INNOVATION
INNOVATION is typically understood as the introduction of something new and useful, for example introducing new methods, techniques, or practices or new or altered products and services.
TYPES OF INNOVATION
Scholars have identified at a variety of classifications for types innovations. Here is an unordered ad-hoc list of examples:
Business model innovation
involves changing the way business is done in terms of capturing value .
Marketing innovation
is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing.
Organizational innovation
involves the creation or alteration of business structures, practices, and models, and may therefore include process, marketing and business model innovation.
Process innovation
involves the implementation of a new or significantly improved production or delivery method.
Product innovation
involves the introduction of a new good or service that is new or substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.
Service innovation
refers to service product innovation which might be, compared to goods product innovation or process innovation, relatively less involving technological advance but more interactive and information-intensive .
Supply chain innovation
where innovations occur in the sourcing of input products from suppliers and the delivery of output products to customers
Substantial innovation
introduces a different product or service within the same line, such as the movement of a candle company into marketing the electric lightbulb.
Financial innovation
through which new financial services and products are developed, by combining basic financial attributes (ownership, risk-sharing, liquidity, credit) in progressive innovative ways, as well as reactive exploration of borders and strength of tax law. Through a cycle of development, directive compliance is being sharpened on opportunities, so new financial services and products are continuously shaped and progressed to be adopted. The dynamic spectrum of financial innovation, where business processes, services and products are adapted and improved so new valuable chains emerge, therefore may be seen to involve most of the above mentioned types of innovation.
Incremental innovations
is a step forward along a technology trajectory, or from the known to the unknown, with little uncertainty about outcomes and success and is generally minor improvements made by those working day to day with existing methods and technology (both process and product), responding to short term goals. Most innovations are incremental innovations. A value-added business process, this involves making minor changes over time to sustain the growth of a company without making sweeping changes to product lines, services, or markets in which competition currently exists.
Breakthrough, disruptive or radical innovation
involves launching an entirely novel product or service rather than providing improved products & services along the same lines as currently. The uncertainty of breakthrough innovations means that seldom do companies achieve their breakthrough goals this way, but those times that breakthrough innovation does work, the rewards can be tremendous. Involves larger leaps of understanding, perhaps demanding a new way of seeing the whole problem, probably taking a much larger risk than many people involved are happy about. There is often considerable uncertainty about future outcomes. There may be considerable opposition to the proposal and questions about the ethics, practicality or cost of the proposal may be raised. People may question if this is, or is not, an advancement of a technology or process.
Radical innovation
involves considerable change in basic technologies and methods, created by those working outside mainstream industry and outside existing paradigms. Sometimes it is very hard to draw a line between both.
New technological systems (systemic innovations)
that may give rise to new industrial sectors, and induce major change across several branches of the economy.
Social innovation
a number of different definitions, but predominantly refers to either innovations that aim to meet a societal need or the social processes used to develop an innovation .
DIFFUSION OF INNOVATION
Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. This process has been studied extensively in the scholarly literature from a variety of viewpoints, most notably in Everett Rogers' classic book, The Diffusion of Innovations. However, this 'linear model' of innovation has been substantinally challenged by scholars in the last 20 years, and much research has shown that the simple invention-innovation-diffusion model does not do justice to the multilevel, non-linear processes that firms, entrepreneurs and users participate in to create successful and sustainable innovations.
Rogers proposed that the life cycle of innovations can be described using the ‘s-curve’ or diffusion curve. The s-curve maps growth of revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point customers begin to demand and the product growth increases more rapidly. New incremental innovations or changes to the product allow growth to continue. Towards the end of its life cycle growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.
The s-curve is derived from half of a normal distribution curve. There is an assumption that new products are likely to have "product Life". i.e. a start-up phase, a rapid increase in revenue and eventual decline. In fact the great majority of innovations never get off the bottom of the curve, and never produce normal returns.
Innovative companies will typically be working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an emerging technology that current yields lower growth but will eventually overtake current technology and lead to even greater levels of growth. The length of life will depend on many factors.
