How many types of innovations are there, really? As an innovator, you must have asked this questions at some point. If you are searching for innovation opportunities, it is helpful to know what’s on the menu for innovation. You are in luck. Researchers on innovation have created a rich typology of innovation. Here is a list of innovations in the innovation literature.
1. Radical and incremental innovations:
These innovations refer to the degree of technological change involved in an innovation. A large technological change refers to a radical innovation. For example, a move from horse and buggy to a car or from an X-ray to a CT scanner. But an incremental innovation refers to innovations where the technological change is small. A move from 15-megapixel camera to 18-megapixel camera would fall in this category of innovation. Technological change refers to the knowledge base underlying a technology.
2. Competence destroying versus competence enhancing innovations:
This typology differentiates between the impact of innovation on an incumbent firm. Competence destroying innovations reduce or eliminate a key competence of a firm. For example, store locations and the retail footprint were critical competencies for Block Buster. Movie rental via post was an innovation that reduced the value of store footprint for BlockBuster. As a result, it was a competence destroying innovation. But some innovations do the opposite. They deepen the capability of a firm and are competence enhancing innovations. For example, Gillette blade innovations have been competence enhancing for Gillette. They helped Gillette deepen its existing capabilities.
3. Architectural versus component innovations:
This is a really cool typology but not immediately obvious. Consider a complex product as a set of components. A car consists of a many parts. A body, an internal combustion engine, telematics, gauges and lighting systems. An innovation in any of these components is a component innovation. But when the innovation involves a change in how these components interact with each other, it is an architectural innovation. A change in architecture involves a change in the way components link with each other. An electric car has significantly different interaction between the electrical, mechanical and digital components than an internal combustion car. A change in architecture often involves a change in the underlying information flow in the organization. As information flow is also connected with the structure of an organization, it is a challenging innovation for an established firm.
4. Major versus minor innovations:
Although this would appear easy to understand there is more to it. A major innovation involves a drastic change whereas minor innovations involve minor change. The change itself can be on either of two different dimensions. A product / technology dimension or a market/customer dimension. An incremental change in technology and markets would obviously be a minor innovation. A drastic change in technology and markets is a revolutionary change. An improvement in the fuel economy of a car is a minor innovation. But a move from analog to a digital camera involved a revolutionary change.
5. Disruptive versus Sustaining innovations:
This typology refers to the purchase criteria of a customer. Innovations that do not change the purchase criteria of a customer are sustaining innovations. But innovations that change the purchase criteria are disruptive innovations. The innovation of the smartphone was a disruptive innovation. It changed what customer valued in a mobile phone. They began to value the presence of email and internet on the phone. But, moves from iPhone1 to iPhone 5 were a series of sustaining innovations. People often confuse between disruptive innovation and disruption. Not all disruptive innovations lead to disruption and not all disruption takes place due to disruptive innovations only. The distinction between disruptive innovation and disruption can be found here.
6. Game Changing innovations:
This is a term often used in organizations and business world but has not appeared in a rigorously defined academic context. If defined tightly, it would refer to the change in norms of an industry or a business. A business is a game with a given set of rules for winning. A game changer would refer to an innovation that changes those rules of the game. As a result, Uber would be a game changer for the taxi industry as much as VOIP was a game changer for telecom. Earlier, one needed to own a telephone network to play and win in the telecom space. With the arrival of the internet, startups like Skype could enter and win in telecom. They could do this without a network ownership. It was a game changer.
7. Business Model Innovation:
This refers to a change in the business model as an innovation. A business model is a blueprint of how money is made in an industry and this refers to the change in that model. Block Buster made most of its money from movie rental and late fee. Netflix changed it to a subscription model with watch all you can feature. It was a business model innovation.
8. Open versus closed innovation:
This typology refers less to where innovation takes place and more to how innovation is done. Traditionally, organizations used to innovate internally. They used to use own resources and own knowledge. This is called a closed innovation because it was all done in-house. More recently, firms have begun to innovate with ecosystem partners. They connect with customers, suppliers, competitors, and other entities to pursue innovation. Such modus operandi is better known as open innovation.
9. Profit destroying versus profit enhancing innovations:
This typology refers to the profit impact of innovation. Most traditional innovations tend to enhance profits of the innovator. Why else would you innovate anyway? But there are a few innovations that tend to reduce profits of the innovator. Take for example the digital camera which reduced potential profits by eliminating film. Quartz watches reduced potential profits from watches. My book the dark side of innovation goes into significant details on profit destroying innovations. You can read more about profit destroying innovations here.
10. Product versus process innovation:
This was one of the earliest distinction in innovation types. This referred to where did innovation take place. Product innovation referred to the innovation in the final outcome of the innovation process. For example, Segway was a product innovation as it was a new to the world product. But, mini steel mill technology was a process innovation as it focused on the way steel was produced.
Benefits of Typologies
Researchers developed and studied these typologies from a predictive perspective. They wanted to know if these innovations can predict the outcome for the firms in an industry. Most wanted to know if incumbents firms can respond to such innovations. Many also wanted to know if any of these innovations can result in incumbent disruption. They found that innovation is indeed hard. Incumbent firms often find it difficult to respond to the above innovations. When they do not innovate fast enough, they often lose position and die.
What’s on the menu for innovation?
But you are more interested in how you can use this typology to design innovations. By using the typology you can search for potential innovations in your business. More importantly, you can assess if most of your innovations belong to just one category. This may be a prompt for you to diversify the types of innovations your business pursues. And this constitutes a menu for innovation that you can select from.
So what’s on the menu for innovation in your business?
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Chopra, A., & Baldegger, R. (n.d.). Deer in the Headlights: Response of Incumbent Firms to Profit Destroying Innovations. International Journal of Innovation in Management.
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