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Begin a Systematic Innovation Practice - Step One

By Praveen Gupta

Developing a systematic innovation strategy from scratch is a challenge many companies are facing in today’s fast-paced world. This series of articles will focus on the steps a company should take in creating its own innovation practice, one that was developed specifically for its product, process or service. Step one – identify the company’s type of innovation. Step two is scouting and strategizing for innovation. Step three is committing to, and cultivating, an innovation environment. Step four is to innovate disruptively. The fifth, and final, step is to sustain innovation.

Innovation is frequently discussed and is on almost every CEO’s agenda. Not enough executives, however, know how to pursue and execute innovation. There are ongoing debates about the definition of innovation, its differentiation from creativity, innovation methodologies, measures of innovation, innovation strategy and, of course, the types of innovation. The first step in pursuing innovation is to understand what type of innovation a company needs and how many resources a company should commit to developing a systematic innovation practice.

Types of Innovation

Outcome-Based Innovations
One of the common breakdowns of innovations represents the incremental, radical and general purpose types of innovation. Incremental innovation represents more of a continual improvement when an existing product, process, service or solution is improved creatively. Radical innovation represents the replacement of an existing solution with a significantly different approach (e.g., a transistor replacing vacuum tubes in electronics or email replacing conventional mail). A radical innovation causes a disruption in the current way of doing things. General purpose innovation describes significant innovations that fundamentally change the way of thinking and doing. Such innovations have wide impact, scope of improvement and a broader range of uses (e.g., the discovery of electricity or Einstein’s theory of relativity).

Process-Based Innovations
Four categories of innovation are defined by their process: continuous process improvement, process revolutions, product or service innovations, and strategic innovations. Continuous process improvement innovation represents methodologies such as Lean. The focus is on incremental innovations. Process revolutions relates to the implementation of new technology, such as RFID, for improving supply chain management productivity. Product or service innovations represent new products or services, such as the iPhone, without changing business models. Strategic innovations include new products or services but with new business models such as Segway rentals or web-based applications.

Operations-Based Innovations
Some organizations differentiate between categories and types of innovation. According to the Doblin Group, there are four categories of innovations including finance, process, offerings and delivery. Finance innovation relates to business models, networks and alliances for innovations such as Dell’s personal computer business and supply chain management. Process innovation relates to enabling processes for innovations such as the compensation and benefits packages at Starbucks and real-time inventory management at Wal-Mart. Offerings innovations include innovative product performance through unique features in an automobile, a product system such as Microsoft Office with multiple products and service innovations as seen in Singapore Airlines flights. Delivery innovations include innovations in channel (e.g., Martha Stewart products), brands (e.g., the iPod) and customer experience (e.g., Harley Davidson).

Pathways-Based Innovations
The four types of pathway-based innovations include product, process, positioning and paradigm. Product innovations are most apparent in the mobile phone market with new phones arriving frequently. Process innovations include new methodologies such as Six Sigma, Lean and TRIZ. Positioning innovation implies repackaging an existing product or service, and branding it innovatively (e.g., the increasing camera capabilities of cell phones could lead to it being branded as a camera). Paradigm innovation represents a shift in thinking and doing. For example, mainframe computers in the late 1970s led to the personal computer, a new paradigm of computing. Today, mobile phones are making conventional landline phones obsolete and Internet phones are in some cases replacing mobile phones.

Hierarchy-Based Innovations
In order to build a portfolio of innovations – and have a strong causative relationship between innovation and allocated resources – there may be a variety of innovations. Depending upon the primary responsibility for managing innovation and key steps in the innovation process, there include the following innovation types: business model, managerial, process, service and product. Of these types of innovation, business model is critical as it sets the direction and the approach of a corporation. Managerial innovation relates to innovative approaches to managing people, technology and resources. Process innovation implies a revolutionary improvement to, or re-engineering of, an existing activity. Service innovation means developing new ways to deliver services or creating new services altogether. Product innovation involves creating products that offer new capabilities for significant economic payoff.

Thought-Based Innovations
While all of the previously-defined classifications have their merits, fundamentally speaking innovation is an intellectual activity. Creativity is a unique combination of two events or ideas – the ability to discover the unique combination is critical. Applied creativity is innovation. The breadth of an organization’s creativity is controlled by people, influenced by the environment and opportunities provided by a company’s leadership.

