Four Important Types of Innovation

Innovation is defined as new ideas that work and a successful innovation can be achieved through the creation and implementation of new processes, products, services and methods of delivery which will result in significant improvements in the profitability and enhance the growth of an enterprise. An organization is considered innovative if it stirs up the marketplace, by creating competitive pressures and new opportunities. It has been recognized that innovation success in an established organization requires balancing the stabilized efficiency of the current market offerings and building new capabilities to create and develop offerings for unknown markets.

There exist four types of changes to achieve strategic edge within an organization. Managers can use these four types of changes to achieve competitive advantage in the international environment. Each company can have maximum impact upon the chosen market through its own unique configuration of technology, product and services, strategy and structure, and culture as explained below.

1. Technological Innovation

Technological innovations refer to changes in an organization’s production process to enable distinctive competence. Changes in an organization’s production process, including its knowledge and skills base, are designed to produce greater in volume or to have a more efficient production. Changes in technology involve the work methods, equipment, and work flow techniques for making products or services. For example, in a university, technology changes are about changes in methods for teaching the courses. Traditionally innovation has been associated with the use of technological knowledge, and research and development activities. A technological innovation is any innovation due to an industrial application of scientific knowledge.

Innovation involves the usage of new knowledge to transform organizational processes or create commercially viable products and services. The latest technology, results of experiments, creative insights, or competitive information may be the sources of new knowledge. However it comes about, innovation occurs when new combinations of ideas and information bring about positive change. Among the most important sources of new ideas is new technology. Technology creates new possibilities and provides the raw material that firms use to make innovative new products and services. But technology is not the only source of innovation. There can be innovations in human resources, firm infrastructure, marketing, service, or in many other value-adding areas that have little to do with anything “high-tech.”

2. Product and Service Innovation

Product and service innovations refer to the product or service outputs of an organization. New products may be in the form of entirely new product lines or small adaptions of existing products. New products are designed to develop new markets, or customers, or to increase the market share. Product innovation is about the introduction of new goods and services which have improvements in terms of design excellence, core characteristics, technical specifications etc. and are derived from customer or industry insight, or strategic alignment of the organization.

The old rule was to create safe and ordinary products that were combined with great marketing. The new rule is to create remarkable products and figure out a great theory by looking at what’s working in the real world and what the various successes have in common. Identify what the successful companies have in common and do something to be remarkable.

There is a clear distinction between product/service innovation and process innovation. Product/Service innovation refers to efforts to develop new products or services for end users. Product/Service innovations tend to be more radical and are more common during the earlier stages of an industry’s life cycle. As an industry matures, there are fewer opportunities for newness, so the innovations tend to be more incremental. Process innovation, by contrast, is associated with improving the efficiency of an organizational process, especially manufacturing systems and operations. Process innovations occur in the later stages of an industry’s life cycle as companies seek ways to remain viable in markets where demand has flattened out and competition is more intensive. As a result, process innovations are often associated with overall cost leader strategies because the aim of many process improvements is to lower the cost of operations.

There are several problems with seeking competitive advantage through investments in process technology. Firstly, the people who sell you robots or point-of-sale terminals, software to analyze production or service delivery will sell the robots, terminals, and software to your competitors. Your ability to obtain the benefits of this technology depends on your ability to implement it more rapidly and more effectively. Secondly, investment in specialized technology is not a substitute for skill in managing the work force. This is because more skills may be required to operate the more sophisticated and advanced equipment’s. Having a higher level of investment per employee will result in increasingly expensive interruptions in the process which means that the ability to operate, maintain, and repair equipment effectively becomes even more critical.

3. Strategy and Structural Innovation

Strategy and structural innovation refers to the administrative section in an organization. It is related to the management and supervision in the organization, including changes in an organization’s strategic management and structure, policies, accounting and budgeting systems, reward systems, labor relations, coordination devices, management information and control systems. Strategy and structure changes in an organization are mandated by top management. They usually have a top-down structure. An example may be if the corporate goes downsizing. On the other hand, product and technology changes may come from the bottom up.

4. Cultural Innovation

Cultural innovation refers to changes that may occur in an employee’s attitudes, beliefs, values, expectations, abilities, and behavior. Culture innovation tends to change the way employees think. These are changes in mindset rather than the technology, structure, or products and services.

Culture can be a powerful force undermining or shoring up the effectiveness of a nation, a business, and a manager. Recognizing the presence and power of culture will help in better navigating through the rough seas of international business. Discovering how to harness the power of culture in an organization will help the organization gain competitive advantage.

To conclude, it can be said that successful innovation in an organization occurs when technological and product or process innovations in the value chain are implemented through effective strategy and structure innovation. Innovation in an organization, which includes people, leadership, creativity, process and organizational culture, is the driver to grow, to achieve high profits and to succeed in the market. Innovation in an organization should be approached in a systematic way and not a piecemeal manner and should be initiated even at the lowest level.

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