As innovation has become a more and more important buzzword, it has begun to be examined more closely and subdivided into types. In the following discussion of the various types of innovation, it is important to understand that one innovation can fall into more than one category. So innovation types aren’t mutually exclusive – something can fall into more than one category of innovation.
Process Innovation is the implementation of a new means of production. For instance, when Henry Ford brought the use of the assembly line to the burgeoning automobile industry, that would be a type of process innovation.
Channel Innovation is when companies implement new means to deliver their products or offerings to customers. An example of this would be when companies began developing mobile apps to deliver their services.
Application Innovation is when existing products are combined to make a new product. That is, the existing products are given a new application. For example, the creation of the sandwich and the creation of the credit card would both be considered application innovations.
Business Model Innovation occurs when a company begins utilizing a completely new business model. For instance, when the internet came along and decimated the print journalism industry, some papers used business model innovation to survive. The New York Times, for instance, charges for online article viewing after a certain number of articles per month. Some newer media companies are non-profits that survive on donations. Some companies rely completely on advertising dollars, both online and offline. Although the internet significantly reduced the revenue from print circulation, the companies that survived found alternative business models that allowed them to stay in business.
Product Innovations are, as the name implies, the creation of new products. Many of the most successful innovations are not actually new products – they are old products that have been redesigned or combined with other products or other types of innovation.
Cost Innovation is essentially about learning how to make something cheaper. With technology, this happens all the time, although with more general products cost innovation happens a lot in certain countries such as China.
Eco-Innovation can include both the innovation of more sustainable and eco-friendly products and the innovation of making existing products more eco-friendly. For instance, the development of hybrid cars offers a more sustainable alternative to existing cars that rely on fossil fuels. However, at this juncture it might be more accurate to view hybrids as an invention; once someone addresses the higher cost and inferior handling of hybrids such that they become more ubiquitous, then they might have the level of impact that distinguishes innovation from invention.
Brand Innovations are innovations in how companies convey their identity. One great business information source, Deloitte Development, writes, “Brand innovations help to ensure that customers and users recognize, remember, and prefer your offerings to those of competitors or substitutes. … They are typically the result of carefully crafted strategies that are implemented across many touchpoints between your company and your customers, including communications, advertising, service interactions, channel environments, and employee and business partner conduct. Brand innovations can transform commodities into prized products, and confer meaning, intent, and value to your offerings and your enterprise.”
Non-customer Innovation is when a company innovates in such a way as to be able to service a new customer demographic. That may mean doing something that allows them to expand into or compete in another country or it may mean creating a product that allows the company to serve a new demographic that previous products couldn’t. Cost innovation may be a type of non-customer innovation if it makes a product newly available to a different demographic. One example of non-customer innovation is the iPad. The iPad was simple enough to operate that it appealed to an older demographic that was not comfortable using personal computers.
Red Ocean Innovation is innovation that happens within the existing market. It is called Red Ocean because the existing market is already filled with competitors, and cutthroat competition turns the figurative ocean blood red. Red Ocean Innovation encompasses a number of types of innovation because it describes essentially any innovation that works within the existing market place.
Blue Ocean Innovation is innovation that happens in industries that don’t exist yet. It creates new market spaces where there isn’t any competition yet. The concepts of Blue Oceans and Red Oceans were developed in 2005 by W. Chan Kim and Renee Mauborgne, who wrote a book called Blue Ocean Strategy. The basic premise is that it’s much better to operate in Blue Ocean areas – using Blue Ocean innovation – than to compete in Red Ocean markets.
Sustaining Innovations are innovations that keep a company going. They are essentially incremental improvements on an existing product or idea. These are the innovations that cater to the high end of the market by offering constantly better products and technology. The newest model of iPhone would be a sustaining innovation. That’s the sort of release that attracts high-end customers and helps Apple sustain its brand name and image. It doesn’t significantly disrupt the market place, but it just helps an existing company continue to thrive.
Breakout Innovations are innovations that are slightly more boundary-pushing than sustaining innovations, but not sufficient to completely disrupt the market. For instance, the Motorola Razr would be a breakout innovation. It was an improvement over other clamshell phones because of its super-thin size and appealing design. It wasn’t, however, the type of innovation that significantly disrupted the market like a smartphone. The Razr was still simply an improved version of existing clamshell phones. However, it was improved enough that it really stood out from the crowd and grabbed a sizeable chunk of market share for Motorola.
Disruptive Innovations are innovations that create new market or value networks. In doing so, they significantly disrupt the existing marketplace. Not all innovations are disruptive innovations. While the newest iPhone would be a sustaining innovation, the invention of smartphones in the first place would be a disruptive innovation.