Innovation – Definition, Innovation Types and Meaning

What is innovation and what are the different types and fields of innovation?

The simple definition of innovation in the business context. We also explain which different fields of innovation there are, what types of innovation are happening and the overall meaning.

Innovation is the practical application of ideas that result in different new types of new offerings, like products, services, processes, and business models, intending to improve or disrupt existing applications or creating new solutions.

It doesn’t matter if you are getting the ideas from outside the organization, through brainstorming, combining of existing ideas, or radical new thinking within your field. But it should be at the heart of your business and it should constantly be done to ensure business survival.

Innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual in the family kitchen. It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth. – Peter Drucker

Therefore we will explain here the different fields where innovation can happen, 4 different types of innovation, and also how to best protect your ideas from being copied or stolen.

8 Fields of Innovation

Innovation can be in different forms and outcomes. When we talk about innovation, most people think of new products while there is a wide array of different innovation outcomes possible. Here we list the most common

1. Product & Product Performance Innovation

Either a new product is developed or the performance of an existing product is improved. This kind of innovation is very common in the business world.

2. Technology Innovation

New technologies can be also the basis for many other innovations. The best example was the Internet, which was itself an innovation but also lead to other innovations in various fields.

3. Business Model Innovation

Many of the most successful companies in the world managed to innovate their business model. Using different channels, technologies and new markets can lead to new possible business models which can create, deliver and capture customer value. Digital ecosystems are a well-known example of innovation using several technologies and creating a whole new type of business.

4. Organizational Innovation

Managing and sharing resources in a new way can also be an innovation. This way it’s possible to use resources and assets in a completely new way.

5. Process Innovation

Innovation in the processes can improve the efficiency or effectiveness of existing methods. Possible process innovations involve production, delivery, or customer interaction.

6. Marketing / Sales – New Channel Innovation

New methods to capture and hold attention from customers. Either through the use of innovative marketing/sales concepts or the use of new channels for customer acquisition/sales.

7. Network Innovation

By connecting different groups and stakeholders it might be possible to create extra value. This type of innovation is very common due to the use of ICT services.

8. Customer Engagement / Retention

Innovative concepts that try to increase the engagement of customers and keep the retention up. The goal is to have innovative models to keep the customers “locked-in” or engaged.

The 4 Types of Innovation

First, we need to understand that there are various ways that innovation can have an impact on products, services, and processes. Most commonly we differentiate between 4 levels of innovation – Incremental, Disruptive, Architectural and Radical.

4 Types of Innovation - Incremental innovation, disruptive innovation, architectural innovation, radical innovation

1. Incremental Innovation

Existing Technology, Existing Market

One of the most common forms of innovation that we can observe. It uses existing technologies within an existing market. The goal is to improve an existing offering by adding new features, changes in the design, etc.

Example

The best Example for incremental innovation can be seen in the Smartphone market where the most innovation is only updating the hardware, improving the design, or adding some additional features/cameras/sensors, etc.

2. Disruptive Innovation

New Technology, Existing Market

Disruptive innovation is mostly associated with applying new technologies, processes, or disruptive business models to existing industries. Sometimes new technologies and business models seem, especially in the beginning, inferior to the existing solutions but after some iterations, they surpass the existing models and take over the market due to efficiency and/or efficacy advantages.

Examples

Amazon used Internet-Technologies to disrupt the existing industry for book-shops. They had the existing market for books but changed the way it was sold, delivered and experienced due to the use of disruptive technologies. Another example was the iPhone, where existing technologies in the market (Phones with buttons, keypads, etc.) were replaced with touch-interface-centered devices combined with intuitive user interfaces.

3. Architectural Innovation

Existing Technology, New Market

Architectural innovation is something we see with tech giants like Amazon, Google, and many more at the moment. They take their domain expertise, technology, and skills and apply them to a different market. This way they can open up new markets and expand their customer base.

Examples

Especially digital ecosystem orchestrators like Amazon and Alibaba use this innovation strategy to enter new markets. They use existing expertise in building apps, platforms, and their existing customer base to offer new services and products for different markets. A recent example for this: Amazon recently entered the medical care field.

4. Radical Innovation

New Technology, New Market

Even it is the stereotypical way most people see innovation; it is the rarest form of them all. Radical innovation involves the creation of technologies, services, and business models that open up entirely new markets.

Example

The best example of radical innovation was the invention of the airplane. This radical new technology opened up a new form of travel, invented an industry, and a whole new market.

How to encourage innovation in your business

Innovation is sometimes a key critical area for the survival of many businesses and industries. But encouraging your employees to come up with new ideas can be sometimes stressful.

Here are some tips on how to get more innovation going:

  • Actively encourage your employees
  • Ask customers for feedback/invite customers for feedback rounds
  • Ask stakeholders for feedback
  • Invest in your employee’s education
  • Actively reserve resources for Research and Development (R&D)
  • Build a reward system for innovative thinking
  • Collaborate with start-ups and innovative companies
  • Build an intrapreneurship program
  • Do active research on the internet (follow industry news, tech news, etc.)
  • Ask / interview experts

Innovation is a calculated risk that needs to be addressed. Not all projects will be successful, and the company’s process needs to be managed to filter out potential fails before they have a too big impact on your innovation budget. Try to streamline the process and maybe create your own innovation program which covers some of the points mentioned above. This way you can manage it better and get a better overview.

Protection of innovations

There are many ways in which you can protect your innovation. We focus here on the 2 major protection methods which are either “legal protection” or being the market leader due to a “first-mover advantage”.

1. Legal Protection

Depending on the type of innovation, it might be useful to patent your invention to monetize it and protect it from others. There also needs to be an understanding of the cost of patent protection. While the initial cost might not be as high, it can be that the legal costs to enforce possible patent infringements can skyrocket and make it harder for smaller companies to get their right.

It is also important to understand that not everything can be protected and patented. While products, processes, and technologies are usually easier to be protected/patented, it’s harder/impossible to protect software or business models.

2. First-Mover Advantage

Especially software companies make use of the first-mover advantage. A company that has a new process, new business model, or new product tries to get as much market share as possible while the competition is still developing its offering. This headstart gives the first-mover the advantage of incrementally improving the product. This way it’s possible to grab a market share and offer a better product/service faster than others.

CEO & Founder of MoreThanDigital. Serial entrepreneur since he successfully founded his first companies at the age of 13. He has always questioned the "status quo" and is committed to innovation, disruption and new ideas. As International keynote speaker, consultant for companies and governments & states, lecturer and published digital transformation expert, Benjamin tries to advance the topics of digitalization, digital transformation and innovation internationally.

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