Innovation and creativity 02 innovation types

INTRODUCTION TO:
INNOVATION AND CREATIVITY
By Kamal M. AL MASRI
Israa University Gaza
Faculty of Managerial and Financial Sciences
Departmentof Management
Chapter 02: Innovation types
Course code: ::::.BEAD4312..::::

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Introduction tothe concepts of Creativity & Innovation, by Kamal M. AL MASRI
Types of innovations:
•Not easy to establish a single list,
•May classifications, based on different criteria.
•Origin: internal vs. external.
•Nature : organizational, social, environmental, technological.
•Scope:incremental vs. radical.
•Object: product, service, process, …
•…
•It depends on the point of interest and the angle of
study.

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Video: FlyZone Hotel

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What is the purpose of types of innovation?
• From the point of view of management, this
classification have a strategic and process-related
significance.
• A clear definitionof the desired innovation object and
degree ofinnovation is importantfor the innovation
strategy.
• This determines wherean organization wants to innovate.
•This is importantin order to choose the method and the
model of innovation (the efforts).

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Incremental vs. radical innovations:
•According to the scope or the impact, different “degrees”:
1. Incremental (evolutionary), continuous, ...
• optimization and further development of existing
products, services or processes.
2. Radical, discontinuous, revolutionary, breakthrough…
• new products, services or processes and involve
significant change and innovation.
3. Transformational, disruptive.
• the impact is also greater: new value chain and new
markets can be created as a result.

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Open innovation vs. closed innovation.
•The literature contains a division into closed and open
innovation, although this refers more to innovation
management than innovation itself.
•Closed innovation involves only internal resourcesfor
generating ideas, developing and implementing innovations.
•Open innovation also integrates external partnerssuch as
customers, research institutes or suppliers into the innovation
process.

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Market pull vs. Technology-push innovations:
•What triggers innovation?
•Market pull innovations originatefrom themarket
and are initiatedby a specificcustomer request.
•Technology-push innovations arethe resultof new
technologiesfor which suitableapplicationpossibilities
aresought andimplemented.

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Sources of inspiration?
Studies suggest:
1- Employees.
2- Customers.
3- Market and competitors.
4- Management and planning teams.
5- Sales department.
6- Suppliers.
7- Managers. 
8- Consultants.
9. …

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Technological vs. Organizational innovations:
•Technological innovations:
•Focuses on the technological aspectsof a product or service rather
than covering the entire organization business model.
•Implementing a technical idea to enhancethe functions or
performanceof a product or a service.
•Organizational innovations:
•Structural improvements, organizational changes, new
practices, new working methods, policies, …
•Include business model innovations.
• Formore,read.

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Social innovations:
•Newsocialpractices thataim to meetsocial
needs in a betterway than the existing
solutions.
•Working conditions, education, community
development or health…
•Examples: Fair trade, Grameen Bank “GFUSA’,
Sharing Economy…
•Can be considered as Organizational
innovations

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What you don’t know about Thomas Edison!
• Thomas Edison wasn’ta simple
“technologyinventor” !!!
• He was agreat organizationalinnovator:
Business model/network(station system
to bring electriclightto city dwellers),
employee motivation/entertainment
sessions, …

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Famous typologies of innovations:
•Many types,many classifications,the most
important:
•1- Doblin group’s 10 types ofinnovation:
•Creating new product is only one typeof innovation.
•2- Moore’s14 innovation types.
•An innovation type for each phase of the category life
cycle.

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Doblin group’s 10 types of innovation:

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Ten types of innovation = different ways to
innovate …
•The 10 types of innovation canhelp
organizations (people) think about
different ways to innovate that simply
trying to come up with a new product.

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•Ten Types of Innovation:The Discipline of
Building Breakthroughsis the culmination of
thirty years of analysis and research.

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1. Profit model
•Howto make money?
•That typeof innovationrepresentsnew waysof
generation profits, which meansof understanding
what peoplearewilling topay for.
•Profit modelsare often taken for granted and can
remainunchangedfor decades,but they'rea good
opportunity to differentiate your business.

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2. Network
•Howto connect with others to create value?
•Our world is hyper-connected,as networks allowus to
do things wecouldn't do on our own.
•Partnerships can bea good way to share risksin
developingnew offers.

