Innovation is the lifeblood of any successful business, driving companies from mere existence to market leadership and accelerating them from stagnation to exponential growth. But what exactly is innovation, and how can businesses effectively harness its power? In this article, I’ll look at the essence of innovation and its key characteristics. Additionally, I will outline ten types of innovation strategies that businesses can adopt to tackle difficult challenges and seize new opportunities. Finally, I will present a seven-step process that companies can use to achieve their next innovative breakthrough.
“Ideas won’t keep. Something must be done about them.”
Alfred North Whitehead
1. What Is Innovation?
Let’s first look at two definitions of innovation. The first is a short International Standards Organization (ISO) definition that identifies the essence of what innovation is and what it is not. The second definition is from Peter Drucker that provides a business perspective on innovation and also provides a more detailed description of what innovation is and what it creates. See below:
Two Definitions of Innovation
“a new or changed entity, realizing or redistributing value”
ISO 56000:2020, Innovation Management – Fundamentals and Vocabulary
“Innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual in the family kitchen. It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.”
Peter Drucker
So, two key points to make about these definitions of innovation. The first point is innovation is a “means” that creates something completely new or it creates a change in an existing resource (ex. entity, process, etc.). Second, innovation realizes or redistributes value. For example with business, this could be a new wealth-producing resource or it endows an existing resource with enhanced potential for creating wealth.
2. Four Types of Innovation: Defining the Different Facets of Its Nature and Characteristics.
In his work, Greg Satell, a well-known innovation expert, outlines four key types of innovation, each with its own distinct characteristics and challenges. He categorized these four types of innovation based on two key problem-solving questions. See below for details on the nature and characteristics of these four types of innovations as defined by two problem-solving questions.
a. Two Problem-Solving Questions That Define the Characteristics of the Innovation Needed.
Surprisingly, you can determine the type of innovation that you are dealing with by just asking the following two questions:
- How well is the problem defined? Here, the problem or opportunity that the innovation will tackle ideally must be clearly defined along with the desired outcomes. For example, a well-defined opportunity could be “we will put a man on Mars by 2050”. On the other hand, a problem can be very ambiguous like, “how can we increase revenue despite the new, restrictive government mandate affecting product X?” So, some problems are well defined, and some are not.
- How well is the domain defined? Here, it is a question of domain skills or capabilities traditionally used to solve a given problem. For instance, a business operation is having challenges solving a particular thorny warehouse capacity issue. Then someone from the marketing department comes up with an innovative solution to this logistics problem. In this case, new skills, marketing, were applied to the problem to come up with an innovative solution. So, some problem domains are very mature, and some are not.
‘Genesis, in truth, means little more than the faculty of perceiving in an unhabitual way.”
William Jame
b. The Different Types of Innovation Based on Clarity of Both the Problem and Domain.
So, that is the first step, looking at how well the problem is defined and the maturity of the domain. Now, you can then break Innovation into four types to better understand the type of Innovation needed. Specifically, this will help determine the nature and characteristics of the type of Innovation that will be needed to solve the problem. Below is a description of each type of Innovation. Also, see chart below that depicts these two questions on an X and Y axis, separating the types of Innovation into four parts.
1) Sustaining Innovation.
Here both the problem and the domain are well defined. So, this involves improving existing products, services, or processes to deliver better performance, quality, or efficiency. It’s also about refining what you already do well to stay ahead of the competition. Examples include Apple’s annual updates to its iPhone lineup or GE’s ongoing efforts to optimize its jet engine designs.
2) Disruptive Innovation.
Here the problem or the opportunity is not well defined, but the domain such as skills or service offerings are well known. So in this case, this can entail creating new markets or reshaping existing ones through radically new offerings. Also, it’s about challenging the status quo and changing the rules of the game. Examples include Uber’s ride-hailing platform, which upended the taxi industry. Another example is Warby Parker’s direct-to-consumer model for eyeglasses, which bypassed brick-and-mortar stores.
3) Breakthrough Innovation.
In this case, the problem is well defined, but the domain is not mature. For instance, this could be a technological breakthrough that creates a new demand that didn’t exist before. Indeed, it’s about pushing the boundaries of what’s possible and achieving orders-of-magnitude improvements. Examples include the development of the polio vaccine, which revolutionized public health. Another example is the invention of the laser, which transformed industries from medicine to manufacturing.
4) Basic Research.
Here, neither the problem, nor the domain is well defined. So, this involves pursuing fundamental scientific knowledge without a specific application in mind. It’s about advancing human understanding and laying the groundwork for future breakthroughs. Examples include the discovery of gravitational waves, which confirmed a key aspect of Einstein’s theory of general relativity. Another example is the mapping of the human genome, which opened up new avenues for personalized medicine.
For more information on these four types of innovation, see MBA’s article, The Four Types of Innovation – And Where to Study Them at Business School. Also, see Sopheon’s article, The 25 types of innovation dominating R&D today, that provides a review of different types of innovation to include Greg Satell’s four types of innovation.
“When all think alike, then no one is thinking.”
Walter Lippmann
3. The 10 Different Types of Innovation Strategies that Businesses Can Use to Innovate
Larry Keeley and his team at Doblin, a leading innovation consultancy, have identified 10 distinct types of innovation strategies that businesses can leverage to create new value. Now, these types of innovation strategies are not mutually exclusive, and the most powerful of innovative approach often combine multiple types. Moreover, businesses can use this innovation framework as a diagnostic tool to assess how best to move forward on a particular problem (or opportunity) needing an innovative solution. Also, this innovative framework breaks innovation types into three categories: configuration, offering, and experience. See chart and also description below of the ten innovation types grouped under these three categories.
a. Configuration Innovation Types.
