Basic Concepts: Types of Innovation

In various sources, you’ll find that innovations are categorized in different ways. Some criteria for classification include the application area of the innovation, the magnitude of its impact, the novelty of the technology used, or the degree to which the targeted need is unmet. However, the use of similar terminology to describe different types can cause confusion. In this book, we occasionally refer to these types, so I’ll briefly discuss a few classification approaches.

One prominent framework, developed by the Doblin Group, an innovation consulting firm, is the ‘Ten Types of Innovation.’ This framework categorizes innovations based on their application areas, dividing them into three main categories: configuration, offering, and experience.

Under configuration, which pertains to an organization’s internal operations, we find:

  • Profit Model Innovation: This encompasses innovations that alter how a business generates revenue. For instance, traditional newspapers transitioning from print ad revenue to subscription models on digital platforms is a classic example.
  • Network: This type includes leveraging stakeholder and alliance networks in supply chains to enhance value or create new markets. An automobile company collaborating with software and graphics processor companies to develop autonomous driving features exemplifies this.
  • Structure: This involves the unique reorganization of a company’s physical, intellectual, and human resources to boost efficiency or create new potential. A shift from traditional to vertical farming in agriculture or Toyota’s lean production culture are illustrative cases.
  • Process: This is about enhancing or creating new processes for more efficient, higher quality work, like Ford’s pioneering assembly line in the early 1900s.

In the offering category, which deals with products and services, we have:

  • Product Performance: This pertains to improving existing products or developing new ones with superior features, like the evolution of vacuum cleaners.
  • Product System: This involves creating product ecosystems or complementary products that offer more value than standalone items, with smartphones being a prime example.
  • Service: This enhances a product’s utility, performance, and value, like an online store offering free shipping and same-day delivery.

The experience category focuses on the end-user experience:

  • Channel: This finds new or improved ways to deliver products or services, such as selling cars online instead of through traditional dealerships.
  • Brand: This uses brand power for market differentiation and value creation, with Patagonia being a notable example.
  • Customer Engagement: This aims to forge deeper, more meaningful connections between customers and products or companies, as seen with Starbucks and Lexus.

Additionally, innovations can be classified by their participatory nature. Open innovation involves collaborating with external partners, like in crowd-sourced platforms such as Kickstarter. In contrast, closed innovation is confined to an organization’s internal resources.

Another distinction is based on the purpose of innovation: commercial profit versus social benefit. Social innovations, like microfinance services in developing countries, aim to address social needs and are often spearheaded by social enterprises or non-profits.

Lastly, the impact of innovation is another classification criterion. Incremental innovation focuses on minor improvements to existing solutions, prevalent in everyday items like phones and cars. Radical or leapfrog innovation, however, has transformative effects and can create entirely new markets, such as the airplane revolutionizing travel.

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