What Are the Different Types of Innovation and Why Do We Need Them All?
Innovation isn't just about (new) product development. This narrow view is unfortunately rife in the corporate world and causes numerous enterprises to miss out on the benefits of innovation.
Let's take a look at Nespresso, for example. Nespresso is an operating group of the Nestle Group that sells single-use coffee capsules. At face value, their success could be attributed to product design and ingenuity, but Nespresso didn't become an industry leader because of their product alone.
Nespresso gained a substantial competitive advantage with a comprehensive, 360-degree approach to innovation. It took them several years to become successful, and the main changes were not about the machines or the capsules but about their business model. Their success was not possible just by having a product that resonated with their audience: perfect espresso at the push of a button. Nespresso devised a revolutionary business model that resulted in a bullish year-on-year growth rate. From a successful indirect distribution model to a comprehensive customer loyalty program, Nespresso has demonstrated the importance of widespread innovation.
Regardless of your business model—commercial or not-for-profit—it's vital that your business is capable of innovating on multiple fronts. Let's start by learning about the different types of innovation.
10 types of innovation for long-term viability
Types of innovation are the avenues within your company that provide opportunities for development, such as your network, daily processes, and profit models. It's a common misunderstanding that open and collaborative innovation are types of innovation. Open or collaborative innovation can be better defined as approaches to innovation. For example, should you decide to open your innovation efforts to your customers, employees, and partners, you're approaching innovation differently from a company that's chosen to innovate internally. Despite these differences, your available innovation types remain the same.
The Doblin Framework for Innovation provides a way to identify innovation opportunities. Using this framework, you can better understand how innovation applies to different areas of your organization and which of these most require attention.
The Framework for Innovation breaks innovation down into three distinct categories:
Configuration: Innovations that focus on the innermost workings of your organization.
Offering: Innovations that focus on developments to your core products and services.
Experience: Innovations that focus on the customer-facing elements of your organization.
By combining several elements, you can strengthen and find greater success with your innovation strategy.
1. Profit model innovation
Innovating in this area involves finding untapped sources of value that generate revenue. Truly innovative profit models challenge an industry's preconceived notions and can go unchallenged for some time.
Take a look at IKEA, for example—who expected a furniture store to become renowned for meatballs? This is a great example of an organization taking a look at alternative revenue streams and implementing a strategy that provides additional value to the customer while extracting profit for themselves. Not only does IKEA earn extra revenue from food sales, but the surrounding infrastructure enables customers to spend more time in the store, resulting in more furniture sales.
2. Network innovation
Innovating new connections with third parties enables you to generate more value for your customers and users. Taking advantage of other companies' processes, technologies, offerings, channels, and brands bolsters your offering while harnessing the capabilities and assets of others. Sharing responsibility in this way also reduces the level of risk when developing new offers.
The Best Friends Animal Society demonstrated this concept perfectly when they collaborated with BuzzFeed to create a video of Harry Potter star Emma Watson answering questions while playing with kittens. The video ended with a call to action where it became apparent that the kittens were available for adoption.
Unsurprisingly, the video went down a treat, and The Best Friends Animal Society was able to leverage BuzzFeed's readership of over 200 million people. This innovative collaboration enabled them to access a unique audience they would otherwise never have had access to.
3. Structure innovation
Structure innovation involves organizing and aligning your talent and assets in unique ways to create value. By reorganizing your business structure, you're able to remove structural barriers that inhibit turnaround times.
Microsoft is a great example of a company that found success by reorganizing its structure. While developing Windows Vista, the company became lost in a complexity trap where constant coordination made development increasingly complicated. To solve the problem, Microsoft dismantled its existing structure and opted for a more freeform approach to the traditional hierarchy which made the company more agile.
By reworking existing structural models and making changes to traditional corporate functions like HR, R&D, and IT, you're able to improve fixed costs and attract new talent by creating supremely productive working environments or fostering a level of performance that competitors can't match.
4. Process innovation
Process innovation involves streamlining the activities and operations that produce your primary offerings. Changes here can require dramatic changes to entrenched ideas but are essential for building market-leading margins.
Most process innovations also include changes to production technology and equipment that save time, money or provide increased value to customers.
One of the most famous and groundbreaking examples of process innovation is Henry Ford's invention of the world's first moving assembly line which simplified vehicle assembly and shortened the time necessary to produce a single vehicle from 12 hours to 90 minutes.
