What is Innovation in Business? Explore 5 Types of Business Innovation
Gone are the days of monopoly, when customers had no choice but to buy from the closest store or local seller. Modern day brings with it modern challenges.
On the one hand, we have a competitive seller base, and on the other hand, informed consumers making smarter decisions. Hence, innovation is no longer a choice, but a key survival skill.
We need new products and solutions to make consumers' lives easier and solve modern-day problems. In almost all industries, from manufacturing to consumer markets, various challenges exist, and the key to resolving these is understanding the problem and finding innovative solutions.
So, what is innovation in business? Why is it important? How can you make your organization more conducive to innovation? This is what we will talk about in this article.
What Is Business Innovation?
Innovation and creativity go hand-in-hand. Although both terms mean the same thing, in the business environment, they are slightly different. Creativity involves introducing new ideas into the business culture and environment. But we can’t stop there. Creativity is the beginning point of innovation.
We need to ensure that the idea is workable, solves a problem, and is useful for the end consumer.
Innovation can be as simple as an upgrade to the company's service or adding new features to a basic product. The key idea is that it should provide a solution for the consumers and drive business growth, i.e., it should create value.
A good example here would be Tesla, which pioneered the production and introduction of electric vehicles on the roads in 2008. The phenomenon was life-altering for the industry, as it was something unheard of and hard to comprehend at that time. It was also an excellent solution to the growing problem of excessive fuel consumption by road vehicles.
5 Types of Innovation
In the business scenario, innovation can be divided into five basic categories.
Sustaining Innovation
Sustaining innovation is a basic improvement to the company's product line for the existing customers. It can be an improvement in organizational processes or technology that boosts the quality or quantity of the offering.
Disruptive Innovation
Disruptive innovation occurs when a company enters a new customer base or acquires a broader market segment. To make this possible, companies often create an entirely new market segment to serve the emerging customer needs.
Both disruptive and sustaining innovation are strategies for success, which is why most businesses incorporate both strategies. One is good for sustenance, while the other is important for growth.
Incremental Innovation
At times, companies make incremental improvements in their products or services. So, when they’re not creating an entirely new product or starting from scratch, they can still enhance value for consumers via incremental innovation.
Radical innovation
Radical innovation is a major breakthrough in the industry or market. It could be a new invention that attracts a newer customer base or changes to the existing market segment. These innovations are usually highly noticeable but also high-risk. However, playing it safe is a risk in itself!
Take the example of the iPhone as launched by Apple in 2007. The iPhone was a phenomenal invention, featuring a phone, a touch-screen, an iPod, and a portable connectivity device. It provided one solution for people to access their emails, browse the web, and use its navigation service, regardless of their location.
This allowed users to access email, browse the web, and navigate while on the go. Fast-forward to today, there are more than 1.4 billion iPhone users worldwide.
Architectural Innovation
Architectural innovation occurs when changes are made to a product or service's architecture, i.e., its packaging, configuration, or structure. The core technology may or may not change, but the presentation creates new value for the users.
This kind of innovation brings new opportunities for growth to a business, as it offers existing technology in a more convenient and accessible way.
A good example of this is Apple’s wearable device, the Apple Watch. While smartphones already offered sensors, software, and connectivity, Apple brought them all together in a compact wearable form. The users received a multifunctional device that offered both health tracking and communication capabilities.
The Importance of Innovation
Now, let’s talk about why innovation is important for a business. We know it helps in the growth by increasing the customer base.
At the same time, it also keeps you ahead of the competition, gives you a USP, and improves your brand image in the market. Here are some key reasons why innovation is important.
Adaptability
Innovation helps businesses adapt to environmental challenges. Factors such as recession, the pandemic, and natural calamities that affect business operations can be mitigated by introducing innovative new processes within the business.
Growth
Business growth or an increase in the market share is a survival strategy today. With increasing competition, you need to be ahead of the curve and offer something of value to your customers that keeps them coming back.
At the same time, it should also attract a substantial number of potential customers, widening your customer base.
Competitive Advantage
Innovation also keeps the business competitive in the market. There is not one or two companies selling the same product today; there are hundreds. When you develop a unique product or service, it sets you apart in the market.
More than 80% digitally mature companies, in fact, think innovation is a core strength.
Efficiency and Productivity
Innovation also enables you to respond to changing market conditions more quickly. It equips you with the right tools and strategies to handle modern-day challenges, and as a result, your company becomes more productive and efficient.
Phases of Innovation
You can’t simply innovate, begin a new process, or introduce products and services out of the blue. The more structured your process, the better the results will be.
There is a four-phase innovation framework that you should follow.
Clarify: The first step is to conduct research and gather as much information as possible from the target market. This is to identify a problem.
Ideate: In the second stage, we try to come up with ideas to solve the problems identified in the first step
Develop: In the third stage, we explore solutions and workable options developed from the ideation stage.
Implement: In the final stage, the developed idea is presented to stakeholders for review, analysis, and refinement.
Wrap Up
Innovation is not a single step or a day's work. There’s so much to do! You need to collaborate, convince the stakeholders, and invest the time, effort, and resources to find optimal and practical solutions to the market problems. Hence, it can be quite discouraging for companies, as many of the ideas are often rejected in the very beginning.
However, it is no longer an option. Only with continuous improvement can we meet the increasing demands of our customers.
Innovation is no longer how we grow; it’s how we survive!
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