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A Business Model consists of two essential
elements (each of which has 3 dimensions).
The operating
model
The value proposition and the
operating model
• Value Chain
• Cost Model
• Organization
• Target Segment
• Product or Service Offering
• Revenue Model

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3. Structure
•How to align your talentand assets?
•The goal here is to better structurethe existing
resourcesand assets of the company to generate
morevalue.
•An innovative company structure can contribute toa
better work environment, which in turn will help the
companyhire better talents and increase its
performance.

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4. Process
•How to use signature or superior methods to do your
work?
•That type of innovation worksby improving
activities and operations that are involved in
creating the product or service sold by the company.
•With better processes, the company can leverage
unique capabilities, work more efficiently, adapt
faster and generate better margins.

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5. Product Performance
•How to employ distinguishing features and
functionality?
•That type of innovation is about the value,
characteristics and quality of a company's products.
•It can be a new product, an update on an exiting
product, or an extension to an existing productthat
increase its value.

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6. Product System
•Howto create complementary products and
services?
•The objective here is to create a robust and
evolutivesystem that connects a company's
existing offer, whetherthroughintegration or
modularisation.

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7. Services
• Howtosupport andenhancethevalue of your
offerings?
•Services can increase the value of a product by
making that product easier to use, by
removing problems or by educating the client
aboutpossibilities they were unaware of.

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8. Channel
•Howtodeliver yourofferingsto customers and
users?
•By addingnew channels and by optimizing
existingchannels, you can improve the
purchase process and remove friction between
yourproduct and yourcustomers.

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9. Brand
•How to represent your offerings and business?
•The goal is to create a distinct brand identity to make
sure clients recognize it, remember it, and prefer your
products to your competitors'.
•To do that, you can rely on marketing
communications, advertising, interaction with your
customers, the environment in which your product is
distributed and the behavior of your employees.

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10. Customer Engagement
•Howto foster distinctive interactions?
•That kind of innovationaims at developing
strongconnections between your customers
and yourcompany, throughrich andmultiple
interactions.

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Moore’s 14 innovation types:
•Innovation isn’t confined to break-out, market-
creating,blockbuster productsand services.
•Thereare innovation typesavailablefor each
phase of the category lifecycle,from growth
through maturityand decline,to end of life.

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Moore’s 14 innovation types:
•In his book “Dealing with Darwin: How Great
Companies Innovate at Every Phase of Their
Evolution”, Moore presents 14 innovation types
in 4 classes:
1. Leadership
2. Customer Intimacy
3. Operational Excellence
4. Category Renewal

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Regarding the lifecycle (Geoffrey Moore)
•There are innovation types available for each phase of the
category life cycle, from growth through maturity and
decline, to end of life.
•The single most important act of strategy leadership is to
select the innovation vector upon which your company
will develop its sustainable competitive advantage—its
core.
•To do thisproperly requires a deeper understanding of the
properties of each ofthese innovation types.

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Explanation:
•Moore identifies five life cycle categories for
products and services: emergent, growth,
maturity, decline, and end of life.
•Innovation types span the entire category
life cycle and can contribute to overall
corporate growth.

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Emergent and growth
•Disruptive innovation, the type of innovation which is
most often associated with high technology, occurs in the
emergent category.
•This phase is described “Crossing the Chasm”, and
involves the leap from early adopters to mainstream
buyers where it enters the growth phase.
•Although disruptive innovation is highly desirable, it is
not the only type of innovation available to companies.

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I- Product Leadership
• This group of innovation types is characterized as very powerful,
expensive and risky. Therefore, they must be executed in high growth
markets to realize the necessary returns and market share wins.
• 1-DisruptiveInnovation–Products andservices which createtechnology
discontinuitiesand newmarketcategoriesare part of this set.
• Existing standards and valuechains are over-turned in favorof newapproaches.
• Ex.:Digital media (music, film) and social media networks.
• 2-Application Innovation– Findingnew uses,newaudiences, andre-combining
existing functionalityare attributesofthiscategory.
• Standards change, existing value chains are disrupted.
• Ex.:Theapplication of Macintosh computers to desktop publishing and using fault tolerant computers
torun ATM networks.
very powerful, expensive and risky

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I- Product Leadership (cont.)
•3- Product Innovation: Existing products are improved
through functionality and usability for existingmarkets.
• Success is achieved through time to market andpatent protection.
• Improvements such as wireless connectivity in laptops, cameras in cell
phones, andhybrid engines in cars are examples of product innovation.
•4- