Some people think of innovation as the creation of the next Uber in their industry. However, innovation is more than that.
It goes beyond the development of groundbreaking products and services or the production of world-changing concepts that are technological, remarkable, and inventive.
In this article, you will learn more about innovation concepts and theories that will help you understand innovation even further.
What is innovation?
Innovation is the process of realizing new products, processes, propositions, or business models to create added value for customers, the organization, and the employees.
People frequently think about technological innovations and other advanced products when they need to come up with fresh ideas. Yet innovation breakthroughs may be discovered in a multitude of areas, as innovation may be used in a variety of sectors and businesses.
However, when it comes to innovation, there are certain instances that are generally overlooked, such as the development of a new financial model, which may be just as inventive as the invention of a new smartphone if done correctly.
What are the types of innovation?
Understanding the many forms of innovation is advantageous. It isn’t easy to focus on a single area when a concept encompasses all of them. Recognizing each form of innovation will help you reach out to the best groups and sponsors so you can manage your resources better.
Here are the following types of innovation from a strategic standpoint:
1. Process Innovation
Process innovation is concerned with how commercial solutions are manufactured and delivered by the company. These items are not altered in any way. It’s more about the activities associated with their sales and development.
It also refers to profit-generating innovation involving the organization’s valuable assets. Within the firm, this kind of innovation utilizes its workforce’s capabilities, expertise, and skills in optimizing processes leading to product and service development.
2. Delivery Innovation
Delivery innovation involves three aspects — platform, marketing, and customer engagement. This type of innovation focuses on distributing products and services to a specific market or through a new network while improving consumer happiness.
Nowadays, businesses can exhibit innovation in the way that the product line is supplied to customers. Currently, there are several options for bringing the product portfolio to market. It might be through B2B, B2C, online, outlet shops, and a multitude of other channels.
3. Finance Innovation
Finance innovation is largely concerned with how to generate money and who you can collaborate with in order to achieve revenue-related objectives. It covers new business formats, payment methods for goods and services, and how the supply chain operates.
Companies have begun to use multiple commercialization methods, such as flexible pricing, membership, and subscription services. These are examples of applying this type of innovation to gain more customers and obtain consumer loyalty.
4. Product Innovation
Product innovation is concerned with the items produced by the organization, as well as its product lines and services in general.
This type of innovation may be used to expand, improve, or defend the existence of the company’s present market share while also making it future-proof for upcoming trends in the industry.
Despite being the most popular in comparison to other kinds, product innovation isn’t necessarily about the product but rather the entire ecosystem. It also has to do with customer service as the brand tries to resolve customer problems through overall product improvement.
What is the problematic concept of innovation?
Discussion about innovation has always been varied.
Even at an institutional level, disciplines like business and manufacturing of products have developed more or less unique aspects, including vocabularies, nomenclature, research approaches, and distribution venues.
As a result, there are several definitions and conceptualizations of innovation. While specific individuals instinctively understand the process of innovation, this activity in and of itself has proven difficult to narrow down since it involves a vast array of ideas and activities.
Many people think of innovation as an idea, activity, or tangible product that seems to be new in the industry since many businesses utilize the concept of newness to describe it.
In this context, organizational innovation is defined as the execution of an internally produced concept for a product, device, system, process, policy, program, or service that is unique or fresh to the employees in some way.
In addition, the concept of innovation is also referred to as both an outcome and a process in solving customer challenges.
It may be the solution applied by the organization to resolve an issue or the process of creating a solution that adds value to both the company and its customers.
What is the technology adoption life cycle?
Geoffrey Moore initially described the technology adoption life cycle in his book called Crossing the Chasm.
It relies on Everett Rogers’ 1962 study on one of the most well-investigated theoretical constructs, the propagation of innovations across companies and communities, explaining why transformative products and services frequently struggle to thrive in the mainstream market.
