| When you try to find an answer to what innovation is, you will get hundreds of different definitions. In essence, innovation is about creating something new. The term is derived from the Latin verb innovare, which means to renew. Today, innovation refers to creating, improving, or replacing a process, product, or service. The standard ISO 56000:2020 defines innovation as “a new or changed entity realizing or redistributing value." | 
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When comparing various existing definitions, they all focus on novelty, improvement, and spread of ideas or technologies. Moreover, value creation is a defining characteristic of innovation. It means that novel solutions should solve meaningful problems to create new value. Based on these common elements, ITONICS defines innovation as:
Innovation is the process of turning an idea into a product or service which addresses a certain problem and creates value for the organization and the customer.
As with the term innovation, you will encounter numerous suggestions when defining the different types of innovation. For this guide, we unpack the three most commonly referenced categorizations for "types of innovation." To provide more clarity, we offer a detailed explanation of The 4 Types of Innovation, which is the most common categorization, 9 Types of Innovation by Focus Area, which are referring to various fields in which innovation can take place within an organization, and, finally Doblin's 10 Types of Innovation.
Interchangeably known as the four levels of innovation, the four types of innovation represent recurring patterns of how companies can innovate. The innovations differ in what problems they aim to solve depending on the market and technology.
Incremental innovation entails the gradual yet continuous improvement of existing technologies, products, or processes to maintain an existing customer base and sustain a certain level of strategic positioning. As part of a balanced growth portfolio, incremental innovation makes up the first, inner horizon of the Three Horizons of Growth framework. It should account for approximately 70% of resource allocation, according to the 70-20-10 Rule of Innovation.
Example: The market for smartphones is an excellent example of incremental innovation. Innovations in this field are primarily updates in design or additional features. Another commonly referenced example is the innovation of razor blades. Companies like Gillette base their revenue models on iterative improvement, enhancing their product offering with new features such as heated razors, cooling technology, or precision trimmers.
Disruptive innovation results in new technologies, products, concepts, or business models that drive transformation. It fundamentally changes an existing industry, creates new markets and value networks, displaces conventional practices, and eventually leads to new customer expectations. Compared to incremental innovation, disruptive innovation makes up the third, outer horizon of the Three Horizons of Growth framework and should account for approximately 10% of resource allocation.
Example: Netflix is a typical disruptive innovation business. Introducing a new, innovative business model supported by technology, Netflix's streaming services have disrupted an existing market and revolutionized how people consume television and rent movies.
| Harvard Business School Professor Clay Christensen, who first framed the term “disruptive innovation," has posited that every established company will one day be threatened or outpaced by a revolutionary newcomer. Customer preferences differ in every market. Some customers may be satisfied with very basic performance levels; others are more demanding and feel satisfied only with a very high level of performance of a technology. Disruptive small players that enter the market with a very low level of performance soon outperform more established than incumbents, and they move upmarket. Remaining competitive in a global environment is a dilemma faced by many cumbersome organizations. |  |
Read on: Disruptive Innovation: Why Uber Isn’t Disruptive But Netflix Is
Architectural innovation involves modifying existing components of a product, such as technology, and modifying them for a new market and purpose. This type of innovation usually holds a lower risk level since an already existing technology is applied elsewhere.
Example: Memory foam is one example of architectural innovation. Initially developed to improve the safety of aircraft cushions at NASA, we today use memory foam for mattresses or pillows in our beds.
Radical innovation is the rarest of the four types. It is about developing technologies, products, or services that entirely replace existing offers and unlock a new market.
Example: One of the most famous radical innovations is the airplane. It reinvented traveling and created a whole new industry and market.
Doblin's Ten Types of Innovation is a framework that encourages organizations to look beyond product innovation and explore innovation opportunities across multiple channels—including product offering and a company's configuration and customer experience. You can combine multiple types to unlock new opportunities and strengthen your approach to innovation.
The different types within the innovation framework are categorized into three focus areas:
A company is surrounded by a number of other players working on innovation topics and wanting to shape the future. The goal should, therefore, be to build and align an ecosystem that is as complete, thriving, and interlinked as possible in order to provide the necessary breeding ground for innovative developments. On the one hand, this gives you access to external perspectives, resources, and inspiration; on the other hand, it also allows you to significantly drive and test your own initiatives. Let's take a look at the different players.
At the core of an innovation ecosystem are all the teams and departments that work every day to plan the innovation agenda, execute initiatives, and drive product developments. Those functions also manage innovation and technology portfolios and are the starting point for any innovation effort.
The key players include:
Also see: Who Should Be Part of My Innovation Community?
An organization’s innovation initiatives are the connection point to the outside world. This is where the hot stuff happens! In addition to innovation labs, intrapreneurs, and innovation competitions, you'll also find so-called hackathons and workathons here - in other words, everything that is specifically intended to drive change inside and outside your company.
Innovation initiatives include:
An established organization should constantly be on the lookout for the next big thing to stay competitive in the long run. While innovative newcomers to the market are still looking for infrastructure, resources, and market access, corporates should seek access to the entrepreneurial ecosystem to bring external innovation power into their own businesses. This ecosystem is bustling with a number of players, such as incubators, accelerators, or venture capitalists, that will connect your organization with the right ventures and entrepreneurs.
The key players of the entrepreneurial ecosystem include:
In addition to entrepreneurial actors, there are a number of other sources of innovation that companies should look at more closely as part of their environmental scanning activities. In this way, the entry of new players into an industry, changing consumer tastes, technological developments, or political movements can be continuously monitored to understand potentially disruptive changes and future-proof your business.
