Types of business innovation: what are they and how are they applied?
Awareness about the importance of business innovation has increased and continues to increase over time. And today it is more necessary than ever, since we live in a changing world in which it is essential to constantly adapt both to new environments and to the demanding demand of consumers. What was a trend yesterday is practically forgotten tomorrow, which means that new technologies, artificial intelligence, sustainability, personal well-being, etc. promote and mobilize the implementation of innovation urgently.
In this sense, as new needs arise in users and customers (and also in employees and workers), constant learning and the support of new technologies become fundamental in the evolution of companies.
This is how innovation has become a strategic pillar in any business model, regardless of the sector to which it belongs. This is a way to boost growth, but it also represents a competitive advantage.
From innovation in a product or service to organizational innovation, through technological innovation, each of them can play a fundamental role. That's why it's important to know the different types of business innovation, to be able to lead organizations towards a competitive and sustainable future.
What types of innovation are there?
When it comes to talking about the different types of innovation, there are different ways to group them together. Below, we see some of the most common ones, although the classification may be more extensive and cover more typologies.
Types of innovation according to the origin of knowledge
Open Innovation
It is a strategy in which companies cooperate with other agents of society such as institutions or other professionals, pursuing the best talent. It consists of taking advantage of ideas, technologies or external collaborations.
Closed innovation
Here we innovate using only the company's internal R&D resources and processes, without external collaboration. You can consult external sources, such as suppliers, at certain stages of the process, but the work is carried out internally.
When treated internally, this innovation is often driven by the employees themselves and by specialized teams. In this sense, one of the main actions of internal innovation is the creation, development and implementation of intra-entrepreneurship programs. This type of program encourages the employees themselves to act as entrepreneurs and to develop innovative projects for the benefit of the company.
The development of internal innovation requires the construction and development of an organizational culture that promotes creativity, experimentation and continuous learning, as well as a defined and structured strategic plan.
| How do creativity and innovation relate to entrepreneurship
Types of innovation according to the degree of change they entail
Incremental innovation
It's about the evolution of an innovation already carried out. In other words, it starts from something that already exists, but new features or significant improvements are gradually incorporated, whether in the brand, in the product or in the production methods. This type of innovation generates additional value, but without promoting a very abrupt change.
To carry out incremental innovation, continuous market analysis must be carried out, to detect the best updates on a continuous basis when necessary. This is how customers of a particular product or service are maintained and loyal.
Disruptive innovation
It consists of creating a radical change in the market, in companies or in consumer behavior by introduce something completely new. The application of new ideas leads to the modification of products, services and processes, generating such drastic change. It's about doing something different from what has been known so far, taking a competitive leap in the market.
Radical innovation
As its name suggests, radical innovation is based on the creation of a a completely different new value proposition for a given product or service. It involves a break with the established method, the generation of new markets or a complete transformation of the existing market.
This innovation can occur through a change in the company's positioning, in the way it works, in the processes, in the products or services offered or in the way it relates to the customer.
Types of innovation according to their nature or relationship with the market
Technological innovation
This innovation is one of the most obvious, as the rapid advancement of technology opens up many opportunities. It comes when you get a improvement in products or processes using new technologies. In other words, it involves the creation, development and application of new solutions or improvements through the integration of advanced technologies.
For example, if we go back to the Industrial Revolution, we see a clear example of how it changed the mode of production of industries, the way of working and even the lives of workers. Today, the use of artificial intelligence to personalize services exemplifies technological innovation.
Social innovation
It refers to different ideas that effectively resolve a social situation, establishing new relationships. That is, to introduce initiatives that generate social benefits. These solutions must be replicable, scalable and maintained over the long term.
Sustainable innovation
The objective of sustainable innovation is to create a positive impact on the environment and on society in general. For this purpose, they implement changes that reduce environmental impact and that promote sustainability, both inside and outside the company.
For example, climate change is one of the challenges facing society, and one that it must try to solve with the application of sustainable innovations.
Market innovation
Among the different types of business innovation, there is also market innovation. This involves the introduction of products, services, or strategies that meet changing consumer needs and at the same time they create unique value in a specific sector.
Types of innovation depending on their application
Product or service innovation
The application of product innovation consists of introduction of a new or significantly improved good or service, in terms of its characteristics or the use for which it is intended. This may include improving technical characteristics, components or materials, mode of use, or other functional characteristics.
The application of this type of innovation can occur throughout the life cycle of an existing product, but a completely new one can also be created.
Process innovation
It is based on optimize or modify processes to make them more efficient (for example, the production or distribution process).
This innovation occurs when a process, whatever it is, is completely changed or when a significant change is introduced to an existing one.
As an example, we could talk about the automation of tasks, freeing workers from mechanical processes means that they have more time to dedicate to more creative topics and that bring more value to the organization.
Business model innovation
When Change the way in which a company generates revenue and value for customers, is called innovation in the business model.
It's about capturing how the company generates profits, the revenue model and the cost structure; and, from there, starting to make significant changes that represent an improvement.
Innovation in business models is common in startups.
Organizational innovation
In organizational innovation the structure or methods of management of the company are modified. This is an innovation that applies new methodologies, such as agile methodologies, with the objective of promoting the company's competitive advantage.
This innovation takes into account the organization of the hierarchy, the relationship between workers and teams, the offer of incentives, working hours, etc. In addition, it involves other types of innovations, which are linked to structural and practical changes that involve an improvement in productivity, products or services and processes.
What distinguishes an organizational innovation from other organizational changes in a company is introduction of an organizational method that has not been used before by the company and that results from strategic decisions taken by management.
In the corporate world, there are different examples of organizational innovation, such as the four-day work week, teleworking or the chatbot as a customer service.
The different types of business innovation can be adapted to the particularities of each company, so it is always advisable to carry out an analysis to determine which innovation is the most appropriate, to involve employees, to define each one's roles and a solid work structure, to support all innovative ideas, to promote a creative and favorable environment, and to align each idea with business objectives and market requirements.
