Everything you Need to Know About Innovation - The Innovation Process and Types of Innovation

I. What is innovation? A Definition

Innovation is the commercial application of an idea that improves existing products or even creates new products, services, or industries. Nowadays, innovation is a must for the success of any organization.

An innovative idea is desirable, feasible, and viable. A desirable idea is one that customers need, a feasible one uses the existing technological capabilities and a viable idea is profitable.

These three dimensions intersect in “the sweet spot of innovation”. You can find out more about the sweet spot of innovation here.

diagram showing the sweet spot of innovation

II. What is the Innovation Process?

The innovation process is the sum of all the activities needed to commercially apply the innovative idea. It starts with identifying a problem and creating a solution that addresses a customer need. There isn’t one fixed innovation process, because it can be adapted from case to case. The innovation process usually looks like this:

 

• Ideas – This is where ideation happens so try to gather as many ideas as possible. Try to have your sources of ideas (people, materials) from varied backgrounds so you can get a broader understanding of your problem.

• Criteria – This is the step where ideas are being selected and you have to make sure that they can bring real value to your company. Also, try to find out what resources you need to develop the selected ideas.

• Testing – Here, ideas are being refined and tested from the market, and users’ point of view. Are they a good fit for the market? Are they solving real users’ needs?

• Launch – If the ideas go past the testing phase, they are being launched on the market.

 

You can also understand the innovation process through the innovation funnel. Find out more about it here.

innovation funnel

III.  What are the most important approaches to innovation ?

There are various approaches to innovation based on several factors:

  1. Based on the object of innovationProduct Innovation and Process Innovation.
  2. Based on how the market evolves – Technological Innovation and Business Model Innovation.
  3. The Innovation MapRoutine Innovation, Radical Innovation, Disruptive Innovation, Architectural Innovation.
  4. Doblin’s 10 types of innovation – based on the configuration of the business, the offering and the customers’ experience – Profit Model Innovation, Network Innovation, Structure Innovation, Process Innovation, Product Performance Innovation, Product System Innovation, Service Innovation, Channel Innovation, Brand Innovation, Customer Innovation
  5. Based on the outcomes of innovationSocial Innovation
  6. Open Innovation and Closed Innovation.

1. Product Innovation and Process Innovation

This innovation approach is about  the “object” of innovation – the product, the final results, and its features or the process through which the product is being developed.

The main difference between these two types of innovation is that product innovation is visible to the final user, while process innovation is not.

iPhone with yellow case on beach background
source: www.businessinsider.com
a. Product Innovation

Product innovation is the most common type of innovation. There are two cases of Product Innovation – the creation of new products or the improvement of existing products. Here are some examples:

• The development of a new innovative product which has to solve an old customer need in a new way: book readers (such as Kindle) or action cameras (such as GoPro)

• The improvement of an already existing product – new Apple phones, which come out every year or so.

Product Innovation is the result of technological advancement or changes among the consumers, based on social, cultural, or economic shifts. On a business level, product innovation happens when the company is trying to reach new market segments, or trying to fain competitive advantage.

b. Process Innovation

Process Innovation is about innovating at the level of capabilities, skills or technologies used for the production and delivery of a service or a product. As we mentioned earlier, this type of innovation is not visible to the final user but only at the company level. This type of innovation results in minimizing production costs, improving processes, and eliminating barriers in the production process.

Process Innovation takes place at the level of equipment, technologies, or methods used by the employees.

Process Innovation examples: 

• Henry Ford’s assembly line – probably the most famous example of process innovation. It is said that the assembly line reduced the production time of a car from 12 hours to only 2 hours and a half.

Google’s 20% project is another process innovation example. The project allows Google employees to work on personal projects for 20% of their working time. This is how Gmail came to life. This is also an example of innovation at the level of the organization or even organizational culture.

 

If you want to read more about Product and Process Innovation read this article – Product and Process Innovation – Characteristics, Differences and Examples.

glass of beer on production line

2.Technological Innovation and Business Model Innovation

This approach to innovation  is based on two factors which are very much influenced by the way in which the market evolves – Technology and technical capabilities and the Business Model – the plan which deals with how the business produces, delivers, and captures value to and from the users.

a. Technological Innovation

Technological Innovation deals with new or improved technologies that are used for the development of products and services.

