Definition and Types of Innovation

Innovation is a very frequently used term. Everyone talks about innovation. We hear phrases like disruptive innovation, incremental innovation, architectural innovation, radical innovation… But how these terms differ an how do we define innovation.

The Cambridge dictionary defines innovation as:

  1. A new idea or method, or the use of new ideas and methods
  2. A new idea, design, product, etc…

However, in business when something is new it is not considered innovation immediately. In business, innovation is defined as something new that creates or ads value. That means if it does not add value it is not an innovation. Then it is an invention.

We define innovation as something new that creates or adds value for a customer or user. That can be a process, a method, a product, a service, a new business model, technology… These are subjects of innovation.

When we talk about innovation in order to define different types, we can differentiate in regard to the extent of change, in regard to the approaching new markets, in regard to the origin of innovation, and by innovation management.

Most often we hear term radical innovation disruptive or sustainable innovation. Often radical and disruptive innovation are considered as a synonym which they are not.

Radical and incremental innovations differ to the extent of the change. Radical innovation is something that is radically different compared to the prior art in the market. On the other hand, incremental innovation means small changes, improvements on a product, service, process… For example, when Apple entered the mobile phone market with its Phone, it made radical change in the look of the mobile phones. Every next new iPhone on the market was incremental innovation while only the first iPhone was a radical innovation.  The same goes for google search engine advertising. That radically changed the advertising industry. Improving search engine algorithms from year to year is just incremental innovation.

Disruptive vs. sustainable innovation is usually considered synonyms for radical and incremental innovation. However, we in Vinco like to differentiate these two categories.

Clayton Christensen has defined disruptive innovation as “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors”. Disruptive innovations originate in low-end or new-market footholds.

In other words, disruptive innovation means solutions that are aimed at bottom markets that are also not attractive to incumbent companies. Sustainable innovation in C. Christensen’s terms would be innovation and solutions that keep you in your current market. Solutions that enable you to deliver improved solutions to your existing markets.

So, while iphoneX could be both an incremental and sustainable innovation, could the first iPhone also be disruptive innovation?

We often hear term open innovation. Open innovation was originally introduced by Chesbrough in his 2003 book Open Innovation: The New Imperative for Creating and Profiting from Technology. Open innovation is when a firm no longer focuses only on their own idea creation, their own R&D,  but also welcomes external ideas to develop and commercialize them through their own business. P&G, for example, uses open innovation approach and advertises on its websites that external parties can contact them if they have an interesting idea or technology that P&G could deliver through its own channels. For such a strategy, companies like G&G usually pay royalties to the idea owner through license agreements.

We can also talk about market pull and technology push innovations. iPhone is a technology push innovation. The same is the case for laptops, AI, blockchain, machine learning. They all are technology pushes that we have embraced to use. Marek pulls innovations are innovations when the market is seeking a solution. For example, solutions that decrease air pollution are market pull innovation. Maybe the best explanation between these two terms would be by using the famous sentence from Henry Ford: “If I have asked customers what they want, they will say faster horses.” Faster horses, if produced, would be a market pull innovation, while a car was a technology push innovation.

Henderson and Clark (1990) find out that defining innovation as radical and incremental is incomplete and excludes some other types of innovation.  They have focused on defining innovation through two dimensions: the horizontal dimension captures an innovation’s impact on components, while the vertical axe captures its impact on the linkages between components. ( Henderson & Clark, 1990)

Here you can have a look at the example of a room air fan as a product and possible new innovative solutions that explain these four different types of innovations.

ARCHITECTURAL INNOVATION (AI) (introduction of a portable fan)

  • Innovation that changes the way in which the components are linked together while leaving the core design concepts untouched.

RADICAL innovation (central air conditioning)

  • is based on a different set of engineering and scientific principles and often opens up whole new markets and potential applications

INCREMENTAL innovation (change in blade design of a room air fan)

  • minor changes to the existing product,  exploits the potential of established design

MODULAR innovation (change from analog to digital)

  • It changes a core design concept without changing the product’s architecture

Architectural innovation may have very significant competitive implications. Established organizations may invest heavily in the new innovation, interpreting it as an incremental extension of the existing technology or underestimating its impact on their embedded architectural knowledge. But new entrants to the industry may exploit its potential much more effectively since they are not handicapped by a legacy of embedded and particularly irrelevant knowledge. ( Henderson & Clark, 1990)

To conclude, we can define innovation in many ways. Some definitions may overlap and be synonyms. However, the classification of the terms is important for innovation management as different types of innovation deem different approaches, capabilities, and strategies.

For more info about our innovation processes have a look here or if interested in innovation culture here.