But being familiar with a broad range of innovation types is still important. Innovation groups should review various kinds of innovation to foster creative internal conversations and catch opportunities that may have fallen by the wayside in your InnovationOps activities.
Despite the amorphous nature of innovation, a few categorization frameworks have proven useful across the board in the world of innovation management. This guide explores 25 types of innovation found within these frameworks.
These types of innovation are grouped according to six popular frameworks for conceptualizing innovation. We’ll explore these frameworks beginning with the simplest and working our way up to the more complex, unpacking the individual innovation types in each.
For illustrative purposes, we’ll apply each innovation type to the basic concept of a neighborhood lemonade stand.
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This is the most basic innovation framework, and it’s probably the most used. Organizations often use upstream and downstream language even when describing types of innovation in the context of the other frameworks mentioned in this article. (In fact, every other type of innovation discussed in this article can be sorted into this framework!)
The upstream vs. downstream framework splits innovation into two types based on when innovation takes place relative to development.
Upstream innovation happens before development. Upstream innovation can result in new products, new components, new systems, new business models, or even new markets. This may be reactive, e.g., the result of customer feedback, focus groups, experimentation, market research, or regulatory changes—but it also includes proactive, strategy-led innovations.
Downstream innovation happens after development. Whereas upstream innovation concerns creating something new, downstream innovation finds new ways to create value with the products, services, and information you already have. This may look like grouping products into collections, selling products in different sizes or quantities, or selling products and services with new value propositions.
For example: You’re trying to find ways to make your lemonade stand more profitable—so you choose to take on a few innovation projects.
This framework plots innovation on a spectrum based on who speaks into the innovation process. This isn’t a neat and tidy framework: different organizations will draw their own lines as to what they consider open innovation or closed innovation. However, it’s a useful way to consider where innovation ideas are coming from, and it can stimulate conversations about whether you’re getting input from the right (or wrong) sources.
Closed innovation is characterized by restricted access to the innovation process. This term is often used in reference to innovation projects that do not receive input beyond a certain boundary.
As you can imagine, there are varying degrees of closedness. Moderately closed innovation may only involve the R&D department and a few key members of senior leadership. Extremely closed innovation projects are often top secret, with only a handful of innovators knowing the project exists.
Open innovation, by contrast, allows those traditionally outside the innovation process to participate. Innovation can have varying levels of openness, too. Moderately open projects may allow other corporate departments or even frontline workers to contribute ideas and expertise to the innovation process. Extremely open processes may allow customers and even third-party companies to collaborate alongside your team on projects.
For example: Let’s say you want to change your lemonade recipe.
Note.: Risk is perhaps the most important factor to consider when determining how open a project should be. The risks of open innovation are apparent: the more open a project is, the more exposed it is. This may give competitors and other bad actors the opportunity to copy or sabotage your efforts. But closed innovation comes with risks, too—most notably the risk of myopia. Restricting exposure limits the amount of people who can do something wrong, but it also locks out perspectives that might have otherwise nipped bad ideas in the bud.
Bansi Nagji and Geoff Tuff from Monitor Group (acquired by Deloitte in 2013) introduced the Innovation Ambition Matrix in the May 2012 issue of Harvard Business Review as a tool for helping clients manage their innovation portfolios. This framework assigns innovation types by novelty to both the company’s offerings and customer markets.
The x-axis of this framework represents the degree of novelty to the innovator’s existing offerings, while the y-axis represents innovation proximity to the current customer base. The matrix is then divided into three concentric waves extending from the here-and-now state—each wave representing a different type of innovation.
Image source: Harvard Business Review, 2012
Core innovations are not especially novel—these innovations optimize or iterate on existing products for existing markets. This may involve expanding or adjusting product lines, improving upon existing services, or creating programs that increase a customer’s lifetime value.
Wellspring founder Rob Lowe describes core innovation like this:
Core innovation is what most companies are already reasonably good at pursuing. Sometimes it is referred to as “incremental” innovation—although that’s not really fair, as some core innovations can be game-changers for the company’s immediate fortunes. What all core innovations share in common is that they seek to extend or expand the value of the current business.
