4 Types of Innovation

In business, innovation is when a company attempts to reinvigorate itself through a new method, product, or market strategy. Innovation allows companies to promote growth and added value. To achieve innovation, business leaders come up with (or listen to) creative ideas, and then use strategic planning and decision-making to implement the new business ideas successfully.

Here are a few reasons to incorporate innovation into your business:

• Innovation allows you stay ahead of the competition. With globalization and a rapidly changing market, your company can face lots of competition. Innovative thinking can help you predict the market and keep up with customer needs, which can give you a competitive edge and make you a market leader.
• Innovation grows your business. Business growth means higher profits. Successful innovation can add value to your business so you can increase your profits—if you don’t innovate well, your business can plateau, and you might lose your competitive advantage.
• Innovation helps you take advantage of new technologies. New technologies evolve quickly, which means you can find new, more efficient technologies to make better products, to offer your services, to market your business, or to track your performance with analytics. By taking advantage of these new technologies for process innovation, you can optimize your business.

When a business innovates, it can either improve its existing product, service, or methodology, or it can start from scratch. The Doblin Innovation Framework posits that all innovation involves the same three factors: the business model, the product, and the business’ outward-facing elements (such as marketing and customer service). You cannot take a one-size-fits-all approach with innovation—consider what parts of your business require change, what you can afford, and what risks you want to take. Innovation management, the process of streamlining and sustaining innovation, makes a difference for every startup and established company alike.

The innovation matrix is an innovation framework that separates types of innovation into four categories: disruptive innovation, incremental innovation, architectural innovation, and radical innovation. These categories can apply to product innovation, marketing innovation, technological innovation, or process innovation.

1. 1. Architectural Innovation: Applying existing technology or methodology to a new market can be a low-risk innovation strategy because it relies on aspects of your business that have already proven successful. For example, car ride share companies exemplify architectural innovation because they took existing technology, ridesharing and geolocation, but applied it to the transportation industry to create an alternative to taxis. This service innovation created an entirely new business model based on freelance work and smart phone technology. With a receptive market, architectural innovation can increase your competitive advantage by appealing to a wider customer base.
2. 2. Disruptive Innovation: In his book Innovator’s Dilemma, Clayton Christiansen coined the term “disruptive innovation,” which is the introduction of new technologies or methodologies to your business’ existing market that create a new value network. This innovation strategy can spark huge success but sometimes requires several attempts to create technology that surpasses the original model. Smart phones are an example of disruptive innovation. Companies took existing technology—the cell phone—and created a new user experience by replacing buttons with a touch-oriented interface. Digital streamers produced similar innovation by introducing a new business model for an existing service.
3. 3. Incremental Innovation: The small upgrades that phone companies frequently introduces exemplify incremental innovation. This is the most common form of innovation, involving gradual but continuous improvements to existing technology in an existing market. You can add value to your product and respond to customer needs by changing the design of your product, adding new features, or even taking away features that do not serve your customers well. This is a fairly low-risk way to increase your business’ market share if you have an established, successful product. Since it usually does not create new markets or involve new products, successful incremental innovation depends on customer engagement—if you listen to customer feedback and implement new features that improve product performance, you can steadily increase both customer satisfaction and profits. But keep in mind that disruptions to the market might render your improvements useless if your core product does not also respond to changing markets.
4. 4. Radical Innovation: When new technology emerges, it can turn an industry on its head or create a new one altogether—known as radical innovation. For example, the invention of the airplane revolutionized travel by creating a new market and new technology that allowed customers to travel long distances faster. Radical innovation responds to customers needs in new ways.
   

Each type of innovation has value, and to be come a market leader, you need to implement all four.

Get the MasterClass Annual Membership for exclusive access to video lessons taught by business luminaries, including Howard Schultz, Chris Voss, Robin Roberts, Sara Blakely, Daniel Pink, Bob Iger, Anna Wintour, and more.