Most of the time, technological innovation is a must for companies who want to maintain their competitive advantage or simply their position on the market. NOKIA is an example of a company that ignored this evolution and the growing presence of smartphones.

Speaking of smartphones, they are a great example of technological innovation – just look at the evolution of iPhones and the new models which won’t stop being launched year after year.

Ford’s assembly line which was mentioned earlier is another good example of technological innovation at the process level. As you will see throughout this whole article, these approaches to innovation are all connected to each other.

b.  Business Model Innovation

Business Model Innovation is a very popular type of innovation, especially in the last few years , that deals with the way in which a company delivers value to its clients (products and services) and the way in which it captures value (profit). You can find out more about what the Business Model  here.

Business Model Innovation is about changing industries, customer segments, or revenue sources, where the company can test different ways of monetizing the same product or service.

The most famous examples of Business Model Innovation are companies like Uber, Airbnb, and Spotify which completely changed the way in which some industries work ( look at taxis, hotels, and the music business.)

3. The Innovation Landscape Map

The Innovation Landscape Map, developed in an article from HBR, by Gary Pisano, offers us four types of innovation based on two factors – changes at the level of technology being used and changes at the level of the business model.

When companies decide on their innovation strategy, they can choose on what to focus on – innovating the technology or new business models.



a. Routine Innovation

Routine Innovation is the least drastic and it happens when the company keeps both the business model and the technological competencies.

This type of innovation is present in companies which are frequently improving their products, such as Microsoft with its new versions of Windows or the Intel CPU’s.



b. Radical Innovation

Radical Innovation happens when the company keeps its old business model but invests in new technologies and technological capabilities.

A good example of radical innovation is the first iPhone which marked the transition from old mobile phones, as we knew them to the ever-present smartphones of today.

c. Disruptive Innovation

Disruptive Innovation means that a company radically changes its business model while still using the technological capabilities available. 

Clayton M. Christensen, who introduced the term in the 90s, in his book Innovator’s Dilemma,, says that the main feature of disruptive innovations is that they challenge big companies and industry leaders.

Examples of disruptive innovation such as Airbnb, Uber or Spotify show us how these small companies managed to change the way in which industries function.

d. Architectural Innovation

Architectural Innovation happens when both the business model and technological capabilities are changed.

Kodak and Polaroid are two examples of architectural innovation. These are companies who had to make the shift from analog to digital and also to change the way in which they monetized their offer.

 

If you want to find out more about the Innovation Landscape Map, read this article – Innovation Landscape Map – Routine, Radical, Disruptive and Architectural Innovation.

camera film on yellow background

3.  10 Types of Innovation

Doblin’s 10 types of innovation approach is based on all the factors that a company has to consider when innovating – the configuration of the business, the offer and the customers’ experience. 

The Configuration:

This category deals with everything related to the business and the systems that make the business work.

Profit Model Innovation

Profit Model Innovation happens when a company finds new ways to deliver and capture value. For this, the company must analyze the customers’ needs and look for new ways of monetizing.

Examples of Profit Model Innovation – the way in which Netflix changed the movie rental industry to a subscription-based one.

Network Innovation

Network Innovation happens when products or services appear as a result of the relation and connection between organizations and people from those organizations.

A similar type of innovation is Open Innovation and we will talk about it in a minute.

Structure Innovation

Structure Innovation is a type of innovation where various elements of the organization, from people to equipment, are being used in an innovative way.

Examples of Structure Innovation20% Project from Google, where employees can spend 20% of their time working on personal projects.

Process Innovation

Process Innovation happens when a company improves its activities and operations to improve efficiency.Zara’s fast-fashion system is an example of process innovation.

 

Find out more about the 10 types of innovation here.

yellow zara perfume
The Offering

This category deals with the main offering of a company – products, services or a combination of both.

Product Performance Innovation

Product performance innovation deals with the value, characteristics, and quality of the products. A company can innovate both by developing new products or improving the ones that already exist.

The GoPro action cameras are such an example of innovation through a new product. Another example of improved old products are smartphones with improved cameras.

Product System Innovation

Product System Innovation deals with the products and services which complement the main offering of a company. 

Nike+ is a kit created by Nike which combines the company’s sports gear with a series of mobile devices and apps.

