This summer the UN World Intellectual Property Organization (speaking of complicated names) revealed that the Netherlands has the fourth most innovative economy in the EU. Obviously, this is not a surprise. We 3D print bridges, invent cow toilets to minimize methane gas emissions and constantly tweak our business models like we have nothing else to do. Without any doubt, innovation is everywhere. However, many people do not clearly know what the concept of innovation entails, let alone the different forms in which it can present itself. Fortunately, we are here to help.Experts are known t o agree to disagree about what innovation truly is. However, there is a general consensus that there are four overall types of innovation to be identified, which have been classified according to the market pull and technology push. Let’s zoom in.
Also known as sustaining innovation or continuous improvement, this slow and steady type of innovation simply improves what is already there. So, it implies that a firm innovates by building on its existing technologies, to provide increased value to the existing market. In practise, this means that additional features or services are added to a business model or that the user experience is being improved. This is not the type of innovation that will make you win awards, however, it can add great value both to the processes within a company as well as to the customers. An example? The Dutch bicycle leasing company Swapfiets are now offering electric bikes too.
We have dedicated one whole blogpost (read it here) to this form of innovation, describing how the term is being used and abused.
According to disruption guru Christensen, disruptive innovation takes place when a smaller company with fewer resources manages to successfully challenge an established business, which can happen in two ways. Option one: the small company first targets the low, price conscious end of the market and slowly moves up market as its technology and therewith value increase. Option 2: entirely new markets are created by offering a product or service people did not even know they wanted. In short, disruptive innovations make products or services more affordable and accessible to a larger public. An example? The PC or digital photography. Having a PC or digital camera at home a few decades ago, resulted in technology empowering individuals, for the very first time.
This form implies that a company uses its existing technologies but introduces them to a completely new market. As the name suggests, the components of the product or service are taken apart and put together differently to serve those new customers in an alternative way. So, rather than reinventing the product or service, it is about redesigning it by putting the initial building blocks to use in a new manner. An example? Many technologies that have originally been developed by the military, are later on used for medical research.
This is what all the innovation buzz is about, as many people hold the belief that innovation is equivalent to radical innovation and therewith overlook the other forms. Some consider radical and disruptive innovation as interchangeable terms, but that is only correct when talking about Christensen’s second option of disruption. Surely, the two overlap. Radical innovation involves applying a new technology to an entirely new market, creating long-term impact. As such, it destroys the existing system and offers a replacement accordingly. When executed successfully, radical innovation can bring significant rewards. However, the risks are significant too. An example? The airplane. This revolutionary invention was not the first mode of transportation. However, it created a new industry where (air) travel could be developed and commercialized for a completely new market.
Sometimes the lines between the different innovation categories get blurry. Where the boundaries lie exactly, could be industry specific and therefore companies should actively think about classifications that apply to them specifically. Why? It will help companies gain structure and alignment within innovation management, which is in turn will benefit a company’s overall success.
Curious to find out how your company can best innovate? We would be happy to help!
About Amstel Lab
Amstel Lab partners with startups and scaleups to commercialize your business. On the back of our experience, we have developed the unique Amstel Lab method: a tailor-made approach to maximize success. We test your markets, refine your product, innovate your commercial approach and execute your strategies. Any good idea is worth seeing through.
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