Types of Innovation

Types of Innovation

It is remarkable how many people are under the false assumption that companies are either innovative or not.  This is a very polarizing and simplistic perspective that does not take into account the different types of innovations that companies can and do pursue.

For this post, let’s break down innovation into two dimensions:  Technology and Market, which gives us the following 4 types of innovation:

1. Incremental Innovation

Incremental Innovation is the most common form of innovation. It utilizes your existing technology and increases value to the customer (features, design changes, etc.) within your existing market. Almost all companies engage in incremental innovation in one form or another.

Examples include adding new features to existing products or services or even removing features (value through simplification). Even small updates to user experience can add value, for example below is an older version of Constant Contact’s email schedule page.

2. Disruptive Innovation

Stealth innovation, sometimes referred to as disruptive innovation, is integrating new technologies or procedures into your business’s present market. It has a stealthy aspect since newer technology often falls short of what is already available on the market. This more recent technology is often more costly, comes with fewer functions, is more challenging to operate, and is less attractive. The newest technology doesn’t overtake the older one and completely upend all established businesses until after a few iterations. The existing businesses may not be able to swiftly compete with the latest technologies by that point.

There are many instances of disruptive innovation, with Apple’s iPhone’s disruption of the mobile phone industry being one of the most notable. The majority of common phones used buttons, keypads, or scroll wheels for user input until the invention of the iPhone. Years of technical evolution, mostly iterated by Palm Treo phones and personal digital assistants, led to the creation of the iPhone (PDAs). Often, the company that ends up disrupting the current market is not the first mover. Apple had to put together an incredible touch screen with an easy-to-use interface and provide customers access to a wide range of integrated and third-party mobile apps in order to upend the mobile phone industry.

3. Architectural Innovation

Architectural innovation is simply taking the lessons, skills and overall technology and applying them within a different market. This innovation is amazing at increasing new customers as long as the new market is receptive. Most of the time, the risk involved in architectural innovation is low due to the reliance and reintroduction of proven technology.   Though most of the time it requires tweaking to match the requirements of the new market.

In 1966, NASA’s Ames Research Center attempted to improve the safety of aircraft cushions. They succeeded by creating a new type of foam, which reacts to the pressure applied to it, yet magically forms back to its original shape.    Originally it was commercially marketed as medical equipment table pads and sports equipment, before having larger success as use in mattresses. This “slow spring back foam” technology falls under architectural innovation. It is commonly known as memory foam.

4. Radical Innovation

Radical innovation is what we think of mostly when considering innovation. It gives birth to new industries (or swallows existing ones) and involves creating revolutionary technology. The airplane, for example, was not the first mode of transportation, but it is revolutionary as it allowed commercialized air travel to develop and prosper.

Innovation Strategies

1. Proactive

Companies with proactive innovation strategies tend to have strong research orientation and first mover advantage and be a technology market leader. They access knowledge from a broad range of sources and take big bets/high risks. Examples include Dupont, Apple and Singapore Airlines.

The types of technological innovation used in a proactive innovation strategy are:

• Radical: Breakthroughs that change the nature of products and services
• Incremental: The constant technological or process changes that lead to improved performance of products and services.

2. Active

Active innovation strategies involve defending existing technologies and markets while being prepared to respond quickly once markets and technologies are proven. Companies using this approach also have broad sources of knowledge and medium-to-low risk exposure; they tend to hedge their bets. Examples include Microsoft, Dell and British Airways.

These companies use mainly incremental innovation with in-house applied research and development.

The reactive innovation strategy is used by companies:

• Which are followers
• Have a focus on operations
• Take a wait-and-see approach
• Look for low-risk opportunities.

They copy proven innovation and use entirely incremental innovators. An example is Ryanair, a budget airline which has successfully copied the no-frills service model of Southwest Airlines.

4. Passive

Companies with passive innovation strategies wait until their customers demand a change in their products or services. Examples include automotive supply companies as they wait for their customers to demand changes to specification before implementing these.