The Innovation Series
Exploring the Different Types of Innovation
When we think about innovation, it is easy to fall into the high-tech trap: the mindset that a new idea/product/service is only innovative if it is radical or tech-oriented. This does not need to be the case, innovation is multi-faceted. This article lays the foundation for my new Innovation Series by defining the different types of innovation aspiring and early-stage entrepreneurs can leverage to provide solutions to customers. The video below typifies how “Frugal Innovation” can benefit society
Radical vs Incremental Innovation
Radical innovation is what we are programmed to think of pertaining to innovation. It refers to when a company introduces an entirely new product/service into a market whereas incremental innovation is when a company gradually improves/adds new features to its products & services. Amazon is a classic example of how radical and incremental innovation can coexist: e-books were a radical innovation. Amazon has consistently made new improvements and features to its business such as shortening delivery time and Audible [its audiobook offering]. Furthermore, self-checkout grocery stores and its patented one-click checkout feature are other examples of radical innovations.
Within these two broad views about innovation, there are multiple types of innovation according to research. The different types of innovation we will be focusing on are product innovation, process innovation, paradigm innovation, position innovation, marketing innovation, and supply chain innovation.
The Different Facets of Product Innovation
As defined by Kenneth Khan, product innovation refers to new products, services and programs. According to Khan, business owners can implement product innovations in the following ways:
Cost reductions: Entrepreneurs can think of ways to cut costs regarding the inputs they use to produce products or deliver services. This leads to price reductions or lower prices compared to the market price, but the product/service largely remains the same.
Product improvements: Entrepreneurs in the tech & software industries are specialists in this field: they constantly get feedback from customers and fix bugs and other quality issues. If you run a service-based business you can make improvements in service quality, customer services or policies.
Line extensions: This is when new features or product lines are added. For instance, a fashion brand adds new styles and items, a software company adds a new feature, or a service business adds a new service to its portfolio.
New markets: When current products & services are launched into different markets. Larger businesses usually explore this avenue. Amazon is planning to expand into South Africa next year. Netflix expanded into new markets as demand for its streaming platform increased. Position Innovation is an extension of this as companies introduce different products/services to different consumer segments.
New uses: When existing products are used for different purposes. Nike’s CEO, John Donahoe, recently admitted that although its products are primarily created for athletes and for sporting use, he is aware customers use Nike’s clothes for other purposes such as work and casual wear. Therefore, athleisure is now a strategic priority for the brand. Customers also use Nike products as collectables and souvenirs.
New Category entries. This refers to companies that launch products/services that they traditionally do not produce and that customers already use. For example when Apple launched its own smartwatch. Customers were already using smartwatches like Fitbit.
New-to-the-world products. Products or services that the market has never seen before. These innovations could be a cure to a medical condition or other breakthrough technologies such as autonomous cars.
Efficiency and Process Innovation
According to multiple research studies, innovation could refer to process efficiency. Process innovation refers to when there are changes in the ways in which products/services are created and delivered. For example, when a manufacturing company creates a new and efficient way to speed up the process of manufacturing a car as Henry Ford did. His Model T cars leveraged division of labour and other process changes. The Fintech industry also improved efficiency pertaining to money transfers & transactions.
Changing the Way People Think through Paradigm Innovation
According to research by Joe Tidd, paradigm innovation changes the underlying mental models which frame what an organisation does: it changes how people perceive what a product/service does. For example, how Coca-Cola redefined what their product actually is through their open happiness campaign.
Meeting other Target Consumers with Position Innovation
This dimension is all about market positioning. It involves changes in the context into which the products/services are introduced. For example, when a fashion line catering to the youth decides to pivot and target older generations. This is often described as ‘new to the company’ rather than ‘new to the audience’.
Marketing Innovation
Marketing innovation is one of the most prevalent types of innovation in the business environment. Companies are constantly looking for fresh, new and innovative ways to promote their products to customers. Who could ever forget the ‘share a coke’ promotion strategy? Or Nando’s hilarious, relevant skits?
Supply Chain Innovation
According to de Haas’ work, supply chain innovation is ‘A change (incremental or radical) within the supply chain network, supply chain technology, or supply chain processes (or combinations of these) that can take place in a company function, within a company, in an industry or in a supply chain in order to enhance new value creation for the stakeholder’. H&M experimented with this type of innovation when it launched Treadler- a platform for its entire sustainability supplier network which enabled fashion retailers to source sustainable materials from trusted suppliers.
Concluding Remarks
A lot could be said about innovation. But more importantly, a lot should be done to encourage innovation globally. WIPRO does excellent work measuring innovation globally and I encourage you to read its publications & findings. In my next issue, I will focus on Business Model Innovation.