Ten Different Types of Innovation

Introduction

There are 2 extreme types of innovation, ie simple and sophisticated

- simple or improving the known (innovation as continuous improvement of current offerings and processes. Generally, it is not enough to build sustainable, competitive advantage this way as incremental improvements are easy to copy, imitate, improve upon, etc by competitors)

- sophisticated or inventing the new (these are transformational innovations. As markets become more complicated and competitive, there is a need to work across boundaries (internal and external), work with multi-disciplinary teams, use multiple types of innovations, etc to achieve a sustainable competitive advantage; have a longer development horizon than for simple innovations. This requires understanding patterns, trends, customers' needs and wants, etc)

We need to innovate with discipline and that demands a clear sense of what you are doing and why. Two 2 questions to assist:

i) how ambitious do we need to be?

ii) how can we innovate differently?

Despite most people being theoretically in favour of innovation, nearly every organisation aspires to kill it as it is pushing us into the unfamiliar, unknown territory. Over the millennia, we have developed

"...a protective self-defence mechanism that makes us alert and on guard when a normal pattern in the world is suddenly abnormal..."

Larry Keeley et al, 2013

This same mechanism provides anxiety about anything that is new and unfamiliar, ie

"...in principle we are all in favour of innovation; in practice we try to make the world safe and certain..."

Larry Keeley et al, 2013

"...if you want to help people to innovate more - and become better at innovating - you have to get individuals and teams to embrace rather than resist the unfamiliar..."

Larry Keeley et al, 2013

Some reasonable reasons for not innovating and ways to counter this

- 'We are too inwardly focused' (need to look outside your organisation and understand what others are doing, especially competitors. How has the industry historically and recently innovated? Studying how other leaders are innovating differently can motivate staff to look at new possibilities)

- 'We know our industry better than anyone. We know what the big problems are - and their answers' (too much focus on steadily improving 'known' or status quo plus focusing on best and most demanding customers. Remember: most disruption comes from outside your industry)

- 'Our culture is too risk adverse and anti-breakthrough' (the urgent always displaces the important; as there is a strong focus on short-term performance, this can encourage incremental innovation, ie steady improvement of existing products. While concentration on core innovations is important, there is a need to manage innovation like an investment portfolio, ie composed of many reliable forms and a few 'bold bets'.

"...we have discovered that customers tend to find the boldest ideas easier to grasp and endorse...... it's a different story with your own colleagues, who instead focus on all the obstacles. This is a key reason to make business ideas tangible, quickly: this helps to bring the doubters on board..."

Larry Keeley et al, 2013

- 'We don't know how to be creative or generative' (this can be a common view in well-established organisations embedded with analytical management sciences like 6 Sigma, lean, agile, etc approaches. Need to encourage multidisciplinary teams)

- 'We find it difficult to bring ideas from concept to market' (as it is difficult to bring ideas from concept to reality, use approaches like prototypes, pilot runs, virtual visualisation, experiment with components, etc)

- 'Innovation is easier in small companies or a start-up' (this is a false belief; it is important to start the process of innovation, regardless of the organisation's size.)

The 3 most common innovation areas:

i) business model (primary focus on degrading assets, capabilities around the value chain to serve customers better and make money. Most relevant to the innovation types of profit model, structure and process (see below))

ii) platform (this focuses on reinventing, recombining or finding new connections, etc to create value to customers. Most relevant to the innovation types of process, product performance, product system and services (see below))

iii) customer experience (this focuses on connecting, serving and engaging customers in distinct ways. Most relevant to the innovation types of channel, service, brand and customer engagement (see below))

NB Once customers experience superior service, it then becomes an expectation.

Three levels of innovation ambition:

i) change the known or core innovation (ways to deliver new quality, utility or delight to customers, eg keep offerings fresh and competitive. As they are usually easy to imitate, copy, etc, their advantages are short lived.)

ii) change the boundaries or adjacent game (involves reframing offerings that are harder to imitate, copy, etc; involves tackling a bigger challenge and delivering more comprehensive solutions for customers; can include changing the way you work; can create a sustainable competitive advantage.)

iii) change the game entirely or transformational innovation (radically challenging and changing the industry;

"...Transformational innovations erase the boundaries between once distinct markets and irrevocably change what is expected from competitors and customers alike..."

