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

Related Case Studies

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.

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.

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

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.

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.

Four-Step Innovation Process

four-step-innovation-process
A four-step innovation process is a simple tool that businesses can use to drive consistent innovation. The four-step innovation process was created by David Weiss and Claude Legrand as a means of encouraging sustainable innovation within an organization. The process helps businesses solve complex problems with creative ideas instead of relying on low-impact, quick-fix solutions.

History of Innovation

innovation
Innovation in the modern sense is about coming up with solutions to defined or not defined problems that can create a new world. Breakthrough innovations might try to solve in a whole new way, well-defined problems. Business innovation might start by finding solutions to well-defined problems by continuously improving on them.

Read also: Business Strategy, Examples, Case Studies, And Tools

Read Next: Lean CanvasAgile Project ManagementScrumMVPVTDF.

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