The innovation spectrum: Understanding the different types

by | Feb 11, 2023 | Innovation

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If you google “types of innovation” you will see a huge variety of responses.

Whichever version of types you choose to adopt, you must ensure that understanding the types will have practical value in helping your organisation be more innovative so that it can achieve its objectives.

Always remember, the highest-level objective of a business is to be profitable, now, with the existing business, and into the future. Innovation will enable you to achieve this.

In this post, I’ll talk about three types of innovation that differ in:

    • The amount of change involved,
    • The focus on existing vs. future business, and
    • Who is responsible for making it happen.
Three types of innovation:

1) Incremental Innovation (or continuous improvement): Small improvements to your existing products, services, and processes.

    • For incremental innovation to happen, all employees need to have an innovation mindset as they look out for small improvements, or 1%ers, that they can make in the business. When combined, each 1% improvement adds up to create big improvements to the business.
    • An example is a small improvement to the online purchasing experience for customers.

2) Sustaining Innovation: Significant improvements to your existing products, services, and processes that will sustain your existing business.

    • This type of innovation focuses on maintaining or improving the profitability of your existing business.
    • Examples include Apple launching an updated version of their iPhone, or rolling out a Customer Relationship Management (CRM) system to help the business better interact with customers.

3) Transformative Innovation: Radical changes in how your business creates and captures value. (You could also call this business model innovation).

    • This is where companies really transform themselves, making pivots with their business that are informed by what is happening in the market.
    • Most of the time, companies can focus on transformative innovation, whilst simultaneously, improving their existing business with incremental and sustaining innovations. However, there are times when the external environment changes so fast and so much that the business goes from profit to loss almost overnight. This is what happened for many companies when Covid-19 hit. Those companies that had existing capabilities in producing alcohol and sewing fabric were able to quickly pivot to produce hand sanitiser and face masks to meet the new demand. In many cases, this was a temporary, short-lived transformation that kept these businesses profitable until they could return to their existing business when customers’ need for their original offering returned. Fortunately, such dramatic changes don’t usually happen that fast, but this is what transformative innovation is about. Looking for the waves that are rolling in, jumping on them, and riding them in.
    • A classic example of Transformative Innovation is Netflix creating its own content to stream. The leaders of Netflix could see that competitive rivalry was increasing with content streaming as Disney, Stan, and others also began streaming. They needed to consider how they would remain profitable in the future and creating content is one way they are banking on.
Moving from theory to practice. Why is it so important to understand these three types of innovation?

1) Understanding innovation types provides clarity on how much change you are willing to make to solve a specific problem

    • How ambitious, and creative can people be with their solutions to a problem? What amount of resources are you willing to invest in the solution?
    • For example, if you are running an innovation competition and want employees to pitch innovative ideas to solve a specific problem, you need to give them guidance as to the type of innovation you are seeking. You could also think of this & call it scope.
    • I’ve run competitions where employees pitched ideas that involved such small, safe changes that they fell into the first type of innovation: incremental. Many ideas were things that people could just go ahead and do. People didn’t understand that we were willing to invest significant resources to solve the important problem in a much better way. We wanted “sustaining innovation”.

2) Understanding innovation types provides clarity on how employees can innovate

    • It is everyone’s responsibility to look for opportunities for incremental innovation. These are those small 1%ers, the 1% changes that add up to big improvements in the existing business.
    • Designated people or teams are typically made accountable for sustaining innovation initiatives that will help the company achieve goals for its existing business. Designated people or teams might also be tasked with exploring and testing ideas for the future that fall under transformative innovation, and
    • Leaders, need to be leading. They need to have one foot in both the now and future. When it is easy to label the type of innovation that leaders are focused on, it can be clear when leaders are not spending enough time on transformative innovation initiatives that are vital to ensure the future profitability of the company.

In summary, understanding innovation types is of practical importance and will help you maintain profitability now and into the future.

Want to talk more about innovation types and putting this concept into practice? Contact us.

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