Larry Keeley et al, 2013

For innovation to be successful, you need to explore within

- your organisation (understand your core competencies, ie what you do best, strengthens and weaknesses)

- your industry (understand your competitive environment and how to differentiate yourself)

- outside your industry (learning from others can provide new ways to think about what to do and how you do it)

NB Great innovations go beyond products and integrate multiple types of innovation.

Sometimes innovations that change industries seem to come out of nowhere. Yet in most cases there were early warning signals that most people missed. Need to be aware of our cognitive biases (for more details, see other parts of the Knowledge Base).

"...industries are plagued with persuasive and unarticulated beliefs about how things are done. Over time, good practices can harden into ossified layers of behaviours that are done by rote. Too often, what might be best for actual customers is overlooked in their zeal to manage familiar behaviours. In time, that provides a great opportunity for an innovator to come along and serve customers in a new and better way. A critical skill in effective innovation is to identify, then systematically challenge, these orthodoxies..."

Larry Keeley et al, 2013

Sometimes you need 'outside eyes', ie new people to the industry who will look at things differently as they do not have the same industry history that incumbents possess, to find new ways, etc.

Innovation requires handling, simultaneously, the following  4 apparently contradicting disciplines or resources

i) creativity + discipline (discipline is a scarcer commodity than creativity. Discipline involves a mastery the methods and tools needed to identify, sequence and solve the innovative challenge. Innovators need to be to disciplined about their skills to maximise their impact. They need to pursue their mission with vigour and rigour)

ii) pragmatism + ambition (solving bold and complicated challenges can be confronting and unnerving as there are many unknowns. Trust in using better methods and techniques, and in your own talent. Ensure that you are tackling the relevant challenges. Explore every opportunity to de-risk your effort.

"...use prototyping and piloting to drive iterative development, and consider how you will deliver the hardest part of your big challenge..."

Larry Keeley et al, 2013

iii) bottom-down + top-up (ownership needs to be at all levels of the organisation. Senior leaders can inspire innovative focus and hold people accountable for delivering results. Everybody needs to be prepared for unexpected outcomes)

iv) analysis + synthesis (analysis means solving problems, and breaking down and examining their component parts. Synthesis means solving problems by creating new solutions from disparate parts. Both are needed in successful innovation, ie

"...analysing powerful innovations and industry patterns, devising new innovations to produce great building blocks..."

Larry Keeley et al, 2013

In innovation you need to learn from the past. For example, when doing reflection on a recent innovation project, some questions could include

- Could you have used other types of innovation effectively?

- What went well and what needs improving or changing?

- What would we do differently next time?

- What does the pattern of innovation success, or failure, look like?

Innovation failure

"...innovation mostly fails. It doesn't need to. You shouldn't let it..."

"...Innovation almost never fails due to lack of creativity. It is almost always because of lack of discipline..."

"...An almost certain way to failure is to focus only on products. Successful innovators use many types of innovation..."

Larry Keeley et al, 2013

NB Need to treat failures as a learning experience, ie understand why it didn't work (include external factors)

Innovation success

"...Successful innovators analyse the patterns of innovation in the industry. Then they make conscious, considered choices to innovate in different ways..."

"...Innovation can be broken down and analysed. When you do so, you will learn why most fail and a few succeed..."

"...Innovations can be built systematically. Doing so increases your odds of success exponentially..."

Larry Keeley et al, 2013

NB When using the below models, it is generally best to just focus on a specific part of the business rather than the whole organisation.

Do not mistake activity for innovation.

Set the bar realistically high.

"...true differentiation doesn't come easy...... remember that innovation doesn't have to be new to the entire world - only to a particular market..."

Larry Keeley et al, 2013

There are 10 different types of innovation:

i) profit model

ii) network

iii) structure

iv) process

v) product performance

vi) product system

vii) servers

viii) channel

ix) brand

x) customer engagement

(for more details see the following pages)

 

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