Innovation can be optimized by taking a strategic approach to your innovation mix. Creating an innovation strategy leaves room for organic innovation. But ensures your approach is proactive and built with sustainability in mind. Mapping out your innovation mix, where you are today and where you should be tomorrow, is critical to driving business outcomes.
While the evolving market, economy, and organizational changes may create the need to pivot, mapping out your upcoming innovations by category and level creates a roadmap for success.
The innovation categories and levels below will help you strategize your timeline and budget.
Primary Innovation Categories
Where many start-ups and established organizations go wrong, is focusing primarily on innovations that improve their product, service, or customer service. In order to better serve your consumers, you must innovate internally too.
While some theories identify up to 12 innovation categories, Northeastern University advises innovations fall into 1 of 3 primary categories:
- Product Innovation,
- Process Innovation; and
- Business Model
This entails all new innovations that solve consumer problems in new, better, or unexpected ways. This includes your next-generation products and services and entirely new products and services.
Product innovation always solves clearly outlined needs for a specific demographic. They should be driven by:
- Current consumer needs
- Evolving consumer needs
- Advancing technology
- Current design trends
- Current market trends
For example, consider how the computer mouse has evolved over the years. It began as a USB device, then evolved to Bluetooth wireless, and a variety of ergonomic variations. That being said, there may be a time when a mouse is obsolete, as technology is moving toward voice and touch activation.
Process innovation includes anything pertaining to product creation, delivery, and ongoing support. It’s heavily driven by advances in software and technology, with the objective to streamline and optimize in a manner that saves time.
When you save time, you save money. This might mean your team has more time to work on your upcoming innovations, that staff can be reallocated, or that the time saved helps to better meet and manage supply and demand.
Primary examples of process innovation include:
- Automation and hyperautomation
- Multi-channel communications
Most of your process innovation will be geared toward optimizing your existing processes. However, you will need to invest in entirely new processes. From testing new software to in-house prototyping with a 3D printer, factory automation, and more.
Business Model Innovation
Business model innovation isn’t required of every organization. It’s the process of reinventing your business, often shifting the value you add to your consumers. Or drastically transforming how you generate profit.
Business model innovation was what most businesses did during the pandemic. For example, shifting from brick-and-mortar sales to online sales. However, there are other times to revise a business model.
For example, Netflix is a rare example of multiple business model innovations. As businesses dwindled in one model, they transitioned to a new one. Today, their business model is vastly different than how they began.
- Netflix began as local-area kiosks you could rent a limited range of DVDs for $1.
- Next, they transformed their business model into an online subscription where DVDs were sent through the mail.
- They further disrupted the industry by transitioning to a global online streaming subscription and production company.
Netflix’s kiosk competitor Redbox is still around, and having a second wind at the current moment, but they didn’t innovate as successfully.
In addition to the categories above, you can sub-categorize innovations into:
- Consumer engagement & retention
- Value innovation—social or environmental
The 5 Innovation Levels
It can also be helpful to drill down into the level of innovation you seek to deliver. This is primarily because many organizations and innovation programs are thinking too big—only targeting disruptive and radical innovation. However, evolving market and new market innovations are typically the most successful, lucrative, and sustainable innovations.
1) Evolving Market Incremental
Incremental innovation is the process of improving existing products or services geared toward your existing market. This includes adding new features and functions that consumers are asking for. Or that leverage modern technology and trends.
For example, the growing range of USB rechargeable gadgets eliminates the need for batteries.
2) New Market Incremental
New market incremental utilizes your existing products or services to target a new demographic. If not a new demographic, to better serve a secondary demographic.
For example, in addition to ridesharing, Uber has Uber Eats for food delivery, Uber Pets for transporting house pets, and the option to utilize Uber as a courier/delivery alternative. They utilize the same technology for a different user base.
New market innovation also includes reverse innovation.
3) Disruptive Innovation
This is the process of utilizing new technology to serve an existing market. Disruptive and radical innovation is what most organizations aim for. However, disruptive and radical innovations are few and far between.
For example, the invention of mobile apps was disruptive. It allowed businesses to create free and paid apps to complement their additional service suite. It also allowed for radical innovations such as mobile-only businesses.
At its inception, Uber was also a disruptive innovation, as it utilized new technology to create a taxicab alternative.
4) Radical Innovation
Radical innovation is often confused with disruptive innovation. Radical innovations utilize a new product, service, or technology to serve a new market.
For example, the invention of mobile apps created the $97 billion dollar mobile gaming industry. This industry has cross-over consumers from the standard gaming industry but targets non-gamers from every walk of life.
5) Pivotal Innovation
Pivotal innovation goes hand in hand with business model innovation. It’s the least ideal type of innovation as it is often driven by necessity not desire.
For example, during the pandemic, many companies launched new products or services, targeted new demographics, and abandoned the innovations in their pipeline. Instead, they pivoted to create pandemic-inspired products or found innovative ways to offer their products and services digitally.
We mentioned Netflix in detail above. Each time business began to dwindle, they pivoted. At their inception, they couldn’t have imagined that they would evolve into a subscription service that gives Hollywood and TV networks a run for their money. Not to mention, the global equity of their TV and movie production.
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