Core innovation is the simplest, easiest, and quickest-to-implement type of innovation in this matrix. As such, this is where most of the “lever pulling” occurs when an organization needs to find new ways to meet short-term needs. It follows that core innovation usually claims the lion’s share of an organization’s project portfolio.
Note.: As Lowe mentions, core innovation is often used interchangeably with “incremental innovation.” However, another framework names incremental innovation as a type unto itself (#12 on this list). The two are not mutually exclusive, but for the purposes of this guide, core and incremental are treated as two distinct types of innovation.
Adjacent innovation introduces new offerings to the organization—or extends existing products to new markets. This type of innovation arises when an organization asks, “What else could we do for the people we already serve?” and/or “Who else could this serve?”
This often involves finding new ways to use the organization’s existing capabilities. The novelty is noticeable enough for the innovation to feel like an innovative step for the company, but it’s not a wild leap.
This is the final frontier of the Innovation Ambition Matrix. Transformational innovation introduces completely new offerings and/or completely new markets. These may involve drastically new technologies, systems, and business models.
Transformational innovation has the potential to create entirely new markets out of people who otherwise wouldn’t engage with the organization at all—and in some cases, the difference between the new and the old is so drastic that it necessitates an entirely new business unit to bring it to market.
It should come as no surprise that transformational innovation carries the highest risk out of the three types in this framework. Therefore, it usually occupies a relatively small portion of an organization’s project portfolio.
Note: Today, transformational innovation is often used interchangeably with “radical innovation.” However, another framework names radical innovation as a type unto itself (#15 on this list). The two are not mutually exclusive, but for the purposes of this guide, transformational and radical are treated as two distinct types of innovation.
For example: You’re thinking of new ways to innovate at your lemonade stand again.
Greg Satell, the co-founder of ChangeOS and author of Mapping Innovation, described this framework in Harvard Business Review in 2017. Satell’s Innovation Matrix assumes that innovation is fundamentally about solving a problem, and puts forth four innovation types based on two major problem-solving questions:
“How well can we define the problem?” A well-defined problem has clear and specific desired outcomes, e.g., “We need product X to be at net-zero emissions (including its supply chain) by the end of 2028.” Ambiguous problems are more open-ended, e.g., “With hybrid workplaces on the rise, how will we compensate for the loss of sales that used to come from commuters?”
“How well can we define the skill domain(s) needed to solve the problem?” Sometimes it’s obvious what expertise is required to find a solution, but some problems are more difficult to map to skillsets.
Satell’s Innovation Matrix imagines problem definition as the y-axis and skill domain definition as the x-axis, and thus splits innovation into four quadrants: sustaining, breakthrough, disruptive, and basic research.
Image source: Harvard Business Review, 2017
Sustaining innovation is the most straightforward, and therefore the most common type of innovation in this matrix. Sustaining innovation takes place when a problem is well-defined, and it’s clear what skills are needed to solve it. Most organizations engage in this form of innovation to get better at what they’re already doing, hence the “sustaining” label.
When undertaking sustaining innovation projects, Satel advises that “conventional strategies” (R&D labs, acquisitions, and strategic roadmapping) and design-thinking methods usually do the trick.
Even if a problem is well-defined, it may be too difficult to solve by using the most obvious skill domains. However, people with knowledge and expertise in non-obvious domains can sometimes provide perspective and insight that the traditional problem-solvers wouldn’t have. When this happens, it’s called breakthrough innovation.
Greg Satell puts it this way:
Sometimes, as was the case with the example of detecting pollutants underwater, we run into a well-defined problem that’s just devilishly hard to solve. In cases like these, we need to explore unconventional skill domains, such as adding a marine biologist to a team of chip designers.
Adjacent innovation is more difficult to plan for than sustaining innovation, as it doesn’t become clear which additional skill domains need to come into play until they already have. Open innovation works well here, because it invites different perspectives into the process. Opening up sustaining innovation can allow nontraditional innovators to share their expertise, which can lead to breakthroughs.
This breed of innovation takes place when the skill domain is well-defined, but the problem is not. Disruptive innovation usually happens in the wake of new technologies and seismic shifts, and often involves changing things besides the offerings themselves. Instead, disruption changes the things behind the product, such as business model, distribution method, and organizational architecture.
