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Different Types of Innovation Explained

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this article is the first part in our new series called innovation explained we’ll kick off the series with a very commonly misunderstood topic and that is what different kinds of innovations there actually are by looking at innovation from these different animals you learn to better understand the topic at large but also to really identify brand new opportunities for driving value with it let’s get started.

all right let’s jump straight in there are basically two distinct high-level ways to classify innovation we refer to these as the categories and the types of innovation categories are the more abstract high-level version of the two when we’re talking about categories we’re talking about terms like incremental disruptive and radical innovation the idea of this categorization is that we’re interested in the novelty impact and timeline of the innovation it’s a very good lens to use when you’re considering the market environment or your innovation portfolio at large for example this can help tell you about your investment needs and the timelines for expected returns types are then the more practical of the two when we’re talking about types of innovation we’re talking at the level of an individual product service or business and we’re interested in what kind of innovations we can actually implement to create more value in practice um these are things like marketing product performance business model and customer service innovations they are the tools we have at our disposal to again try to create more value for the customer or for other stakeholders.

let’s now take a closer look at the different categories of innovation so the traditional way to categorize innovation is based on the novelty of the technology being used as well as the novelty and the impact of the innovation for the market that it’s being introduced to ii in addition we can also look at the overall impact that the innovation has for the business and for the society at large which is what we have on the z-axis here and the cube is basically just a simplified visualization for all of that now each of these terms is a pretty lengthy topic on their own so i’ll just provide you with a brief overview here so if you want to go into more detail on any of these topics we’ve written about them quite extensively in our blog so i’ll provide you with links to these in the description below let’s start from incremental innovation since it’s the easiest one to understand essentially it’s just a term for all the continuous improvement work like new features minor product or process improvements improve customer experience and basically you name it alone any one of these innovations has a negligible impact on the overall market and there usually isn’t that much new technology involved now sustaining innovation is sometimes bumped into a category of its own but we’ve put it together with incremental here since it’s essentially just a term used for innovations that are aiming to uphold the existing market dynamics but typically have a slightly bigger impact than purely incremental innovations they can use new technology quite extensively at times but aren’t as heavy on it as say radical innovations new much improved private versions are a great example of this so no matter how much cool new technology the latest iphone has they’ve essentially all been either incremental or sustaining innovations since the first couple of generations next we have radical innovation and that’s characterized as innovation with brand new and well you know radical technology a classic example are autonomous surgical robots they’re very heavy on technology and can make quite an impact perhaps even transforming the job of many surgeons but they still don’t fundamentally change the dynamics of the healthcare industry then we have disruptive innovation ever since professor christensen coined the term innovators dilemma it’s become hugely popular but also hugely misunderstood as the name would suggest disruptive innovation disrupts entire industries with innovation now the key characteristics to understand here is that it begins from the low end of the market or from total non-consumption if people just can’t afford something it typically relies heavily on new technology but that isn’t always the case it usually also includes completely new business models but again this might not always be the case essentially disruptive innovations meet the demands of the high end of the market in the beginning but they do solve the needs of some of the less demanding customers just fine at a significantly lower price point airbnb is a great example of this you know they started by just offering a simple air mattress in someone’s living room for cases when all the hotels were either booked or you simply couldn’t afford any of them now when the incumbent starts to lose market share in this already low market marching segments um due to this new competition they typically retreat up market and choose to focus on their most lucrative customers which momentarily allows them to boost margins and improve cash flow the problem is that the same pattern then repeats as the technology and business of the disruptor evolve until the incumbent realizes that they’ve been cornered and pretty much made irrelevant now in airbnb’s case this is still very much a work in progress but they have constantly been moving up market and taking share from big hotels by offering constantly better yet authentic experiences while still being very competitively priced finally there’s architectural innovation which is probably the most versatile of the quadrants here by definition architectural innovation means reassembling existing components or innovations to create something brand new now often these include a combination of innovations from each of the other quadrants they can either use mostly existing technology or be really heavy on new technology and often they can combine many different technologies to create something that will change the business model and dynamics of the market that it affects um but the thing here is that unlike disruptive innovation it doesn’t necessarily just originate from the low end of the market an example of this that we might see become a reality in the next decade or two is crispr gene editing technology which builds on a lot of other technologies in the space i’m really not an expert on the topic but the basic premise is that currently our healthcare system is pretty focused on just treating symptoms instead of solving the underlying problem and crispr could change that by actually being able to fix many diseases for good so that patients don’t need to stay on medication for the rest of their lives obviously this would have huge implications for the healthcare industry in general but obviously still needs quite a bit of work to become feasible at scale now the last commonly used term here is breakthrough innovation that simply refers to any kind of an innovation that has a really big impact it’s different from the other definitions in that it doesn’t care if you use technology or fundamentally change the dynamics of the market in theory a breakthrough innovation could belong to any of the four aforementioned categories but in practice it’s almost always either architectural radical or disruptive innovation i think it would be actually quite fair to say that airbnb autonomous surgical robots and crispr would all be breakthrough innovations as you know was the first iphone but that isn’t really the case with the latest models now in reality the vast majority you know probably more than of all innovations fall into that category of incremental innovation and that’s not necessarily a bad thing um it’s something that we’ll get into later on in the series but if you have the resources and the opportunity it obviously makes sense to have those big bets but incremental innovation is what makes businesses competitive and is something that every organization just needs to invest heavily in and and be good at what most people don’t realize is that the big truly meaningful innovations you know the breakthroughs they always require hundreds of smaller incremental innovations to be possible a great example of this are electric cars all of the basics have essentially been there since the s but it’s really only now a few decades and hundreds of incremental improvements later that we’re starting to see them take off so in many ways the lines we’ve drawn between the boxes here are a bit arbitrary and in the real world innovations often don’t fall neatly into just one quadrant but i still think this is a helpful model for trying to understand innovation at large with the categories covered.

 let’s move on to the types of innovation there are many different ways we could choose to break this down but my favorite is a framework called the types of innovation that was first created by the innovation consultancy dublin so that’s what we’ll use today as we just discussed the important thing to realize is that pretty much every innovative product or service isn’t just a single innovation they all consist of many smaller often hundreds of incremental innovations the basic idea with the types framework you see here is that it helps you break down a specific problem service or product into these distinct areas you then look at each of them in more detail to try to find new ways to make them better through innovation the idea is that if you can combine innovations from many of these areas into a cohesive well thought out service you’re pretty much guaranteed to have a winner in your hands in theory the more types the better for example if we again look at airbnb the disruptive innovation isn’t their website or their mobile app it’s the whole service consisting of everything that goes into it airbnb arguably includes innovations from every single one of these elements in their service they obviously have a very different profit model than the hospitality industry has traditionally had they have a process that ensures that both the hosts and the guests can trust each other and they have a strong network of hosts that have incentives to promote the platform and the list goes on it’s not really important for you to remember all of these types by heart but just remember that the most impactful innovations are always a sum of many innovations not just one big innovation also whatever business you may be in try to systematically break it down into its components and look for innovations in each of these areas and i can guarantee you’ll find quite a few novel opportunities for innovation to create more value that concludes our session for today if you’re interested in learning more about the topic please check out the in-depth guide we have on it from our website we have a link in the description below also if you have any questions please feel free to leave a comment and we’ll get right back to you catch you on the next one.

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