Types of Innovation - Complete Listing

Innovation in business is a vast ocean of possibilities, where understanding its types and classifications can be crucial for developing and implementing new ideas.

1. Types of Innovation by Level of Novelty

In this section, we will explore two important models that help classify innovations: The technology-market matrix and the modularity matrix, both essential for understanding how companies can innovate in their products and services.

Technology-Market Matrix

The technology-market matrix focuses more on products from two main dimensions–technological novelty and market novelty. Technological novelty refers to the technology embedded in the product. Market novelty refers to the novelty of the target customer group or the novelty of the preferences of that customer group. Innovations are classified into four categories here:

1. Incremental Innovation

• Description: Marginal changes in both technology and market.
• Example: A new cell phone design that differs little from existing models.

2. Technological Innovation

• Description: New in terms of technology, but serving the same function as existing products.
• Example: The digital watch versus the traditional analog watch.

3. Niche Innovation

• Description: Uses existing technology but targets new customers or new preferences of existing customers.
• Example: A convertible version of an existing car model.

4. Radical Innovation:

• Description: Novelty in both technology and market.
• Example: The first iPhone, which combined technologies in a novel way and created a new market.

This model is limited to some elements of the Business Model Canvas, primarily the value proposition, resources (technology), and the customer segment.

Modularity Matrix: Focus on Product Composition

The modularity matrix focuses on product composition and is organized around two main axes–the components of the product and the interfaces between them. Innovations are classified as follows:

1. Incremental Innovation

• Description: Marginal change in components and interfaces.
• Example: Update of a car model.

2. Architectural Innovation

• Description: Radical change in the interfaces, using the same components.
• Example: Recumbent bicycle.

3. Modular Innovation

• Description: Change in one component without altering most of the interfaces.
• Example: Vegetarian burger.

4. Radical Innovation:

• Description: Changes in both components and interfaces.
• Example: The first iPhone, with new applications and interfaces.

Both models provide a framework for understanding how innovations can be categorized and how each type differently affects the market and the technology used. Although these models are ideal for classifying product innovations, they could also be expanded to include more dimensions of the business model.

2. Types of Innovation by Area of Application

1. Product/Service Innovation: Refers to the introduction of a new product/service or a significant improvement of features or functionality in an existing one.

2. Process Innovation: Involves changes in the way products or services are produced and delivered, aiming to increase efficiency, quality, or sustainability.

3. Business Model Innovation: Refers to changes in how a company creates, delivers, and captures value. This can include new ways of interacting with customers, new sources of revenue, or the introduction of new operating models.

3. Types of Innovation by Generated Value

Traditionally, innovation was seen primarily through the lens of economic value, but this perspective has recently evolved to include other forms of value, such as social and environmental value.

1. Social Innovation: Refers to innovations aimed at solving societal issues like inequality, education, or health. These innovations may be products, services, or models that generate social value.

2. Sustainable Innovation: Focused on developing products and processes that not only provide economic benefits but also address social issues while reducing environmental impact.

3. Regenerative Innovation: It goes beyond sustainable innovation, as it seeks to restore ecosystems and reverse the socio-environmental damage caused in the past.

4. Types of Innovation by Openness

Closed Innovation: Innovation with the exclusive participation of company members.

Open Innovation: It is based on the idea that companies can and should make use of both internal and external ideas, such as those from suppliers, customers, other businesses, universities, etc.

Conclusion

This understanding of the different types of innovations not only enriches business strategy but also guides companies in developing products that can truly make a difference in the market.