Your scanning strategy should include:
All of the above-mentioned players acting in a corporate innovation ecosystem should come together in a Digital Innovation Space - a collaborative innovation platform or shared knowledge that links the inside and outside world. Learn here more about the most important innovation tools.
Innovation is embedded in the DNA of some of the most successful companies of our time. If you look at these organizations, it quickly becomes clear that they have the following things in common: quickly understanding and responding to change, a high willingness to experiment, an innovation culture that not only promotes innovation but requires it, strong employee engagement, and a heavy focus on customer needs.
Also see:
Below, we have taken a closer look at some of the companies that are already successfully implementing the approaches mentioned in the previous chapter.
Netflix is a prime example of disruptive innovation, as it has completely revolutionized the way people enjoy entertainment on a daily basis. By primarily targeting the competition's fringe audiences, such as early adopters and digital natives, Netflix was able to enter with an alternative product relatively cost-effectively and then gradually work its way up into the competition's core market. In this way, classic industry giants like Blockbuster were pushed out of the market forever.
Having expanded into more than 190 different countries, the streaming provider continues to strive for innovation excellence at scale. Now with its own film production division, Netflix has not only made the leap from being a pure streaming provider into the mainstream film business, but also serves countless niche groups in addition to the masses. The strong focus on personalized movie experiences, user experience (UX) optimization for multiple devices, and a smart algorithm make Netflix a platform that is hard to imagine everyday life without.
Read one: Disruptive Innovation: Why Uber Isn’t Disruptive But Netflix Is
Distell, Africa's leading producer and marketer of wines, spirits, ciders and other ready-to-drink beverages sold around the world, experienced significant disruption under the severe and unexpected pressure of the COVID-19 pandemic. During that time, only companies offering essential goods and services were allowed to operate during this time. Alcohol, of course, was not one of them, massively affecting all areas at Distell. The organization had to decide what could be done within its means. The situation provided an incredible platform as employees who could not go about their daily work came together online to somehow make a difference and work together on accelerating innovation.
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Among these initiatives were:
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This agile approach resulted from the availability of open-minded, resilient, and quick-response cross-functional team members who could identify opportunities even in such challenging circumstances by applying existing skills in new ways. For a beverage manufacturer, this could lead to the production of alternative beverages. But it could also be about finding new ways to leverage go-to-market capabilities, deep consumer insights and understanding of future consumer needs. In terms of transformative innovation, you could be looking at completely new and different business models.
Tune into the podcast episode “The Power of Purpose-Led Innovation” with Caroline Snyman from Distell or read the blog article "The Power Of Purpose-Driven Innovation In A Pandemic".
| The days when a solid business model worked for decades are long gone. The banking sector in particular has a lot of catching up to do. The new customer expectations of financial service providers in the digital age and the appearance of new digital competitors (fintechs) on the market are challenging all areas of the value chain in the banking business. This also poses new challenges to innovation departments in particular. So how does a major bank manage to become an innovative thought leader? |
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DZ BANK Group, Germany's second-largest bank by assets, has successfully implemented a software platform called the "DZ BANK Innovation Radar" to link emerging trends and technologies (external perspective) with its own innovation activities (internal perspective) to gain a better understanding of the company-wide innovation portfolio (see also: DZ BANK Innovation Blog). With hundreds of employees on the platform, innovation has become accessible across different departments, fostering company-wide collaboration and transparency.
The Innovation Big Picture gives you a holistic overview of the (innovation) value chain. Where does innovation start? Where does it end? And how do individual measures within the innovation process interact and depend on each other? If you're at the very beginning of the innovation journey, it's best to start with just that - developing an understanding of the bigger picture.
If you want to deepen your knowledge of innovation terminology, use this Innovation Glossary or create your own to align your organization around a common language. An innovation glossary defines the most important key terms you are most likely to encounter on your innovation journey. It is fundamental to understanding innovation methodology and its core concepts.
After understanding the process and terminology, you should be able to answer an important question: Where do I actually start? The Innovation Maturity Assessment will help you to understand where to put focus. Use this quick assessment to determine the maturity of your company's forward-looking activities and amplify the impact of your innovation initiatives. The assessment can be used both as a status analysis and benchmark to other industry leaders, and as a guide for setting priorities.
The success of the innovation leaders of our time can be systematized. The Innovation Framework maps all areas of innovation competence relevant for long-term impact and forms the perfect follow-up step after having accomplished the Innovation Maturity Assessment. Use it to set your focus, develop new competencies in your organization and monitor progress in key areas.
The Innovation Framework is based on extensive experience from hundreds of innovation projects and academic expertise. It thus holistically bundles the most important goals of innovation management into a controllable framework.
Are you lacking inspiration? Pimp your innovation workspace with these inspiring posters that remind you daily why innovation is key to success! Download, print, hang and become a true Innovation Rockstar!
You have made it this far? Awesome! But that was only half the battle. If you really want to maximize the impact of your innovation activities and firmly anchor them globally in your organization, only a digital innovation space can take you there. A central go-to space for all topics related to innovation in your organization helps you create transparency, break down silos, and involve different teams or even locations to work collaboratively on the growth of your company.
The ITONICS Innovation Software maps your innovation value chain from start to finish and provides touchpoints to various stakeholders - innovation and strategy departments, R&D, the leadership board, suppliers, clients, academia or your whole organization.
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