resources are tight, research from McKinsey shows that investing in innovation through a crisis can boost a company's performance by 30% over market averages—with increased growth lasting the next three to five years.

Today, corporations face challenges from global health pandemics and the rising threat of well-funded startups. When an agile disruptor derails a stagnant enterprise, everyone sees, and nobody forgets. Just look at Kodak when digital cameras took over or Blockbuster when Netflix entered the market. No corporate leader wants to be at the helm of the dethroned giant when disruption like this happens.

If your corporation is going to remain competitive when fast-paced startups join the market, you must embrace new technology and different types of innovation that will help enhance your business model. In doing so, you can provide the most convenient, highest-quality solution to the market problem. 

What Type of Innovator Is Your Business?

Before you start spending time and money experimenting with different types of innovation, you first need to understand what type of innovator you are. This foundational research will help determine the types of innovation best suited to your business, team, and objectives. 

Your business’s innovation type largely depends on whether your existing innovation culture is open or closed.

Open Innovation Culture

An open innovation culture realizes that creativity is not exclusive to the employees within your company. This approach embraces creative talent, research professionals, and subject matter experts from outside your organization so that they can bring their unique perspectives, experience, skills, and intellectual property to your enterprise.

If your business engages in open innovation, then it likely falls under one of the two following types of innovation categories:

  • Explorer: Your company invests minimally in innovation but still explores external assistance.
  • Hunter: Your company invests heavily in innovation and makes external partnerships a priority.

Closed Innovation Culture

In a closed innovation culture, the company keeps all innovation processes within the organization. Without input from external technology, partners, or resources, the corporation retains complete control of the innovation process. 

However, the caveat is that all efforts are limited to the current workforce’s capabilities, which means your company may lose out on the benefits of external input that could accelerate change.
A closed innovation company typically falls under one of the following types of innovation categories:

  • Experimenter: The company does not invest much in innovation but reserves some internal capacity and budget for new ventures.
  • Builder: The company maintains innovation entirely in-house and invests significantly and consistently in innovation.

Based on the type of innovator you are, you can select the most appropriate types of innovation strategies to grow and scale your firm's new ideas.

5 Main Types of Innovation You Should Know

When it comes to business growth, specificity is vital. The word "innovation" is a somewhat vague and versatile term. We can classify innovation based on the object of innovation and the degree of innovation. 

When we study the various types of innovation, you’ll find it easier to identify the right track that will accelerate your company.

Incremental Innovation

According to Entrepreneur, 98% of all innovation is incremental. While the buzz is around disruptive innovations, incremental innovation is an age-old strategy that has enabled many established companies to remain competitive for decades.

Incremental innovation is the process of minor, steady improvements to your business operations, tools, marketing, and products. A relatively low-risk approach, incremental innovation focuses on improving existing offerings to align with current consumer trends.

This approach allows companies to maintain their current business model and avoid cannibalizing their existing products or services. Let's take a look at some incremental innovation examples:

  • TVs: Televisions are a prime example of incremental innovation. These products started as heavy boxes needing wired antennae to bring shows to consumers' living rooms. Modern TV still serves the same purpose, but manufacturers now offer slimmer, higher-quality screens.
  • Shaving Razors: What started as a single-blade safety razor has evolved into a myriad of product variations. Customers can choose from various blade counts, handles, and motorized or non-motorized razors. The features may have changed, but this product’s basic purpose has remained consistent over time.

Sustaining Innovation

Sustaining innovation focuses on creating networks of value and customer satisfaction within the current market. This approach is opposed to disruptive innovation, which creates a new value network. 

Companies seek to improve product performance each time to reduce defects. The newer product version may be more expensive but also carries higher profit margins. This step-change approach makes the product more appealing to consumers who demand better performance and are willing to pay a premium.

Sustaining innovation can also help companies create cheaper products, as the companies identify areas to reduce production costs and leverage a more efficient production process.

Let’s look at some sustaining innovation examples:

  • iPhone: The original iPhone was disruptive, but every new model is an example of sustaining innovation. Each year, a new version comes out. It features incremental, sustainable improvements without reinventing the phone altogether.
  • Automobiles: The car industry predominantly practices sustainable innovation. For instance, each version of an SUV becomes slightly more advanced. Perhaps new features and technology are added, but the fundamental design and market remain the same.

Architectural Innovation

Architectural innovation is a process that takes methodologies, technologies, or approaches from one field and applies them to a different area.

Also known as recombination innovation, this is the underlying approach behind 40% of registered patents since the 1850s. And this trend will undoubtedly continue to grow as the rate of invention slows down.

Let’s look at some architectural innovation examples:

  • Uber: This app combines freelance work, geolocation, and ride-sharing. Uber brought the ideas together, to create something groundbreaking. Not only did Uber shake up the taxi industry, but it effectively founded the “gig” economy.
  • 3D Printers: Three-dimensional printing technology grew in popularity throughout universities in the early 2000s. But with advances in technology, the capabilities of 3D printers are now driving massive changes in many industries. We can already print product prototypes, and research is underway on the best way to print human organs!

Rapid Innovation

Rapid innovation uses speed as the most critical innovation component in order to respond to a sudden shift in market conditions or consumer demands, such as a pandemic or economic crisis.

In 2020, many companies had to innovate this way, even if they preferred to continue business as usual. Let's explore some rapid innovation examples:

  • Pharmaceutical Positioning: Big pharma companies understand that it is more profitable to meet existing consumer demand than to create it. Pharma companies repositioned their products to help identify and treat symptoms of COVID-19, so they could tackle the crisis and handle new demand for medicines.
  • Hand Sanitizer Hayday: Most will recall the early days of the pandemic when hand sanitizer was in short supply. Whiskey and cosmetic companies took note, beginning to produce the coveted product in batches to open additional revenue streams.