The first four types of innovations are focused on how organizations are set up and structured. Thus, they can be grouped under this innovation type category, Configuration. Also, these types of innovations are behind the scenes that the end user may never see.
1) Profit Model: How you make money. Examples include Rolls-Royce’s “power by the hour” model for jet engine maintenance. Another example is the use of a razor-razorblade model by Gillette.
2) Network: How you connect with other players to create value. Examples include Visa’s network of banks and merchants. Another example is the global ecosystem of suppliers and partners that supports Apple’s iPhone.
3) Structure: How you organize and align your business. Examples include W.L. Gore’s use of a flat “lattice” structure to empower employees. Another example is Amazon’s creation of independent two-pizza teams to drive agility.
4) Process: How you get work done. Examples include Dell’s direct-to-consumer sales model. Another example is McDonald’s systematized approach to fast food preparation.
“The best way to predict the future is to create it.”
Alan Kay
b. Offering Innovation Types.
There are two types of innovation associated with this category. These innovation types are about what product or services an organization provides to their customers or stakeholders.
5) Product Performance: The features and functions that make your offerings stand out. Examples include the Dyson vacuum’s superior suction power. Another example is the ability of Nespresso’s coffee machines to deliver high-quality espresso at home.
6) Product System: This includes complementary products that work together. Examples include Apple’s ecosystem of Macs, iPads, iPhones, and Apple Watches. Another example is the family of software tools that make up Microsoft Office.
“I am looking for a lot of people who have an infinite capacity to not know what can’t be done.”
Henry Ford
c. Experience Offering Types.
There are four types of innovation associated with this category. Experience innovation types concentrate on how products or services are delivered.
7) Service: The intangible customer experiences that surround your offerings. Examples include the personalized service that defines the Nordstrom retail experience. Another example is the concierge-like service that sets the Four Seasons hotel chain apart from other brands.
8) Channel: How you reach your customers and deliver your offerings. Examples include Amazon’s ecommerce platform. Another example is the use of franchising by companies like McDonald’s and 7-Eleven.
9) Brand: The representation of your offerings and business. Examples include the luxury cachet that surrounds the Louis Vuitton brand. Another example is the association of purpose and sustainability that defines the Patagonia brand.
10) Customer Engagement: The ways in which you interact with and involve your customers. Examples include the loyalty programs that reward repeat customers. Another example is the use of social media to engage in two-way dialogues with customers.
By understanding these different types of innovation strategies, businesses can develop a more multifaceted approach to innovation that goes beyond just products and technology. Whether you’re seeking to sustain your lead, disrupt the market, or break through to new heights, there’s a type of innovation strategy that’s right for your goals and capabilities. Indeed, when deciding which of these ten types of Innovation strategies to use, you can further characterize your innovation strategy by using Greg Satell’s four types of innovations: sustaining, disruptive, breakthrough, and basic research.
For more detailed discussion on these ten types of Innovation, see VisualCapitalist’s, 10 Types of Innovation: The Art of Discovering a Breakthrough Product and Hype Board’s article, Types of Innovation – The Ultimate Guide with Definitions and Examples,
“Innovation distinguishes between a leader and a follower.”
Steve Jobs
4. A 7-Step Innovation Process for Businesses to Follow
While innovation requires a degree of creativity and adaptability, it’s not just about throwing things against the wall and seeing what sticks. Indeed, a structured process can help you increase your odds of success and make innovation a sustainable capability. Below is a 7-step innovation approach that businesses can follow to achieve their next innovation breakthrough.:
Business Innovation: 7-Step Process
a. Identify Problems and Opportunities.
First, identify the problem or opportunity that may be an ideal candidate for an innovative solution. This is also where you can identify one of the four types of Innovation that you need: sustaining, disruptive, breakthrough, or basic research.
b. Innovative Idea Generation.
Next, tap into a wide range of sources to generate a pipeline of potential innovative ideas. This can involve customer research, trend analysis, internal brainstorming, and more. Also, you can leverage Larry Keeley’s 10 types of Innovation Framework to identify the best Innovation strategy to address the problem or opportunity.
c. Evaluate and Select Ideas.
In this step, evaluate and filter your ideas based on criteria such as alignment with strategy, market potential, competitive differentiation, and feasibility. Here, your goal is to identify a portfolio of high-potential ideas to pursue further.
d. Concept Development.
Next, you flesh out your selected ideas into more fully formed concepts. This can involve creating prototypes, developing business cases, and defining go-to-market strategies. Also, at this time you can identify minimum viable product (MVP) requirements.
e. Testing and Iteration.
Next, put your concepts in front of real users and gather feedback. Use this to refine and iterate on your solutions, and to validate key assumptions.
f. Scaling and Implement.
Once you have validated an idea, develop a plan to scale it up and bring it to market. This can involve mobilizing resources, building capabilities, and crafting marketing and sales strategies.
g. Monitor and Evaluate.
After launch, regularly review how your innovative solution is performing and reflect on what you can do better. Use this analysis to refine your innovation process and solutions over time. Hence, you will build upon past successes and failures.
By understanding the nature of innovation, exploring various innovation strategies, and following a structured innovation process, businesses can cultivate a culture of innovation that drives growth, differentiation, and long-term success. Whether you’re just starting your innovation journey or looking to take your efforts to the next level, the potential for creating new value and shaping the future is vast. For more ideas on innovation solutions and processes to follow, see IDEASCALE’s article, What is Innovation? Definition, Types, Examples and Process.
“The world needs dreamers and the world needs doers. But above all, what the world needs most are dreamers that do.”
Sarah Ban Breathnach
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Writer and expert in supply chain technology and operational analytics. Passionate about giving actionable insights on information technology, business, innovation, creativity, and life in general.