Innovation comes in multiple forms. For pursuing each form, there are certain tools that work better than others. What these different forms and associated tools are, depends on the model you follow. Here I look at three: one from the Organization for Economic Co-operation and Development (OECD), one from Doblin Innovation, and one from Greg Satell.
First, it is worth defining what innovation actually is. The OECD define innovation broadly as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.” Innovation activities are the “scientific, technological, organizational, financial and commercial steps which actually, or are intended to, lead to the implementation of innovations.”
Now on to the three models.
The Oslo Manual, from the OECD, is a set of international guidelines for collecting and interpreting innovation data, with the third and latest version being published in 2005. In setting out the scope of the manual, they define four types of innovation:
- Product innovation: a good or service that is new or significantly improved.
- Process innovation: a new or significantly improved production or delivery method.
- Marketing innovation: a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
- Organizational innovation: a new organizational method in business practices, workplace organization or external relations.
Doblin: Ten Types of Innovation
This model - first developed in the 90’s by Doblin (now part of Deloitte) – is more granular that of the Oslo Manual and arranges the different types according to how visible they are to end users, starting with the most internally focused. Ten different types of innovation are grouped into three different categories, with certain tactics are associated with each type:
- Configuration. Innovations related to how the organization is set up: its profit model, its external networks, its talent and asset management, and its production process. Associated tactics include forced scarcity, open innovation, incentive schemes, and predictive analytics.
- Offering. innovations related to an organization’s product: its performance and its complementary products and services. Associated tactics include new functionality or plugins.
- Experience. innovations related to the customer experience: customer service, delivery channels, brand identity, and customer engagement. Associated tactics include loyalty programs, private label, and personalization.
Greg Satell’s Innovation Matrix
Greg Satell presents four types of innovation, which are differentiated by how defined the problem and skills required to solve it are. Unlike the two previous models, this focuses on the impact of innovation and follows a similar approach to the incremental/breakthrough, conservative/radical, sustaining/disruptive innovation dichotomies put forward by others. The four types are:
- Sustaining Innovation: incremental innovations that will allow you to do what you already do better. The problems faced and skills required to tackle them are well defined. Good tools for sustaining innovation include traditional R&D labs and design thinking. An example would be the three-bladed razor becoming a five-bladed one.
- Breakthrough Innovation: a specific innovation that will have significant organizational value. The problem is well defined but the skills required to tackle it are less so. Due to this uncertainty, exposing the problem to a diverse range of skill domains, for instance through an InnoCentive Challenge, can be highly effective.
- Disruptive Innovation: a term coined by Clayton Christensen, this is a form of innovation that is characterized by the path it takes to the mainstream. It originates in low-end or new-market footholds that have been neglected by established incumbent companies and is initially considered inferior to existing products or services. Performance is then improved and mainstream customers start adopting it in volume. Here the problem being addressed is not well defined but the skill domain required to tackle it is. In order to determine that problem or need, tools such as lean start-up methods can be effective. An example of a disruptive innovation would be Netflix.
- Basic Research: when neither the problem nor the skill domain is defined, this is basic research - the initial discoveries that can have a transformative impact later on. An example would be Einstein’s theory of relativity providing the foundations for today’s GPS systems. Tools for pursuing basic research include academic partnerships and dedicated research labs.
One thing to note: under the definitions set out by the OECD, basic research is considered a type of innovation activity rather than innovation.
The three models outlined here are not exclusive. Different situations call for different levels of detail and classifications. Used together, these models can allow organizations to be very precise with the type of innovation they are pursuing and tailor the associated activities accordingly.