Disruptive Innovation

Disruptive innovation is the launch of a new business model, concept, product, or service that creates a new market segment and value-drivers. Often, disruption comes from a new company, which eventually displaces established market leaders and products.

This approach focuses on meeting consumer demands in ways that no other product or service has done before. Disruptive innovation often creates entirely new markets or a fundamental shift in how the consumers interact with the current market after the disruptive product is introduced. 

Let's look at some disruptive innovation examples:

  • Aldi: The grocery chain Aldi created a new type of supermarket, offering a no-frills experience. Customers must bring their bags (or pay for them) and place their food in their bags themselves. This model cuts down on expenses for Aldi without reducing the quality of their produce.
  • Netflix: In the past few years, streaming has become the default way to view movies and television shows. Since Netflix rose to become a $243B giant, renting physical copies of games, TV shows, or films is all but in the past.

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Source: Viima

The Doblin Innovation Framework

Doblin Inc. was founded in Chicago in 1981 and has since become the innovation unit of Deloitte. The Doblin Innovation Framework is a famous model that asserts all types of innovation consist of the same basic elements. The framework groups ten elements into three main areas of innovation: 

  1. The Configuration: this area covers the business model, network, structure, and processes of the organization. 
  2. The Offering: This area covers the critical aspects of the product performance and systems.
  3. The Experience: This area covers the business's outward-facing elements, including the brand, customer service, marketing channels, and customer engagement. 

This framework helps illustrate how innovation occurs across various parts of the business model. Let's take a look at some of the critical distinctions the Doblin Innovation Framework uses to explain the innovation component in any business.

Product Innovation

There are two types of product innovation in Doblin’s framework, which make up the Offering. Product performance closely aligns with traditional views of innovation. A company can innovate on a product's features or functionality to improve the user experience and overall quality. Alternatively, you can create entirely new features.

The second type of product innovation is Product System, which is the process of creating complementary products and services that add value to your core products. For example, Apple has a lot of accessories for the iPhone, which can add value by helping consumers use the product more efficiently. 

Process Innovation

This type of innovation looks at an organization's internal processes to identify ways of improving how you develop and deliver products and services. An often-overlooked area, processes are vitally important to the longevity and success of any company.

While there are added costs when you focus on improving internal processes, there is massive potential for a high return on investment (ROI). Your business can pursue this incremental innovation strategy to create better products and streamline business operations to become more efficient and productive. Also, as the changes are internal, you can gain a competitive advantage.

Some examples of process innovation include process automation, standardization, lean methodology,  predictive analytics, and crowdsourcing.

Service Innovation

Service innovation seeks to enhance the utility, performance, and perceived value of a company's offering. By putting the customer first, a business can eliminate issues in the customer journey to create a more enjoyable buyer experience and smoother route to conversion. 

In this type of innovation, customer satisfaction is paramount. Done right, you can use outstanding service to forge a fantastic brand reputation that sets your company apart from your competitors. According to SuperOffice, 86% of buyers will pay more for a great customer experience.

Some ideas for service innovation include free trials, money-back guarantees, and self-service systems.

Technological Innovation

Regardless of your industry or products, technology is likely to be a pillar of your business. If it's not, you might struggle to survive in your market in the future, let alone thrive. 

While The Doblin Innovation Framework doesn’t specifically highlight technological innovation as one of its 10 elements, several categories inherently relate to technology, including Profit Model, Process, Channel, and Customer Engagement. 

By embracing AI, machine learning, data science, and automation, your business can innovate in each of these areas to improve its internal processes and external communications. Ultimately, these advances will positively impact productivity, sales, marketing, and customer service. 

Marketing Innovation

Marketing innovation seeks new or improved ways to promote, explain, and advertise your products and services. As with many other aspects of business, the marketing channels that provide the best ROI are constantly changing. 

The Doblin Innovation Framework highlights Channel Innovation as a key aspect of The Experience. For years, the business has become more about segmented audience targeting and personalization. Companies endeavor to provide customers with a tailored service that caters directly to their needs and interests. 

As companies constantly research their target audience and analyze behavioral data, they can use incremental innovation and A/B testing to refine the content, language, tone, imagery, and messaging across each channel. Over time, this innovation enables a business to offer an engaging, seamless experience, even as people move from one channel to the next. 

Social Innovation

The last type of innovation we’ll highlight is one that few businesses can choose to ignore today. Social innovation—or Network Innovation as per the Doblin Framework—is the strategy of leveraging popular social topics and current trends to generate new ideas and build a bigger audience. 

This approach allows the company to tap into the thought-pool of the public without great expense. By aligning with the social narrative on topics like environmentalism, equality, or democracy, companies can position their products and services with a broader audience's social values and principles.

Beyond that, network innovations enable companies to take advantage of other companies' processes, technologies, and channels. In essence, social or network innovation is open innovation at its best. 

Wrap Up

Many established companies have fallen by the wayside because they were too slow to adapt to change. No company is immune to disruption, and no enterprise is too big to be muscled out of its market. 

The MassChallenge platform gives corporate enterprises access to a unique platform and network of innovation partners that can help companies remain competitive and agile in ever-evolving industries. 

Join the MassChallenge program to experiment with different types of innovation, and learn how you can thrive in the age of startups and disruption.

 

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