Types of Innovation: Definitions and How to Apply Them

Updated Sep 6, 2022.
Types of Innovation

Every business needs an innovation strategy to develop viable innovations that position them for success in today’s highly-competitive environment.

Many people think of innovation in terms of ground-breaking technological inventions. Although technology innovation is the most obvious innovation type, there are other types of innovation that businesses can apply for optimized results and higher profit margins.

Most innovations in today’s marketplace involve small and incremental improvements on an existing offering instead of drastic and disruptive changes that transform industries.

This article will cover what you need to know about innovation to get you started on your innovation journey.

Let’s get started.

What is Innovation?

Innovation entails practically applying new ideas and thoughts into the limelight for a better and much-improved product and service delivery.

The goal of incorporating an innovation process into your business model is to arrive at new products, services, business processes, and models to drive the needed improvement of existing models or completely overhaul the existing ones. 

For successful innovation to be incorporated into your existing business, your business needs to be open to new ideas and leverage existing technologies, as technology is the backbone of every innovation process. 

Structure your innovation thinking to be an effective growth strategy to bring economic benefits to your scope of operations.

The World's most innovative countries
Source: Statista

Fields of Innovation

Innovation comes in different forms and can determine a wide range of outcomes. 

Most times, your innovation's result depends on several factors such as your chosen tactic and strategy of implementation, business behavior and capabilities, structure, and several other criteria.

The outcome of an innovation process is not just limited to developing new products, as innovation can bring several results for your business.

Here are the standard eight fields of innovation:

1. Product Innovation

Product innovation is also referred to as product performance innovation. The outcome of product innovations is for new products to be developed or improved on existing products for better customer satisfaction.

This innovation field can help you reduce production costs and includes innovations to the product system.

A typical example of product innovation was the development of television. Television was not an existing product until its invention. It brought about an innovative way of providing people access to images, sound, and entertainment on one platform.

With time, businesses started changing existing TV products to provide consumers with the best experience. This innovation brought about the invention of color, cable, intelligent, and flat-screen TV brands.

2. Technological Innovation

Developing new and exciting technologies can be the basis for other innovations. Technological innovation is the most visible and widely evident of all the fields of innovation.

With the advancement of technology, businesses are open to a wide range of opportunities to exploit in creating unique products and services in a populated market.

The internet is a notable example of a technological innovation that allowed new and exciting technologies to be developed. Without the discovery of the internet, the smartphone market would not have existed.

Another notable mention is the industrial revolution, which brought about many opportunities for new production methods, products, and services. It led to the market being revolutionized to previously beyond-reach options.

3. Business Model Innovation

What all successful companies have in common is an innovative business model. By using different technologies and processes for various market options, businesses can create effective business models to provide the best possible value to their customers.

Innovation in a business model is common among startup companies looking for more effective ways to conduct business operations. 

Stepping into an industry with several competitors stacked against you, you need to incorporate a high degree of innovation into your business model to help you stand out.

Your innovation in your new business model can be goal oriented. For example, in the case of cosmetic brands, opt for cruelty-free processes that do not require the use of animals as an environmental awareness measure.

Online banks have incorporated innovation into their business model by offering financial services to their customers without needing to visit a physical bank facility.

The most innovative companies over time
Source: Statista

4. Organizational Innovation

Organizational innovation involves properly managing and sharing resources and assets in a completely new and effective way. 

This innovation field borrows ideas from other fields of innovation to bring about the changes your organization needs to improve its productivity, product, services, and overall processes.

5. Process Innovation

Implementing innovative changes in your business process to give it a unique feel to your customer goes a long way in improving the effectiveness of your business strategies.

Process innovation involves creating or changing your business organization's production, delivery, and customer interaction methods. These changes are poised to make significant value for your organization.

6. Marketing/Sales Innovation

Marketing or sales innovation is also referred to in the corporate business world as the new channel innovation. This field of innovation is structured to compete for a target market, hoping to sway them into patronizing your products or services.

Incorporating a unique and innovative marketing/sales strategy into your business opens your business up to new concepts that boost sales.

The approach business takes to acquire new customers is becoming more innovative, with companies tweaking their marketing strategy to accommodate a broader range of market audiences. 

