What is the purpose of innovation?
Why are you studying for innovation? From the point of view of innovation management, the types of innovation and thus the classification of innovation have a strategic and procedural significance.
For the innovation strategy, a clear definition of the desired innovation object and degree of novelty is important. This defines the "where" an organization wants to innovate.
The division is also relevant for the innovation process, as the different types of innovation have different requirements for the innovation process. A radical innovation requires a more comprehensive process with different decision-making structures than a small, incremental innovation.
Innovative object - What is being innovated?
Innovation can happen anywhere, whether it's a profit-driven or non-profit organization. It can concern the performance of the organization itself, ie the product or the service, but also the structures, how the service is provided. The first classification is therefore the subject of what is to be innovated.
- Product innovation: Products concern both material products and intangible services, such as services that satisfy customer needs and are therefore acquired by the customer. With product innovations a company earns its money and tries to differentiate itself from the competition.
An innovation can simultaneously affect several innovative objects. There is, logically, no clear distinction here. For example, a product innovation can simultaneously be a process and environmental innovation. Or a business model innovation usually also brings about a product and organizational innovation.
- Service innovation: Service innovations are like product innovations when it comes to placing them directly to the customer, e.g. An insurance or a business consultancy. Even if services are not actively sold, such as manufacturing companies, every company brings services to their customers, such as logistics, complaints, sales advice, etc. Here, too, innovation begins when it comes to differentiation and customer enthusiasm.
- Business Model Innovation: The business model is the way a company works and earns money. The business model innovation includes innovations in strategy, marketing, supply chains, value creation, pricing or cost structures.
- Process and technology innovation: As the name implies, technological innovations are the way products are created and / or rendered. They are also process innovations in principle. These include, for example, production processes or IT technologies for apps. Product innovations, quality increases or cost savings are often associated with process and technology innovations.
- Organizational Innovation: Organizational innovations relate to the organizational structure of the organization. This may include organizational process innovations or management innovations, e.g. New tools for measuring customer satisfaction or optimizing delivery processes for cost reduction.
- Social Innovation: Social innovations are innovations, where the benefit lies in society and the purpose is not primarily profit. Examples include innovation in education, poverty reduction, equal opportunities or health.
- Environmental Innovation: All innovations that contribute to the improvement of the environment are among the environmental innovations. For example, environmental friendly products, contributions to environmental protection or the avoidance of emissions.
Innovation - How new is innovation?
How new is an innovation is often also a subjective consideration. An innovation can therefore be new
- For a company,
- For a market or industry, or
- For the entire world.
Another frequently used classification for innovation according to novelty is according to the scope of change:
Radical innovations are new products, services or processes and embrace a substantial change and innovation. Accordingly, the impact is also greater, for example new markets may arise.
Incremental innovations are the optimization and further development of Existing products, services or processes. The purpose and benefits are the optimization of customer service, cost reduction, repositioning, adaptation to new markets or the adaptation to new conditions such as new laws and standards.
Accordingly, radical innovations are basic innovations and revolutions, incremental innovation improvement, adaptation or subsequent innovations and thus evolution.
Whether an innovation is radical or incremental is often very much in the eye of the beholder. Therefore, a clear, objective differentiation is often challenging.
This also shows the example iPhone. Apple and Steve Jobs polarize in this regard, one think his products were not innovative, others see him as the ultimate innovator. Viewed individually, most technologies were not new. But the iPhone as a product that has established the new smartphone market was a revolutionary innovation. Also the business model with apps was extremely innovative. Who would have thought that mobile phone software will become a market of its own.
It is important for companies and their innovation management to set criteria for themselves, according to which innovations are divided into incremental and radical innovations. Examples of criteria are return on investment, amount of investment costs, payback period, patentability, etc. Thus, innovative ideas with a high ROI, high investment costs, longer amortization and patentable are radical.
A further, currently very popular classification according to the novelty is in English
- Sustaining Innovations: Preserving or continual innovations refer to the improvement of existing, similar to incremental innovation. This type of innovation focuses on current customers and their needs.
- Disruptive Innovations: Disruptive stands for detachment and disruption and describes innovations that shape a new market. Disruptive innovations usually arise in the low-end segment, in small attractive segments. However, they gradually take over the mass market with the increasing maturity of the other types of innovation.
Pull innovation and push innovation
In addition to the innovation and the degree of innovation, there are other classifications.
One is the innovation trigger - What triggered innovation? One differentiates between market pull and technology push.
- Market pull innovations go from the market and are initiated by a concrete customer request.
- Technology push innovations are created by new technologies for which suitable application possibilities are sought and realized.
In the literature on innovation types one also finds the division into closed and open innovation, which is more related to innovation management than to innovation itself.
With Closed Innovation, only internal resources are used for the generation, development and implementation of innovations. At Open Innovation, external partners such as customers, research institutes or suppliers are also integrated into the innovation process.
Conclusion: kind of innovation
The main classification is based on the object of innovation and the degree of innovation. There are blurring boundaries in the classification of the types of innovation. Where exactly the boundaries between the different types of innovation lie in these categories, an organization must define itself. This classification has a strategic relevance for innovation management, namely to define the focus in the innovation strategy. The further purpose is to initiate the individual innovation projects into the innovation process. A small, incremental innovation in the product area requires a different process than a radical innovation in the production process.
Dietmar Vahs and Alexander Brem: Innovation Management: From the Idea to Successful Marketing, 2015