Disruptive innovation was first described by Joseph Bower and Clayton Christensen in 1995, and refers to a particular way in which a market can be transformed. The term is often used interchangeably with radical or transformational innovation, but actually describes a more specific form of change. Disruptive innovation serves previously overlooked, under-served, or nonexistent markets. When this is the case, incumbent players are forced to follow suit or decline. The market is disrupted.
This type of innovation is extremely well-known and popular, and its game-changing reputation makes it a hit with venture capitalists—when it works.
Although opposite sustaining innovation on the Innovation Matrix, basic research is similar in that it’s not a novel concept. Even without a well-defined problem and well-defined requisite skill domains, innovation can arise. Sometimes discoveries arise from sheer human curiosity.
Basic research explores the implications of new discoveries. It is often the domain of research institutions, academia, think tanks, conferences, and government-funded projects. One could even argue that research-based innovation happens in reverse: a solution is found, and the process of finding applicable problems begins.
For example: A few items need your attention at the lemonade stand—and you’ll need to innovate to address them:
In 1990, MIT’s Rebecca Henderson and Harvard’s Kim Clark published a new innovation typology based on an innovation’s impact on components and/or the relationships between components. The matrix draws four more types of innovation, this time across two new factors: components and architecture.
The matrix plots an innovation’s impact on components on the x-axis and its impact on architecture on the y-axis.
Image source: Administrative Science Quarterly
Henderson and Clark developed this framework to demonstrate that successful product development requires knowledge of both the parts of the product and the relationships between those parts. Their article specifically calls out the tendency for organizations to fixate on upgrading a product’s components while neglecting the implications on the product’s architecture.
N.B.: This article is concerned with physical product innovation, but the concepts of components and architecture still hold for digital offerings.
Incremental innovation reinforces core components without changing architecture. Henderson and Clark describe it as refining and extending an established design. While individual components are improved, the links between them are unchanged.
Whereas incremental innovation improves upon the components, modular innovation replaces old components with novel ones entirely. However, the relationships between the components remain essentially identical. (Henderson and Clark use the example of analog telephone dialers being replaced by digital ones.)
This type of innovation is the focal point of Henderson and Clark’s findings: innovations that change the relationships between components without changing the core concept behind the components themselves. As they put it:
The essence of an architectural innovation is the reconfiguration of an established system to link together existing components in a new way. This does not mean that the components themselves are untouched by architectural innovation. Architectural innovation is often triggered by a change in a component—perhaps size or some other subsidiary parameter of its design—that creates new interactions and new linkages with other components in the established product. The important point is that the core design concept behind each component—and the associated scientific and engineering knowledge—remain the same.
Such innovations can turn one product into several distinct products that perform similar functions in different ways. However, architectural innovations tend to pose a subtle challenge: when architecture changes, organizations often keep operating under the same modus operandi as before—which means these innovations can be hampered by a lack of new architectural knowledge within the company.
This type of innovation establishes an entirely new dominant design with a new set of components arranged within a new architecture. These are the next-generation innovations that fundamentally change the core concepts of the product, service, or system in question.
For example: Let’s say you’ve innovated in all four ways at the lemonade stand this year:
In 1998, Doblin’s Larry Keeley created the Ten Types of Innovation framework to help organizations review and structure their innovation efforts. (Doblin was acquired by Monitor Group in 2007, which were themselves acquired by Deloitte in 2013.) As they explain, the framework “can be a diagnostic tool to assess how you’re approaching innovation internally, it can help you analyze your competitive environment, and it can reveal gaps and potential opportunities for doing something different and upending the market.”
The ten types are grouped into three categories: configuration types, offering types, and experience types. These categories are arranged from most distant from customers (configuration) to those that are the most customer-focused (experience).
This type of innovation changes the way your organization makes money. The shift from buying software licenses to the software-as-a-service model is perhaps the most dominant example of this today.
For example: Instead of only selling lemonade by the cup, you sell a “Refreshment Pass” to neighbors, allowing them to drink their fill by paying a monthly subscription fee.
Organizations can innovate by leveraging their connections to create new value. Examining your existing networks for new ways to do business together can be a fruitful source of innovation ideas.
