Find out everything you need to know about innovation – The innovation process, types of innovation, and approaches to innovation.
It might seem that this term, innovation, may be overused nowadays, as it is attributed to various products and facilities. As you will later see, most of the time, these products or facilities are indeed innovative since innovation is a comprehensive and broad concept that encompasses a bunch of activities, processes and strategies.
In the article, Everything you Need to Know About Innovation – The Innovation Process and Types of Innovation, we have tried to clarify and bring together every approach and each classification of the different types of innovation which are influenced by various factors. Among these, one of the approaches classifies innovation according to how severe the process is. From this rank stem 4 types of innovation: routine innovation, radical innovation, disruptive innovation and architectural innovation.
The Innovation Landscape Map is an instrument which allows you to visualise the innovation possibilities from the perspective of two factors – the business model and the technology needed to innovate. It contains four types of innovation: Routine, Radical, Disruptive and Architectural Innovation.
These types of innovation are best approached after a solid analysis of the market. Following this analysis, the companies should acknowledge which are the most appropriate steps they should take into consideration. From this stem four types of innovation:
• Routine Innovation – requires neither a new business model nor new technologies
• Radical Innovation – does not require a new business model but does require new technologies.
• Disruptive Innovation – requires a new business model but does not require new technologies.
• Architectural Innovation – requires both categories: a new business model and new technologies.
Coming up, we will present definitions and examples of each type of innovation. Until then we need to clarify certain terms:
Business model – Briefly, the business model establishes how a business produces, offers and captures value. In this context, the value represents anything, from the end-product to solving not only some psychological needs but other needs of the consumers, until you reach profit.
Technologies – These are the skills and technological resources that the company (which innovates) has at hand.
Routine innovation is the least drastic type of innovation, in which the company can innovate using both the current business model and current technological skills. Most of the time, this type of innovation also preserves the segment of customers up to the moment of innovation.
Although routine innovation does not seem to be innovation, by definition it is very effective. There are a lot of examples of successful innovation, most of the time software (as well as others) companies that have managed to successfully innovate in this way. Most of the companies that use this type of innovation are well-established on the market and they do nothing more than invest in what benefits them.
Apple is one of the most familiar examples of routine innovation, led by Steve Jobs. Most of Apple’s products, such as iPod, iPhone or iPad, are just inventions based on already existing technologies plus a well-thought-out design and marketing strategy. And as you well know, from one year to another, as technology evolves, there is another new model that emerges on the market with new features – larger screens, better cameras.
Microsoft, in its early days, entered the market as a disruptive innovation but has since become a company that is supporting itself through routine innovation. Everything they did was to strengthen their competitive position and advantage by improving and updating basic products – Windows and Office.
The author of this article says that, indeed, with this approach, Microsoft is growing slowly, it has missed many market opportunities and new products and it is threatened by Linux. However, that is how they managed to make profits of over 300 billion USD.
As opposed to routine innovation, radical innovation’s case, the company requires new technological skills while they maintain their current business model.
This type of innovation is often confused with disruptive innovation but, in reality, it is the opposite. If disruptive innovation changes the business model and thus also the market segment and consumer categories, in this case only the technologies used are changed, serving the same segments. Radical innovation focuses more on the long-term impact.
An example of radical innovation is that of biopharmaceutical meds. They became more common in the 70s and they indeed represented a radical innovation because they used a brand-new technology – biotechnology compared to chemical synthesis – and they focused on medical problems that could not be treated until then.
This Amazon product is nothing else but a small device, connected to Wi-Fi that can be glued anywhere in the house and which helps you order various products such as detergent, toilet paper or garbage bags. They were taken out of production last year but during their lifetime they were used and loved by customers. Today there is only a virtual form, on the mobile app or on the Amazon’s website.
The product used both new technology and a new concept – that of making this type of repeated orders, falling in the radical innovation category.
As we previously mentioned, at the opposite side of radical innovation there is disruptive innovation, which consists in radically changing the business model while using the technologies and technological skills that are already within the company’s reach.
The term disruptive innovation was made known in the 90s by Clayton M. Christensen, in his book, The Innovator’s Dilemma. There, he says about this type of innovation that „one of the main characteristics of the companies that use this type of innovation is that they manage to challenge large companies that have a monopoly in a given industry by meeting the needs of a small segment of consumers, that those large companies often ignore. The actual disruption occurs when the large, general market segment also adopts the same products and facilities.
Uber is a company that has been widely analysed as an example of disruptive innovation. In 2015, Clayton M. Christensen said that Uber was not an example of disruptive innovation because it did not start from the base of the market and a limited segment of consumers because they had, from the beginning, a service with higher prices than the competition, the taxis.
A year later, in 2016, Christensen concluded that Uber is, in fact, an example of disruptive innovation. Why? Because Uber’s business model was not attractive to its competition and one of the features of disruptive innovations is that at the beginning, they are considered to be inferior by most consumers.
Netflix has been a real disruptor since the time it was operating in a completely different form than today – it was a service that rented DVDs via mail. This business model has threatened the video-rental store industry and ultimately tore it apart.
As the definition says, this happened when Netflix noticed that there was a rather large segment of people that Blockbuster, which was then the market leader, did not serve properly.
At its turn, Netflix, as a company, was almost the victim of disruptive innovation – streaming services, but they managed to predict this and, as this article says, Netflix became its own disruptor in order to survive.
Architectural innovation occurs when the company changes both its current business model and their technological skills. Most of the time, we observe that the companies resort to this type of innovation because they are “forced” by the circumstances – either the technologies used are truly outdated and the competitors are using new ones, either the processes are outdated and they require changes which can reduce the costs, either the industry has been changed by a disruptive company, as the ones previously mentioned.
Kodak and Polaroid are two examples of companies that had to resort to architectural innovation. These two companies faced the evolution and popularization of new technologies and digital photography.
To survive, both companies had to turn to new technologies – from camera design to software – and find new business models. If in the beginning, the profit came from consumables – film, photographic paper, developer, etc. – now they had to look for other sources of income.
Now that you have learnt about the four types of innovation from the innovation landscape map, you have to understand that it is not compulsory to resort to all of them for your company – under any circumstances. Firstly, you have to understand what you and your company need, and at the same time, to keep an eye on the evolution of your competitors and what the consumers need.
You do not necessarily have to resort to types of innovation such as the disruptive or the radical ones if you do not need it. From the examples we have offered, you have observed how large companies like Microsoft or Apple owe their success to disruptive innovation.
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