Fast-food franchise McDonald' is also heralded as a master of process innovation, with digital innovations such as self-order kiosks greatly enhancing the customer experience and accelerating ordering times.
5. Product performance innovation
To innovate here, your organization must develop distinguishing features and functionality that address the value and quality of your offering. This includes updates to existing products and services as well as line extensions.
It wouldn't be possible to write an article about innovation without giving a subtle nod to Apple—a company that's demonstrated the effects of product development and innovation as a whole.
In 2020, Apple released its first line of laptop computers fitted with a low-powered ARM-based chip. Placing what was essentially regarded as a mobile-phone chip into the body of a laptop gave the chip more space to breathe and access to a larger battery, making this one of the faster and most energy-efficient computers ever made.
The journey that led Apple to this moment started approximately 10 years before it came to fruition, but the result of this revolutionary idea has firmly placed Apple at the forefront of its industry.
6. Product system innovation
An innovative product system involves developing complementary products and services that resemble a robust and scalable system. The idea is to connect or bundle together individual services or products that extract maximum value from existing technology.
Let's continue using Apple—notorious for its closed product systems—as an example. Apple has successfully created the so-called Apple eco-system: a closed system of projects with exclusive compatibility across an entire array of products such as the iPod, iPhone, iMac, and iPad.
Apple has gone to great lengths to create a closed product system, and despite making many users angry, it has experienced a seemingly endless upward trajectory.
7. Service innovation
In what ways can you support and amplify the value of your current offerings? By innovating new ways for your customers to try, use and enjoy your product or service, you're able to enhance the performance and apparent value of your offering.
Effective service innovation is about creating an enjoyable and pain-free journey for your customer by fixing or preventing rough patches and rectifying problems. Performed successfully, service innovation can turn a mundane experience into a memorable one that customers come back for.
Consider the rise of chatbots, for example. Chatbots have become popular among businesses for facilitating customer engagement via messaging, text, or speech. Not only do these functions enable customers to acquire instant answers to common questions, but they also free up valuable manpower, reducing the need for customer service staff.
8. Channel innovation
Think about how you deliver your offerings to your customers or users, then ask yourself: how can you make this experience more immersive and rewarding? Perhaps you'll focus on improving existing channels or creating entirely new ones. Either way, channel innovation is about providing an experience that's delightful and minimizes friction.
Let's look at an example. HelloFresh is the number one provider of meal kits in the United States. By leveraging a subscription-based model, HelloFresh can deliver perishable foods to customers' doorsteps in a way that's convenient and affordable for customers.
9. Brand innovation
Your brand represents your offerings to your customers, which causes them to remember you. Customers with a positive association with your brand are more likely to choose you over competitors or substitutes. Most successful brands distill a promise to their customers and convey a distinct identity.
Sometimes, you can increase traction and even results significantly simply by raising awareness about your offerings or communicating your value more effectively. Brand innovations can transform commodities into prized products and confer meaning, intent, and value to your offerings and your enterprise.
Dove, a personal care brand, successfully connected with its customers by remarketing itself as a product for the "everyday" person. After a global study found that just 11% of women worldwide considered themselves beautiful, Dove challenged the conversation by launching its "Real Beauty" campaign.
10. Customer engagement innovation
Customer engagement innovation is all about fostering compelling interactions between your customer and your brand. By understanding your customer's aspirations, you're able to develop meaningful connections between them and your company. These innovations can be difficult to spot because they're often embedded in other areas, such as branding or service.
Tim Hortons is a fast-food restaurant company that recently upgraded its loyalty program by implementing gamified elements within its mobile app. Now, users can play games and 'level up' while working towards earning rewards they can redeem at Tim Hortons restaurants. Although games are not related to Tim Hortons products, this is an authentic interaction that kept customers engaged with its product.
How can companies innovate more quickly?
Coordinating a comprehensive innovation strategy can be overwhelming. While attempting to innovate in multiple areas is a must, such an influx of ideas and suggestions can cause your innovation efforts to implode.
That's why successful companies treat innovation as a dedicated function and use innovation management software to oversee the process. With the right tools, you can make ideas a reality in months, not years.
InnovationCast is a collaborative innovation management software trusted by forward-thinking companies such as DHL, Visa, Vodafone, and more. With our tailor-made experience, turning ideas into value has never been easier.
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