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What are the 4 types of innovation?

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Whenever you see a successful business, someone once made a courageous decision.

Peter Drucker (author and theorist)

If a company’s success depends on its ability to innovate continuously, then bravery would be one of the primary qualities of a successful entrepreneur. At least that’s what management guru Peter Drucker seemed to imply with this quote, which will certainly inspire many readers.

Innovation, in our collective imagination, is a bit like Aladdin’s lamp or a magic wand that everyone wants to get their hands on without knowing how to use it. If turning lead into gold is a well-kept secret for alchemists, converting an idea into an innovative product or service is just as important for growing companies eager for patents. According to EY, in 2022, 65% of innovation and human resources departments expect transformation to provide new opportunities for profitability.

In this article, we will unpack this much-desired concept. To do so, we will first define what innovation is in concrete terms. Then we will discuss the four most commonly accepted types of innovation.

What is innovation?

If there is a term that is difficult to define, it is “innovation”. However, there are common delimiters to the concept of innovation, such as novelty or that a new product or service creates value for its stakeholders and can meet the needs of its main market. 

For a 21st-century company, one mantra reigns: growth velocity. In a world of constant change, the organizations that thrive are those that innovate, that can make decisions in real-time, and whose processes are continuously improving. It is not only a question of maintaining itself but also to scale fast.

While the debate about its meaning could take hours, the idea is to give the most accurate definition of innovation. So, let’s use the one that is the reference today, namely that of the Organization for Economic Co-operation and Development (OECD):

“The implementation of a new or significantly improved product (good or service) or process, a new marketing method or a new organizational method in business practices, workplace organization or external relations.”

Thus, the new version of a product is always more seductive than the previous one, even if the only innovation is the marketing message that accompanies it. Who has ever been surprised to see that Apple presents its new iPhone model as a jewel of innovation every year, while the previous model was almost identical? Wasn’t the real innovation here the invention of the very first iPhone? And can we still call the new models of the Apple brand innovative?

How many types of innovation there are?

The truth is, it is not that simple to define the exact number of innovation types that exist. It is not an exact science, even if economic science tackled this subject very early on. Economist Joseph Schumpeter proposed five types and introduced the famous concept of creative destruction, which means that new technologies destroy and replace old ones.

The OECD listed four, while the industrial designer Jay Doblin identified 10. 

This is without counting the multitude of concepts such as Jugaad innovation, which was a big hit a few years back in the startup world.

So, in this innovation jungle, which concepts should we retain? Which ones are the most reliable?

Based on our numerous discussions and the support we have given to dozens of innovation leaders, we can now, without a doubt, start with four main types of innovation.

What are the 4 types of innovation?

These are the four types of innovation that stand out and seem to be the consensus among organizations looking for a groundbreaking idea, concept, or product.

1. Incremental innovation

Incremental innovation, also known as continuous improvement, consists of improving a product or service in its market. It’s less ” spectacular ” and immediate than other types of innovation, yet incremental innovation is effective when addressing transformation issues within the company or change processes.

Moreover, incremental innovation is an especially participative approach in the sense that it can involve employees. Modern human resource development leaders have made it an asset to building a collective culture of improvement. In this article, we dive deeper into the best ways to create such a culture

The iPhone is a good example of incremental innovation, going from the iPhone 12 to the 13 and then most probably to the 14.

2. Adjacent innovation

Adjacent innovation is a typical example of a successful expansion. It refers to using existing capabilities (like technology or knowledge) to appeal to a new audience or enter a new market. This provides a competitive advantage to the original product or service that allows it to be differentiated in the market.

To illustrate the concept of adjacent innovation, we can take the example of big companies that buy innovative startups in order to integrate their groundbreaking products and services into their own portfolio.

3. Disruptive innovation

Disruptive innovation refers to the actions taken by a smaller company to shake up an industry by targeting its large, existing competitors’ overlooked segments. 

Over time, the disruptive innovation party will accelerate and start taking over the main segments of the industry. When adoption of the new innovation by the main segment happens, we speak of disruptive innovation. 

Netflix is a very good example of disruptive innovation. The company started out by targeting a less essential segment of Blockbuster’s audience with its relatively unpopular offer of mailing rental DVDs. They then moved on to improve its services while keeping a low price, which appealed to and conquered Blockbuster’s main audience completely.

4. Radical innovation

Radical innovation is the “one more thing” of our article. And for good reason, it is the creation of a brand new product or service that nobody expected and that tends to impose itself on the life of users.

Television and the smartphone are two typical examples of radical innovations that have changed our daily lives. 

Not all the results of an innovation are easily measurable. The method proposed in the Oslo manual from OECD consists of distinguishing the result of innovative activities from the resources invested to carry them out.

It is no longer surprising that, in large companies, the results of an innovation are assessed in terms of accounting and financial indicators: profit, revenue growth, changes in share value, market capitalization, or productivity. 

My two cents

Innovation is a subject as complex as it is exciting. Innovation is also a strong injunction within today’s companies, which can no longer sleep on their assets without fearing for their survival.

“The species that survive are not the strongest, nor the most intelligent, but those that adapt best to change.” This quote from Darwin about the evolution of species seemed to foreshadow the context in which businesses operate today.

Whatever type of innovation you focus on, make sure you’re well equipped. It’s necessary and worth the effort!

Agorize Innovation Management Software

Innovation management made easy

Learn more about Agorize solutions for innovation management.

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