What types of innovation are there?
The term innovation is very versatile and is also used very inflationary. A clear definition of the term is important for a clear, common understanding in companies. To this end, there are different types of innovation with regard to the innovation object and the degree of innovation. This knowledge of classification is necessary for innovation management.
What is the purpose of types of innovation?
Why do we deal with types of innovation? From the point of view of innovation management, the types of innovation and thus the classification of innovation have a strategic and process-related significance.
A clear definition of the desired innovation object and degree of innovation is important for the innovation strategy. This determines "where" an organization wants to innovate.
The classification is also relevant for the innovation process, since 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.
Innovation - What is being innovated?
Innovation can happen anywhere, whether it is a profit-driven or non-profit organization. It can affect the performance of the organisation itself, i. e. the product or service, but also the structures of how the service is provided. The first classification is thus the object of innovation.
Product innovation: Products concern both material products and intangible services such as services that meet customer needs and are thus acquired by the customer. With product innovations, a company earns its money and tries to differentiate itself from the competition.
Service innovation: service innovations are like product innovations when it comes to selling them directly to the customer, e. g. insurance or management consultancy. Even if services are not actively sold, as in the case of manufacturing companies, each company still provides services to its customers, for example in logistics, complaints, sales advice, etc., even if they are not actively sold. This is also where innovation comes in when it comes to differentiation and customer enthusiasm.
Business model innovation: The business model is the way a company functions and earns money. The business model innovation encompasses innovations in strategy, marketing, supply chains, value creation, pricing or cost structures.
Process and technology innovation: As the name implies, these are technological innovations, such as the creation of products and services. In principle, they are also process innovations. These include, for example, production processes or IT technologies for apps. Product innovations, quality improvements or cost savings often go hand in hand with process and technology innovations.
Organizational innovation: Organizational innovations affect the process and organizational structure. These can be organizational process innovations or management innovations, e. g. new tools for measuring customer satisfaction or optimizing delivery processes to reduce costs.
Social innovation: Social innovations are innovations where the benefit lies with society and the purpose is not primarily profit. Examples include innovation in education, poverty reduction, equal opportunities and health.
Environmental innovation: All innovations that contribute to improving the environment are environmental innovations. For example, environmentally friendly products, contributions to environmental protection or the avoidance of emissions.
An innovation can affect several innovation subjects at the same time. Logically, there is no clear demarcation here. For example, a product innovation can be a process and environmental innovation at the same time. Or a business model innovation usually also brings with it a product and organisational innovation.
Degree of innovation - How new is the innovation?
How new an innovation is is often a subjective consideration. An innovation can therefore be called new
- for a company,
- for a market or industry, or
- for the whole world.
Another frequently used classification for innovation according to novelty is according to the extent of change:
- Radical innovations are new products, services or processes and involve significant change and innovation. Accordingly, the impact is also greater, for example, new markets can be created as a result.
- Incremental innovations are the optimization and further development of existing products, services or processes. The purpose and benefits are optimization of customer benefit, cost reduction, repositioning, adaptation for introduction into new markets or adaptation to new circumstances such as new laws and standards.
Radical innovations are therefore basic innovations and revolutions, incremental innovation are improvement, adaptation or follow-up innovations and thus evolutions.
Whether an innovation is radical or incremental is often very much in the eye of the beholder. Therefore, clear, objective differentiation is often challenging.
This is also shown by the example of the iPhone. Apple and Steve Jobs are polarizing in this respect, one of them believes that his products were not innovative, while others see him as the ultimate innovator. Individually, most technologies were not new. But the iPhone, as a product that launched the new smartphone market, was a revolutionary innovation. The business model with apps was also extremely innovative. Who would have thought that mobile phone software would become a separate market.
It is important for companies and their innovation management that they define 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 payback periods and which are patentable would be radical.
Another, currently very popular classification according to the novelty is in English in
- Sustaining Innovations: Preserving or continuous innovation refers 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 mostly originate in the low-end segment, in less attractive segments. However, as the maturity of technology and products increases, they are gradually attacking the mass market and thus replacing existing services.
Further types of innovation
In addition to the subject of innovation and the degree of innovation, there are other classifications.
One of them is the trigger for innovation - what triggered the innovation? A distinction is made between market pull and technology push.
- Market pull innovations originate from the market and are initiated by a specific customer request.
- Technology push innovations are the result of new technologies for which suitable application possibilities are sought and realised.
The literature on types of innovation also includes the classification into closed and open innovation, which refers more to innovation management than innovation itself.
Closed innovation involves only internal resources for generating ideas, developing and implementing innovations. Open Innovation also integrates external partners such as customers, research institutes or suppliers into the innovation process.
Conclusion: Types of innovation
The main classification is by innovation subject and degree of innovation. There are blurred limits to the classification of types of innovation. Where exactly the boundaries between the individual types of innovation in these categories lie, an organization must define for itself. This classification has a strategic relevance for innovation management, namely to determine the focus in the innovation strategy. The further purpose is to initiate individual innovation projects into the innovation process. Because a small, incremental innovation in the product area requires a different treatment than a radical innovation in the production process.
Born in Graz, Austria. After positions as project manager & head of innovation of the project management at LEAD Innovation, Daniel Zapfl has been responsible for the success of the innovation projects of our innovation partners since January 2018.