There are different types of innovation. There are four broad categories of innovation. Following these categories are referred as the 4Ps of innovation:
- ‘product innovation’ — changes in the things (products/services) which an organization offers.
- ‘process innovation’ — changes in the ways in which they are created and delivered.
- ‘position innovation’ — changes in the context in which the products/services are introduced.
- ‘paradigm innovation’ — changes in the underlying mental models which frame what the organization does.
For example, the new version of a car, a new bank account offer and a new home personnel computer are all examples of a product innovation. In comparison to a product innovation a change in the production process and machines used to manufacture the car or the home computer these examples are process innovations. Similar the example of the new bank account offer if this came up by changing procedures and sequencing in the bank office. Characteristic for services is the merge of a process and product innovation. For example a new weekend trip package could be combination of both types of innovations.
The third type is the ‘position innovation’. In this context an innovation changes the perception of the customer through repositioning of the established product or process. For example, to use shower gel also to wash and clean clothes is a good example of a ‘position’ innovation.
Sometimes innovation opportunities emerge when people start to think outside the box. A very good example of a paradigm innovation is Henry Ford. He fundamentally changed the way of transportation people. He archived this neither by inventing the motor car (Invention of the motor car was 1999) nor because he changed the way of manufacture and produce an automobile (also the inventor of the conveyor production). His idea was to change the underlying model for the automobile production in this time. He changed the perspective of producing automobiles from handmade specialist product to a few wealthy customers to a mass product with a price a normal household could afford. The ensuing shift from craft to mass production was nothing short of a revolution in the way cars (and later countless other products and services) were created and delivered. This example shows that a paradigm innovation also requires intensive product and process innovation — for example, in component design, in machinery building, in the layout of the factory and in the social system around which work was organized.
Not only Henry Ford changed an industry. In the last decades the shift to low-cost airlines and the increasing numbers of goods sold in the internet are recent examples of ‘paradigm’ innovation — changes in mental models.
From Incremental to Radical Innovation
Every Innovation is new, but the question is how new. So we can divide innovations between incremental and radical. For example, a new version of a car model is incremental while coming up with a completely new electric driven concept car which is made out of new light weight carbon fiber is radical. Similarly, further development of the accuracy and speed of a saw mill is not the same as replacing it with a computer-controlled laser cutting process. This example shows there are degrees of new innovation, running from minor, incremental improvements to radical changes which changes the way things are done and we use them.
These changes are often present to a particular industry, but sometimes they are so radical and extensive that they are able to change the core of society. The major steps in today’s communication and information technology have affected almost every person on this planet and will continue to gain importance.
Mapping Innovation Space
In the figure below each of the 4Ps of innovation can take place along an axis. Hence the blue circle indicates the potential innovation space within a business can operate, the innovation is able to run from incremental to radical change.
Whether the innovation utilizes all the space is a question of the innovation strategy. The way day-to-day change is approached within an organization differs from the approach how to handle a radical step change in products or processes. Here it is essential to keep in mind that the perceived stage of novelty is the important part and that this novelty is in the perspective of the observer. For example, in a giant, technologically advanced organization like Volkswagen or Siemens the tracking of goods from suppliers by RFID and GPS is used and implemented in day to day business while such an expensive process might be totally new and innovative for a small car dealership or food processor.
Sustaining or Disruptive Innovation
Quite a lot of innovations involve a discontinuous shift but very few bring something completely new which changes a market conditions dramatically. Most of them usually are incremental. In recent time ‘lean’ thinking came up in the production and service sector, which underlines the huge possibilities of continuous improvements within a firm. However this continues improvement idea is hampered through the new approach of the platform concept or robust design. This idea bases on the development of a future general design which will dominate the market as well as used by the competitor. A good example for such a robust design is the Walkman originally developed by Sony. This first design of a portable cassette and radio player system dominated the market for the whole product lifetime of cassettes. Also car makers tend to change their development process from each single model to a platform strategy. The Volkswagen AG introduced platforms which are used for different brands of the company group. This not only saves costs but also helps them to dominate the market with faster model updates and exchanges. The platform and robust design strategy of firms is a powerful way of recover the high initial investments such as Research and Development as well as market analysis.