Your Guide to the 4 Types of Business Innovation

Modern business is defined by its constant forward momentum. New philosophies, technological advancements and a changing workforce conspire to keep companies on their toes, looking for the next great innovation to propel them ahead of competitors. In business parlance, this is referred to as business innovation.  

But, despite a common misconception, not all business innovation is equal. Some organizations innovate to change their internal structure. Others innovate to evolve their product or service.

And some businesses innovate to disrupt entire industries. Several factors dictate the type of business innovation: its impact on the market, the provenance of the market, the technology used to innovate, the degree of change, etc.

Most experts agree that you can neatly categorize business innovation by four types (though there’s some dispute on what those four types are). Below, let’s explore these four types of business innovation with quotes and case studies as support.

1. Sustaining Innovation

Sustaining innovation is probably the most common type of innovation – a workaday kind of self-improvement that most organizations undertake at some point.

Essentially, sustaining innovation occurs when a company makes minor improvements to its product or service in order to sustain its position in an existing market.

The most obvious example of sustaining innovation – and the best way to illustrate the concept – is the litany of iPhone generations. Each generation of the company’s flagship product undergoes small adjustments so the company can maintain its market leader position.

2. Disruptive Innovation

In contrast to sustaining innovation, disruptive innovation is a big swing for the fences – a massive change that creates entirely new markets, or fundamentally alters an existing market.

Disruptive innovation typically leverages new technology to target a traditionally overlooked segment of consumers, delivering a product/service that’s more convenient, cheaper, better or outright unheard of.

A recent example of disruptive innovation is Nobul, the end-to-end real estate digital marketplace. The company deploys a proprietary algorithm to match consumers with real estate agents who then compete for the consumers’ business. 

Speaking to Medium, Nobul CEO Regan McGee shared that, “We are the tip of the spear of disruption. We’re finally giving consumers power in this industry.

Real estate transactions have the single largest fees people pay and the average person pays those fees 11 times in their lifetime. For us to be disrupting this market is extremely exciting.”

3. Incremental Innovation

Like sustaining innovation, incremental innovation deals in small steps, not giant leaps and bounds. Unlike sustaining innovation, though, incremental innovation aims to improve a company’s market standing.

Companies that aim for incremental innovation aren’t concerned with disrupting an industry – they’re perfectly fine with the market the way it is. Instead, they look to grow their business by improving operations or offerings in the hopes of capturing consumers from competitors.

Gillette and Schick, the razor companies, are two great examples of companies engaged in a battle of incremental innovation. Every time one adds an extra blade, the other counters.

When one adds a “hydrating gel guard,” the other adds a “lubricating bar.” To consumers, it may look like comical one-upmanship; to the businesses, it’s a serious game of incremental innovation.

4. Radical or Breakthrough Innovation

Breakthrough or radical innovation is akin to disruptive innovation, but not quite the same. Incidentally, it’s the hardest of the four to define.

Let’s cede the floor, then, to Hopp, Antons, Kaminski and Salge, authors of the research paper “Disruptive Innovation: Conceptual Foundations, Empirical Evidence, and Research Opportunities in the Digital Age.”

Writing for Harvard Business Review, they outline the difference between radical and disruptive innovations: “Disruptive innovation… describes a process in which new entrants challenge incumbent firms…

Radical innovations, on the other hand, stem from the creation of new knowledge and the commercialization of completely novel ideas or products.”

Put simply, radical innovations introduce entirely new paradigms. In this way, many companies commonly labelled “disruptive innovators” may also be radical innovators.

Final Thoughts:

Do you innovate to retain your position or move ahead of competitors? Are you changing your industry by applying new technologies or creating an entirely new industry from scratch?

If you’re curious where your organization fits in the grand scheme of business innovation, use the guide above. And remember: whatever you do, never stop innovating.

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