Marketing innovations involve the promotion of existing products or services using new methods. Advertising is a marketing strategy businesses of all sizes use to promote or sell their products or services to an audience.

Online advertisements offer the best innovative way of pitching your brand to a more significant market audience at once as the world is gradually moving towards a more online presence. 

Social media advertisements offer more customer engagement and returns than traditional newspaper and television platforms.

7. Network Innovation

Innovation in the network structure of your business is significant to how your business processes are carried out. Simply connecting key stakeholders and teams of your organization, you can create more value than was initially expected.

Network innovations depend mainly on the use of ICT facilities. By providing your business access to satellite communications solutions, your business has access to voice and data connectivity on a global stage.

The most common form of network innovation is open innovation, where a series of companies or stakeholders share their resources, technology, and knowledge and share the outcome of the results obtained.

Connecting different groups and stakeholders might be possible to create extra value. This type of innovation is prevalent due to the use of ICT services.

8. Customer Engagement Innovation

Customer engagement or retention is key to the success of any business venture or organization. Your overall business goals should focus on providing customers with the most value.

Innovative concepts and methods increase customers' interaction with your brand and keep them happy. Happy customers ultimately translate to high success and customer retention rates.

So in choosing an innovative model to incorporate with your existing business model, you need to ensure the model is customer-centric and designed to keep your customers engaged throughout their interaction with your business brand. 

Customer engagement innovation requires you to have a clear understanding of the customer journey for a more effective business-customer connection. 

Types of Innovation

Innovation has several ways of impacting your business's products, services, and processes. The impact innovation has on your business can be observed across four significant types of innovation.

To a large extent, new technologies and existing market impact define what type of innovation such innovations fall under.

An innovation matrix distinguishes innovations based on two factors: the market of operation and the technology used. Companies use the innovation matrix to visualize different innovative dimensions when trying to create or improve a product or service.

Types of Innovation
Source: Medium

The innovation framework consists of five major innovation types:

1. Incremental Innovation

Incremental innovation is among many businesses' most common and widely used innovation types. It operates by leveraging existing technologies within the confinement of a current market structure.

The main aim of incremental innovation is to improve your business' existing offerings by providing new and exciting features, and changing your overall business strategy, among many other factors that grossly affect how your business runs.

Incremental innovation focuses on continuously improving your business's existing products and services to provide the most value to your business.

Constantly improving your existing services, products, and overall business processes can significantly position your business to grow its market share.

Incremental innovation vs Radical innovation
Source: ResearchGate

Examples of Incremental Innovation

A typical example of incremental innovation is in the world of smartphone manufacturers like Apple. By only making changes to existing smartphone hardware and design and offering new features, you get to capitalize on existing market coverings. 

2. Disruptive Innovation

Disruptive innovation utilizes new technologies, processes, or a disruptive business model in an existing market and is well-known in the industry. It offers a practical impact on your business due to the efficacy of these new technologies.

New processes and technologies always come with unique vulnerabilities as they go against an already-established structure with a relatively high acceptance rate. 

Use your disruptive innovation strategies to pitch your new model, product, or service to the existing market to gain significant popularity and acceptance.

Most organizations that use disruptive innovations target vulnerable market segments and pitch their product and services as more affordable and convenient. This strategy provides the needed competitive advantage against other players in the industry.

Examples of Disruptive Innovation

Amazon is an example of an organization that uses disruptive innovation for its operations. With internet technologies that disrupt the bookshop industry, Amazon has altered how books are sold and delivered.

Apple is another organization that utilizes disruptive innovation. 

After identifying a chance to pound on the smartphone market, Apple came up with iPhone that offered touch-interface devices with an intuitive user interface to the existing smartphone market users and ended up driving the needed change in the market.  

3. Architectural Innovation

Architectural innovation capitalizes on existing technology to structure its tactics and strategies for entirely new markets.

With their previously created processes and business model, businesses take their characteristic technology and seek to pitch new ideas from these technologies to an entirely new market audience utterly different from their custom market audiences.

Tech giants like Google, Alibaba, and Amazon use architectural innovation to drive their business operations.

By taking their domain prowess, skills, and technology, these companies journey into an entirely new market to seek relevance and a wide range of acceptability. It allows them to expand their current customer base and venture into new market opportunities.

