types-of-innovation

The Four Types Of Innovation In A Nutshell

According to how well-defined is the problem and how well-defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).

How does innovation work?

Innovation can come in several formats, depending on whether it uses the past as a foundation for building up the future.

And in that case, the process of innovation might be following a gradual and organic path.

In other cases, innovation follows a whole new set of principles, no longer attached to the past, and in some cases contrasting with that (see how Galileo refuted the previous paradigm).

Another way to look at the types of innovation is highlighted by Greg Satell in the Innovation Matrix by looking at whether a problem is well defined, and whether the domain where this problem might apply is well defined.

As we move into a well-defined problem and domain, we move into the domain of sustaining innovation.

As we move in a context where both the problem and domain are not well defined, we have basic research.

This makes us look into four kinds of innovation:

innovation-strategy

Basic research

According to the Innovation Matrix, the problem and the domain where the problem needs to be solved are not well defined in basic research.

innovation-theory
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.

Disruptive

the Godfather of Disruptive Innovation, Clayton Christensen, defined it as when new products or services enter at the bottom of a market and over time move up, thus displacing established incumbents.

disruptive-innovation
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Breakthrough

While a breakthrough innovation takes a leap forward, it might start with a well-defined problem, which is extremely hard to solve (the domain is not well-defined).

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Continuous/sustaining/incremental

As an iterative process, in this case, innovation builds up over time, gradually.

There is a pretty clear idea of what problems need to be solved and what skill domains are required to solve them.

continuous-innovation
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

From technological innovation to business model innovation

In today’s context, when we hear the term innovation, most probably the reference is to IT innovation.

That’s not a surprise.

The PC, then the Internet, and all the platforms born on top of it enabled technological innovation to become ubiquitous.

Companies that didn’t exist at the turn of the century became the tech giants we know today.

As we’ll see throughout the guide, this is a misconception.

Technological innovation does provide the ground for business model innovation, but that isn’t always the case.

When in 1996, Google (still an academic project known as BackRub) built a new way to index the web, and its search engine took off.

Yet, by 1999, Google still hadn’t figured out a whole business model to enable revenue traction (it would come a couple of years later with Google AdWords).

google-business-model
Google is a platform and a tech media company running an attention-based business model. As of 2021, Alphabet’s Google generated over $257 billion in revenues. Over $209 billion (over 81% of the total revenues) came from Google Advertising products (Google Search, YouTube Ads, and Network Members sites). They were followed by over $28 billion in other revenues (comprising Google Play, Pixel phones, and YouTube Premium), and by Google Cloud, which generated over $19 billion in 2021.

It was the combination of technological innovation with a business model innovation (Google would redefine the way advertising was delivered, making it relevant and almost invisible to the average user) which made the company scale from a business standpoint.

Why business model innovation is critical

business-model-innovation
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

A business model is a holistic concept to describe an organization and also helps it shape the overall business (from product up to profit formula) to evolve in the marketplace.

Business model (or business) innovation comes in many forms.

In some cases, that is a recombination of several known business patterns.

Those patterns have proved successful in other domains and industries or for other players in the same industry.

Therefore, a business can experiment with those patterns almost like a chef experiment with ingredients and how changing the dosage of an ingredient changes the final output.

types-of-innovation

Read Next: Business Model Innovation, Business Models.

Related Innovation Frameworks

Business Engineering

business-engineering-manifesto

Business Model Innovation

business-model-innovation
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Innovation Theory

innovation-theory
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.

Types of Innovation

types-of-innovation
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).

Continuous Innovation

continuous-innovation
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

Disruptive Innovation

disruptive-innovation
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Business Competition

business-competition
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Diffusion of Innovation

diffusion-of-innovation
Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.

Frugal Innovation

frugal-innovation
In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.

Constructive Disruption

constructive-disruption
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.

Growth Matrix

growth-strategies
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Innovation Funnel

innovation-funnel
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.

Idea Generation

idea-generation

Design Thinking

design-thinking
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.

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