TYPES OF INNOVATION
Scholars have identified at a variety of classifications for types innovations. Here is an unordered ad-hoc list of examples:
Business model innovation
involves changing the way business is done in terms of capturing value .
Marketing innovation
is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing.
Organizational innovation
involves the creation or alteration of business structures, practices, and models, and may therefore include process, marketing and business model innovation.
Process innovation
involves the implementation of a new or significantly improved production or delivery method.
Product innovation
involves the introduction of a new good or service that is new or substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.
Service innovation
refers to service product innovation which might be, compared to goods product innovation or process innovation, relatively less involving technological advance but more interactive and information-intensive .
Supply chain innovation
where innovations occur in the sourcing of input products from suppliers and the delivery of output products to customers
Substantial innovation
introduces a different product or service within the same line, such as the movement of a candle company into marketing the electric lightbulb.
Financial innovation
through which new financial services and products are developed, by combining basic financial attributes (ownership, risk-sharing, liquidity, credit) in progressive innovative ways, as well as reactive exploration of borders and strength of tax law. Through a cycle of development, directive compliance is being sharpened on opportunities, so new financial services and products are continuously shaped and progressed to be adopted. The dynamic spectrum of financial innovation, where business processes, services and products are adapted and improved so new valuable chains emerge, therefore may be seen to involve most of the above mentioned types of innovation.
Incremental innovations
is a step forward along a technology trajectory, or from the known to the unknown, with little uncertainty about outcomes and success and is generally minor improvements made by those working day to day with existing methods and technology (both process and product), responding to short term goals. Most innovations are incremental innovations. A value-added business process, this involves making minor changes over time to sustain the growth of a company without making sweeping changes to product lines, services, or markets in which competition currently exists.
Breakthrough, disruptive or radical innovation
involves launching an entirely novel product or service rather than providing improved products & services along the same lines as currently. The uncertainty of breakthrough innovations means that seldom do companies achieve their breakthrough goals this way, but those times that breakthrough innovation does work, the rewards can be tremendous. Involves larger leaps of understanding, perhaps demanding a new way of seeing the whole problem, probably taking a much larger risk than many people involved are happy about. There is often considerable uncertainty about future outcomes. There may be considerable opposition to the proposal and questions about the ethics, practicality or cost of the proposal may be raised. People may question if this is, or is not, an advancement of a technology or process.
Radical innovation
involves considerable change in basic technologies and methods, created by those working outside mainstream industry and outside existing paradigms. Sometimes it is very hard to draw a line between both.
New technological systems (systemic innovations)
that may give rise to new industrial sectors, and induce major change across several branches of the economy.
Social innovation
a number of different definitions, but predominantly refers to either innovations that aim to meet a societal need or the social processes used to develop an innovation .
DIFFUSION OF INNOVATION
Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. This process has been studied extensively in the scholarly literature from a variety of viewpoints, most notably in Everett Rogers' classic book, The Diffusion of Innovations. However, this 'linear model' of innovation has been substantinally challenged by scholars in the last 20 years, and much research has shown that the simple invention-innovation-diffusion model does not do justice to the multilevel, non-linear processes that firms, entrepreneurs and users participate in to create successful and sustainable innovations.
Rogers proposed that the life cycle of innovations can be described using the ‘s-curve’ or diffusion curve. The s-curve maps growth of revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point customers begin to demand and the product growth increases more rapidly. New incremental innovations or changes to the product allow growth to continue. Towards the end of its life cycle growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.
The s-curve is derived from half of a normal distribution curve. There is an assumption that new products are likely to have "product Life". i.e. a start-up phase, a rapid increase in revenue and eventual decline. In fact the great majority of innovations never get off the bottom of the curve, and never produce normal returns.
Innovative companies will typically be working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an emerging technology that current yields lower growth but will eventually overtake current technology and lead to even greater levels of growth. The length of life will depend on many factors.