Innovation is propagated or diffused in certain channels within a company to deliver information and discover factors that impact an innovation’s rate of acceptance into society.
According to the theory, the three primary factors that enable the diffusion of innovation are communication, tie, and social systems. Other factors include complexity, relative benefit, trialability, adaptability, and observability.
The market is then segmented depending on specific categories and customer eagerness to accept new products and services, with each group having its own set of expectations and aspirations for the company to follow.
What is the 70-20-10 rule?
The 70-20-10 rule, established by Google’s previous CEO, Eric Schmidt, is a basic guideline for distributing resources between the fundamental, adjoining, and creative activities that implement the three horizons paradigm into effect.
Fundamental operations involve the processes that make up most of the business’s present pursuits, whereas adjoining activities refer to the procedures that lead to enhancements and expansions of the organization.
On the other hand, creative activities are measures done by the company to realize nonprimary objectives.
To get the best results, dedicate 70% of your efforts to your core business activities, 20% to projects linked to your business (such as new markets), and the remaining 10% to produce something totally new.
Businesses that deploy their resources in this manner often exceed their counterparts by around 10-20%. The study also discovered that the long-term gains for every form of investment are inversely proportional to the amount of money invested.
What is the “three horizons of growth” concept?
McKinsey & Company’s three horizons of growth model is a popular methodology for businesses to organize their efforts and achieve a suitable balance between projects of different sizes in their arsenal.
The three horizon model states that in order for enterprises to reach their full potential, they must work on initiatives across all three horizons at the same time.
Horizon 1: Efforts linked to the core business
Horizon 2: Exploration of new business prospects in developing industries
Horizon 3: Development of new, transformative enterprises
You could notice a boost in your performance if you are dedicated to making modest changes to your existing business with Horizon 1 activities. If you don’t come up with fresh business models and strategies to make money, though, you’ll end up hurting your long-term success.
The same situation applies if you exclusively concentrate on disruptive innovation and ignore your present core business, which is already profitable.
Companies can’t ensure a promising state in the next few years without finding the right balance between all three horizons. And by doing so, you will not only optimize your potential development but also minimize the errors in your organization’s portfolio.
What is the stage-gate or funnel concept?
In every industry, fresh ideas, products, and services are important. Without innovation, a company would cease to exist. One method to achieve this is to use a stage-gate process development funnel.
This is a technique for compressing a lot of different concepts into a single final notion.
This unified concept will go through five stages, with five gates determining whether it will progress. A company needs to keep a close eye on the process to develop meaningful criteria for evaluating each step.
To explain this process even further, the stage-gate funnel starts with a few concepts. These suggestions will progress to the first gate, which sorts and advances only specific concepts to the second stage.
These concepts are further refined before entering the second gate. They are assessed once more, and the process repeats. The finest concept will eventually turn into a polished product or service.
In short, the stage-gate process guarantees that the best concept is implemented and that the generated product, change, or service has the highest chance of success.
What is idea management?
Innovation management includes idea management.
Its primary objective is to produce the finest potential concepts that would benefit the business. When idea management is applied, the innovation team comes up with many ideas.
They create information-based decisions and effectively select which initiatives to pursue and what concepts to go for.
Apart from minimizing emotional involvement, managing ideas in a systematic manner improve their logical value. Finishing one or even several challenges every year does not extract the maximum benefit of concept management. It has to be continuous.
What is an innovation portfolio?
Innovation portfolio refers to a set of concepts, initiatives, programs, and activities that a company manages as if they were investments, with the goal of achieving specific results and objectives related to innovation strategies.
It is a step in the innovation process that directs project management while also balancing the organization’s projected benefit against investments and risks.
It is a precursor to future operations as it considers the greatest chances of success, as well as new opportunities and alternatives for the growth of the business.
Understanding concepts and theories about innovation will help you implement your innovation initiatives effectively. You can learn more about innovation by downloading our innovation ebook for free from our website or you can join us on our regular innovation webinars.