The different types of innovation
Innovation means different things to different people, so I am kicking this year’s articles off with an overview of the different types of innovation that organisations can generate. The intention is then to take each of these categories and unpack it in forthcoming articles.
I have witnessed many categorisations and explanations of the different types of innovation (since becoming obsessed with the field) and there would probably never be a conclusive list, but I found an article in the MIT Sloan Management Review (Sawhney, Wolcott & Arroniz, 2011) which – in my opinion – covers the spread of the different types of innovation very insightfully.
12 Different ways to innovate
I have covered the definition of innovation extensively over the course of the 4 year that this column has been running, but to put the subsequent categorisation in perspective, I want to share the definition that is used in the article, namely: “…the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business system”. This definition also leads the authors to the following three characterisations: Business innovation is about new value, not new things; Business innovation can take on many dimensions; and Business innovation is systemic.
Successful business innovation requires the careful consideration of all aspects of a business. A great product with a lousy distribution channel will fail just as spectacularly as a terrific new technology that lacks a valuable end user application. Thus, when innovating, a company must consider all dimensions of its business system. Below is 6 of the 12 dimensions in which innovation is catgroized, and a concise explanation of each category. I will cover the other 6 dimensions in the following article.
1. Offerings. Offerings are a firm’s products and services. Innovation along this dimension requires the creation of new products and services that are valued by customers.
2. Platform. A platform is a set of common components, assembly methods or technologies that serve as building blocks for a portfolio of products or services. Platform innovation involves exploiting the “power of commonality” — using modularity to create a diverse set of derivative offerings more quickly and cheaply than if they were standalone items.
3. Solutions. A solution is a customized, integrated combination of products, services and information that solves a customer problem. Solution innovation creates value for customers through the breadth of assortment and the depth of integration of the different elements.
4. Customers, are the individuals or organizations that use or consume a company’s offerings to satisfy certain needs. To innovate along this dimension, the company can discover new customer segments or uncover unmet (and sometimes unarticulated) needs.
5. Customer Experience. This dimension considers everything a customer sees, hears, feels and otherwise experiences while interacting with a company at all moments. To innovate here, the company needs to rethink the interface between the organization and its customers.
6. Value Capture, refers to the mechanism that a company uses to recapture the value it creates. To innovate along this dimension, the company can discover untapped revenue streams, develop novel pricing systems and otherwise expand its ability to capture value from interactions with customers and partners.
The objective of this overview of the different dimensions of innovation is to demonstrate that innovation can be “taken apart” in order to understand it better and also to focus innovation efforts and to play to your strengths or increase your competitiveness along a specific dimension. I will address the remaining 6 dimensions in the next article. To kick off the year’s quotes, I want to share again one of my favourite innovation quotes from Harvey Firestone: “Capital isn’t so important in business. Experience isn’t so important. You can get both these things. What is important is ideas. If you have ideas, you have the main asset you need, and there isn’t any limit to what you can do with your business and your life”.
Sawhney, M., Wolcott, R.C. and Arroniz, I., 2011. The 12 different ways for companies to innovate. Sloan Management Review, 47(3), pp.28-34.