Innovation is about the application of novel ideas in getting jobs done better. But why are there different types of innovation? Which factors determine types of innovation? Due to varying nature, purpose and effect, there are seven major types of innovation. They are (i) product, (ii) process, (iii) incremental (iv) sustaining, (v) renovation, (vi)frugal and (vii) disruptive innovation. In addition to product innovation, process innovation is also significant due to its role in producing products and deploying multiple products to get jobs done. Types of innovation include the development of new products and processes. It also includes the advancement of existing ones through incremental innovation. For sustaining products in the competition space, types of innovation also include sustaining innovation. The invention of a technology core triggers reinvention and reinnovation. Furthermore, innovations out of new technology core grow as waves of creative destruction, even taking the shape of disruptive innovation.
Due to the inherent urge to get jobs done better, human beings constantly search for novel ideas. They deploy those ideas in the form of products and processes. At the core of product and process innovation is the invention of technology core. It happens to be that the embryonic beginning of technology core keeps improving due to the flow of ideas for perfecting out of the growth of scientific knowledge. Furthermore, additional knowledge about customer preferences leads to incremental advancement. Besides, competition brings another dimension—sustaining innovation agenda. A clear understanding of different types of innovation is essential for having an appropriate strategic response. Here is a further elaboration of different types of innovation.
Product innovation: a key member of types of innovation
We use numerous products to serve our purposes. Starting from automobiles, Televisions to air conditioners, the list goes on. These are examples of product innovation. But how did they show up? In addition to the growth of the number of products in our lives, each significant product has been evolving, getting better. Profit-making competition in helping people perform their jobs better is at the core of product innovation and evolution. In this profit-making race, innovators develop new products, add new features, and improve existing ones. Due to the focus of innovating more suitable products to serve customer segment-specific requirements, which have been evolving, innovators have been diversifying products. Hence, instead of having one type of automobile, there have been multiple automobile product innovations.
Furthermore, the same category of a product is also evolving. For example, Toyota Corolla in 2021 is different than the one Toyota offered in the 1970s. It has been evolving with the addition of features and the advancement of existing ones. Besides, the advancement of the technology core also makes a contribution to the evolution of product innovation.
For producing products, we need process. The process of manufacturing smartphones is different than the one we use to make bread. Furthermore, the advancement of production processes improves precision, reduces wastage, lowers defects, etc. Hence, we are after innovating new methods and also improving existing ones. In many cases, process innovation is the key to improving the quality and reducing the cost of products. Hence, there has been a competitive race of process innovation.
Invariably, process innovation involves automation and robotics, resulting in decreasing involvement of humans. For this reason, the human role in producing products like automobiles, displays, and smartphones has come down to less than 10 percent.
Incremental types of innovation:
In addition to innovating new products and processes, we are also making incremental advancements of them. We call it incremental innovation. This type of innovation does not draw media attention. But it’s vital for taking advantage of technology advancement and additional knowledge about customers’ pain points and preferences. Incremental innovation keeps adding momentum to products for diffusing deeper in society.
Due to the competition effect, every product innovation suffers from downward pressure on the willingness to pay. It does not matter how great the product innovation is; competitors will respond with copy, imitation, innovation, and substitution. Hence, the willingness to pay for product innovation has a natural tendency of drifting downward. To counter it, innovators are required to keep releasing successive better versions. If the consecutive releases are sufficiently better, the product keeps sustaining momentum to diffuse deeper in society. This aspect of types of innovation is called sustaining innovation.
Reinvention and reinnovation:
After embryonic beginning, powerful technology cores keep growing due to the continued supply of ideas out of the flow of scientific knowledge. But this growth behavior is not linear. Instead, it takes the shape of an S-curve. Due to the growth during childhood and youth, innovations also keep growing. Of course, it happens through redesign and successive releases. But like living things, technology cores also mature and stop growing further. Fortunately, human beings succeed in giving birth to alternative technology core.
For example, the light-emitting diode is the next generation of filament producing light. Hence, inventions go through reinventions due to the emergence of a better alternative. Due to these reasons, the incandescent light bulb became LED bulb. Due to the reinvention of the core mechanism, lighting products also got reinnovated. Like light bulbs, automobiles are now reinvented and reinnovated. The same dynamic is persistent in the evolution of cameras and many other products.
With a bid of increasing affordability, there has been a new movement in less developing countries of developing strip-down versions of existing products. Usually, the quality is poorer. The strip-down version is cheaper due to removal of certain features, and making many other features inferior. Tata Nano is an example of frugal innovation. But is it a novel idea? If not, do they qualify as innovation? There is another similar phrase: reverse innovation. Unlike other innovations, frugal or reverse innovations have a tendency of offering poorer products at a lower cost. But they do not have the latent potential to keep going better and cheaper due to the advancement of technology core. It appears that these terminologies are causing confusion in the literature of innovation types.
Creative destruction effects of types of innovation:
Due to the invention or reinvention of technology cores, both products and processes go through reinnovation. Completely new products and processes also get innovated due to the invention and reinvention. For example, due to the reinvention of the lighting technology core, lighting products went through reinnovation. As alternative technology cores emerge in embryonic form, innovated or reinnovated products appear as inferior alternatives in the early days. However, due to the advancement of the technology core, reinnovations also keep growing.
If the reinvented technology core is sufficiently amenable to progression, reinnovations may grow as a better alternative to existing products being made out of mature technology core. Hence, at the inflection point, demand for mature products and firms engaged in producing them suffer from creative destruction. Furthermore, due to sustaining innovation, the newly released version causes creative destruction effect to the previous versions. Creative destruction appears to be a constant product and process innovation mechanism in a competitive market space. Due to it, newly released products and processes replace outdated ones. Prof. Joseph Schumpeter (1942) coined this term and articulated it as ‘the essential fact about capitalism.’
As explained in the previous section, reinnovations or innovations around budding technology core emerge in primitive form. Due to the progress of the technology core, they keep growing. However, in many cases, new entrants drive such new waves. Besides, in some instances, high-performing incumbents making mature products keep avoiding this new wave until it’s too late. Although at the inflection point, many of them make a desperate move to switch to the uprising new wave, invariably, they fail. Consequentially, they suffer from disruptive effects in the form of rapid loss of demand for their once high-performing products, resulting in loss of jobs and even firms. We call this effect of innovation disruptive innovation. Or, we may term innovations creating this effect as disruptive innovations. By the way, Prof. Clayton is the first to coin this phrase.
A clear understanding of these types of innovation is essential to interpret dynamics, predict the future, and design appropriate strategic responses.
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