By reviewing the contributions of great innovators, specifically Einstein, Galileo and Edison, it is clear that Einstein engaged in mostly theoretical innovation, Edison innovated practical or business solutions, and Galileo did a combination of the two. Einstein’s work was more fundamental in nature, while Edison’s work was more tangible. Einstein conducted mostly thought experiments (e.g., riding the light wave), while Edison conducted experiments in his laboratory. Looking at various innovations, they can be classified into four categories based on the amount of effort and the speed-of-thought components (knowledge, play and imagination): fundamental, platform, derivative and variation.

Fundamental Innovation
Fundamental innovation is a creative idea that leads to a revolution in thinking. Such innovations are based on extensive research, knowledge-driven, theoretically proven and lead to follow-up research and development. Such innovations occur with the collaborations of academia, commercial laboratories and even corporations. These innovations may lead to changes in thinking, extend an existing theory or be a breakthrough concept with enormous impact – perhaps even leading to the evolution of a new industry. Examples of such fundamental innovations include Einstein’s theory of relativity, electricity, penicillin, the telephone, wireless communication, the transistor, computer software, UNIX and the Internet. A fundamental innovation has a significant academic component of science, which makes it available for the common good and also less protected, commercially speaking.

Platform Innovation
The platform innovation is defined as one that leads to the practical application of fundamental innovations. Such innovations normally are launching pads for a new industry. Examples of platform innovations include personal computers, silicon chips, cell phones, digital printers, Microsoft Windows, databases, Linux, drug delivery devices, satellites and the space shuttle. The platform component increases the portion of the laboratory or development component more so than do fundamental innovations. Platform innovations launch industries and change ways of life.

Derivative Innovation
A derivative innovation is a secondary product or service derived from a platform innovation. Derivative innovations include new server-client configurations based on a new network architecture or operating system for a cell phone, for example. These innovations are slight modifications of the main product. In the case of Microsoft-like software, the platform is Windows and derivatives are a new office suite; for CDMA-like platforms, derivative innovations are various features available to service providers; for a major satellite system, the derivative innovations are various launching options or capabilities offered to users.

Variation Innovation
A variation innovation is a tertiary-level innovation that requires less time to develop and is a slight variation of the next-level products or services based on a derivative innovation. For example, variation innovations in cell phones are various color covers, ring tones, camera feature and additional software-based optional features. In the case of Microsoft software, variation innovations are applications developed and based on the Microsoft platform and derivative innovations. Typically, the variation innovation occurs close to the customer and may be the candidate for reaching the ultimate in speed of innovation or innovation on demand in real-time.

Interactions Among Thought-Based Types of Innovation
Various types of innovations are achieved by differing degrees of speeds of thought, which consists of knowledge, play and imagination. A fundamental innovation may require a more meditative process to think of theories, concepts or solutions without significant physical experimentation. In fundamental innovation, knowledge and imagination are key components. For example, Einstein’s work was completed in his mind rather than in a laboratory – typically conducting “thought experiments.”

A platform innovation involves relatively less knowledge and imagination, but rather more play or experimentation. A variation innovation requires more play than does a fundamental innovation. Fundamental innovations can take a much longer time than do the other innovation types; as a result, more variation innovations will result than will fundamental innovations.

By understanding the types of innovation, an organization can decide its domain of innovation and develop an innovation strategy suitable to produce solutions within the designated type of innovation. The company then can look into the resources that will facilitate particular types of innovation. For example, to develop a fundamental innovation the leadership must understand the process will take a long time, dedicated resources, and overall more endurance, persistence and patience. On the other hand, variation innovation requires more experimentation and/or play, and can be completed in a shorter time. Company leaders must first decide the planned scope of innovation activities in order for the corporation to appropriate necessary resources to facilitate the innovations to come.

About the Author:
Praveen Gupta is the lead author of Business Innovation in the 21st Century that organizes various aspects of innovation from concept to commercialization. He is the president of Accelper Consulting, which provides training and consulting services in innovation and teaches business innovation at Illinois Institute of Technology, Chicago. Contact Praveen Gupta at praveen (at) or visit