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:
According to the Innovation Matrix, the problem and the domain where the problem needs to be solved are not well defined in basic research.
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.
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).
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.
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).
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
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.
Read Next: Business Model Innovation, Business Models.