Examples of Architectural Innovation

Amazon and Alibaba are familiar tech firms that use architectural innovation to drive their venture into unknown market waters.

Already known for their expertise in building world-class and effective apps and platforms with their already determined customer base, these two tech giants also offer new products and services to an entirely different market audience.

4. Radical innovation

Radical innovation is the rarest form and the riskiest among all types of innovation. It involves creating and utilizing new services, technologies, and business models for an entirely new market.

This innovation type takes advantage of technological breakthroughs or recent technological advancements to create new markets for industries. 

Radical innovation causes a total overhaul of how organizations previously go about their business processes and how consumers interact with them.

The success of your radical innovation tactics and strategies is primarily tied to your business organizational behavior and unique capabilities. These behavioral conduct and qualifications create the right and conducive environment to get value from your new ideas.

Definitions of radical innovation and definitions of incremental innovation
Source: 6Heads  

Examples of Radical innovation

A typical example of radical innovation is in the air transportation industry. Previously before the invention of airplanes, there was no form or means of transport by air.

The creation of a new technology that allows for air travel unlocked an entirely new market for transporting goods and people. Radical innovation brought out an entirely new industry from a single new technology.

5. Sustaining Innovation

Sustaining innovation allows businesses to consolidate and protect their claims and position in a specific market. It focuses on making small or minute improvements to pre-existing products or services to increase customer value.

By focusing on and identifying unique opportunities to gain or consolidate a market-leader position, businesses can pounce on the existing market and pitch their improved products to their needs.  

Sustaining innovation creates and offers unique features in the form of products and services that are pretty distinct to differentiate it from its competitors.

Examples of Sustaining Innovation

The smartphone market is a classic example of sustaining innovation in today’s business world. Top smartphone manufacturers such as Apple, Xiaomi, Samsung, and Huawei release new and improved smartphone models that represent an upgrade on previous versions.

How to Encourage Innovation in Your Business

Innovation is crucial for business success. Every creative journey begins with innovative thinking on implementing changes to how a pre-existing system or model carries out its operations. 

For continuous improvements, you can encourage innovation in your business with strategies that primarily focus on improving customer interaction and overall company performance. 

1. Encourage Positive Relationships Among Your Workforce

Creating a positive environment for your workforce to develop exciting new ideas helps encourage innovation as the force is better motivated to share ideas by guaranteeing them a listening ear. 

2. Offer Rewards for Innovative Habits

Your workforce is motivated to develop innovative ideas if there are adequate incentives to compensate them for their opinions. 

Create a structure in your business organization that rewards employees for their bright ideas. Rewarding employees with promotion and benefits packages can go a long way in encouraging other employees to step up their game in the innovation field. 

3. Create a Collaborative Work/Life Balance Environment

An effective work/life balance relationship is needed to keep your workforce’s energy and commitment levels at 100.

Bombarding your workforce with constant tasks without striking a balance between their personal life leaves no room for your workforce to initiate innovative thoughts due to their overworked schedule. 

4. Model and Promote Innovative Behaviors

Established companies have a structure that promotes innovative behaviors from the top hierarchy down to the last level of their employee structure. Let your workforce know that Innovation matters and can boost the company’s performance.

How to Protect Innovations

There are several ways you can provide adequate coverage for innovation frameworks. It is best to protect your innovation to prevent theft or a wide range of vices that negatively affect innovation processes. 

1. Legal Protection

Covering your viable innovations by patenting them to receive the most value from them and distinguishing them from other companies' processes is one of the most effective ways to protect your inventions. 

Legal Protection protects your innovations but comes at a cost. It would be best if you strategize how the legal cost of your patent protection will likely affect critical aspects of your business. 

Although the cost of patronizing legal services for patent protection may not be high initially, legal prices can rise quickly.

Legal Protection can not protect all aspects of companies' innovation processes. While patent laws can cover new technologies, products, and techniques, business models and software do not enjoy the same benefits. 

2. First-Mover Advantage

First-mover advantage is familiar to software companies, with software constantly faced with developing exciting products and processes, new business models, or revolutionary technology to give them an edge in the available market shares.

Companies can leverage incremental innovation tactics to improve their existing solutions with a first-mover advantage. You can grab a significant market share by offering your customers an incremental improvement to your production system.

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Anastasia Belyh

Editor at FounderJar

Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.