 

Find out more about the 10 types of innovation here.

yellow nike cortez shoes overlooking city
The Experience

This category deals with the users – the way in which they interact with the product and also the other elements of the business – from the channels to the brand itself.

Service Innovation

Service Innovation deals with improving the product and its usability – it has to be easy to use and natural for the user. 

Zappos is a great example of service innovation, having the mission “to deliver WOW through customer service.”

Channel Innovation

Channel Innovation focuses on all the channels that a company is using and the way in which they are being used, to connect the clients and users with their offering.

New York Public Library is a great example of channel innovation. Especially its project Insta Novels which managed to bring reading in front of a new generation of users.

 

Find out more about the 10 types of innovation here.

Brand Innovation

Brand Innovation makes sure that the users and clients put your brand first, before those of the competitors. This happens with the help of a strong brand identity.

An example of brand innovation is Virgin Media which extended in the market of soft drinks, with Virgin Cola, as well as in the market of travel, with Virgin Holidays.

Customer Engagement Innovation

Customer Engagement Innovation is a result of the understanding of the needs of the customers and satisfying those needs.

Apple is a great example of Customer Engagement Innovation, being able to maintain such a strong bond between the company and its customers throughout the years.

IV. Other approaches to innovation.

Social Innovation

What is social Innovation?

Social Innovation happens when a product, service or any other type of invention serves the wellbeing of a community, creates change and brings more value than existing solutions.

For example, a certain technology isn’t social innovation but when that technology improves the quality of life or helps with say, curing a disease, it is social innovation.

There are multiple types of social innovation:

• Socio-juridical innovation

• Socio-cultural innovation

• Socio-political innovation

• Socio-ideological innovation

• Socio-ethical innovation

• Socio-economic innovation

• Socio-organizational innovation

• Socio-technical innovation

• Socio-ecological innovation

• Socio-analytical innovation

Yellow door with US Graffiti on it
Examples of Social Innovation

There are several examples of social innovation that are now known worldwide. One of them is Earth Hour which takes place every year, always in the last Saturday of every March, or Giving Tuesday, a worldwide fundraising campaign.

There are also local examples of Social Innovation, such as SEPAL (Supporting Employment Platform Through Apprenticeship Learning) a job platform built using an innovative model which aims to integrate young people from vulnerable categories into the work field.

Social Innovation is also a result of Open Innovation. For example, #EUvsVirus is a global hackathon that took place in April 2020 as a result of the global COVID-19 pandemic. Most of the winners of the hackathon are great examples of applied social innovation.

 

Find out more about social innovation here.

 

Open Innovation

Open Innovation is quite a broad concept. If closed innovation takes place in a well-defined context, open innovation is about an open flux of information and resources.

In this case, not only those responsible with innovation are innovating but also others from other departments, all the stakeholders and even the customers.

There are two factors which help us categorize open innovation:

Level of Inclusion

• Intracompany – inside the company

• Intercompany – between two or more companies

• For experts – all those from outside the company which have a certain level of knowledge

• Open to the public – everybody, no matter the level of knowledge

Purpose

• Marketing – to get a broad variety of information and perspectives

• Insight – information about the market and consumer.

• Talent Scouting

• R&D – for the research and design of new products and service.

The most common examples of open innovation are hackathons – events where different people with different backgrounds, from developers to marketers to those with business knowledge gather in a formal context to come up with solutions for different problems.

A lot of these events, of great sizes – at an European and global level – happened in March and April 2020 because of the global pandemic. Among these, we can recall #EUvsVirus and The Global Hack.

 

Find out more about open innovation here.

conclusion-word-formed-from-lettered-yellow-tiles

IV.Conclusions

As you noticed, there are many criteria based on which we can categorize innovation and types of innovation. You may also have noticed that many of the types of innovation from diverse categories are similar to each other. This is because each approach is done by a different business “school” if we may call them so – several individuals who analyzed innovation only from a certain perspective that they were interested in.

 

This is what you have to remember about innovation:

• The difference between technology and business model which can be found when it comes to technological innovation and business model innovation as well as when it comes to radical innovation, routine innovation, disruptive innovation and architectural innovation.

• Product Innovation, process innovation and their variations can be also found among Doblin’s 10 types of innovation.

• Social Innovation as an example of the result of innovation

• Open Innovation as an alternative based on the basic elements of innovation – knowledge, information and people.

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