For example: You work out a deal with your neighborhood homeowners association and include subscriptions to your lemonade stand Refreshment Pass as one of the neighborhood amenities covered by HOA fees—and they send you a monthly check.
Organizations are always experimenting with different ways of arranging their assets, people, and disciplines. This may look as simple as an internal reorg, or it may involve large shifts toward centralizing or outsourcing certain functions.
For example: Instead of making daily trips to the grocery store for ingredients, you outsource supply runs to a neighborhood teen who works as a cashier there—now he picks up lemons, disposable cups, and sweetener for you at the end of his shifts and brings them to your door. This allows you to keep your stand open longer, increasing sales.
Streamlining operations is a common way that organizations reduce the cost of goods sold, production time, and labor expenses. While optimizing internal processes may not directly influence final offerings, it can drastically affect the costs involved in creating them—improving margins and/or allowing for more competitive pricing.
For example: Rather than making each batch of lemonade on an as-needed basis, you spend the first two hours of every business day preparing ingredients in the kitchen, so you can quickly replenish your streetside inventory without closing the stand.
This is what most people think of when they hear the word “innovation”—and indeed, most of the frameworks we’ve discussed thus far were developed with an eye on this type of innovation. Product performance innovation creates new products, new services, and new features for existing offerings.
N.B.: Unless it involves some sort of intellectual property protection, product performance innovation is one of the easiest innovation types for competitors to copy.
For example: You introduce a host of new beverages—strawberry lemonade, raspberry lemonade, limeade, cherry limeade, etc. You’re not just a lemonade stand anymore!
By combining products or services into bundles or creating ecosystems around them, organizations can reach new markets or create additional value in existing ones. This approach to innovation may involve developing complementary products or services—or even acquiring them outright.
For example: You offer a selection of sweet and salty snacks alongside your beverages.
Without changing the nature of the product or service, organizations can change the way they deliver them to create additional value. This approach may involve delivering an experience that end users can’t get elsewhere, providing rewards for loyalty, or finding new ways to go the extra mile when it comes to support.
For example: You notice that your neighborhood is popular with dog owners—every other passerby seems to be walking their dogs. You set out a jar of complimentary dog biscuits, which makes your lemonade stand an essential stop for every evening walk.
This involves finding new ways to deliver offerings to customers and users. The rise of digital technology has dominated this type of innovation over the past three decades: from websites to ecommerce marketplaces to apps to VR.
However, the allure of digital channel innovation should be considered carefully. Not every new channel will be the right fit for your organization, and new channels come into play all the time. Channel innovation, when done well, is a game-changer—but if pursued for its own sake, it can put an unnecessary load on your organization.
For example: You offer a lemonade bike delivery service to the neighborhood. All they have to do is send you a text, and five minutes later they’ll have fresh, cold lemonade delivered to their door.
This type of innovation explores new ways to position an organization’s brand and communicate value. When done well, brand innovation can reach new markets and galvanize existing ones. However, brand innovation can be risky: it could dilute loyalty if it fails, and rebranding efforts have a tendency to absorb internal attention and energy that might be more wisely applied to other areas of business.
For example: You notice that sales drop off as the weather gets colder. So in October, you launch “Gremlinade”: a warm lemon toddy stand for trick-or-treating families.
Lastly, organizations can find innovative ways to improve their interactions with customers and users. This extends beyond the point of sale, and can involve ways an organization connects with potential customers long before they’ve entered the buying cycle and long after they’ve made a purchase.
For example: You get up early and create beautiful sidewalk chalk murals around the neighborhood directing walkers to swing by your lemonade stand. During especially hot days, you set up misting fans along the sidewalk on either side of your stand, giving overheated passersby a cool break from the heat.
Most innovative organizations have several innovation projects spanning several innovation types in their portfolio—and keeping track of them all isn’t easy. An innovation management platform can help your organization orchestrate and optimize your innovation efforts at the project and portfolio level alike.
That’s what Accolade was made for. Innovative organizations use Accolade to reduce time-to-market, increase product success, improve efficiency, and optimize portfolio value—book a demo today to see how Accolade can help you orchestrate your innovation portfolio.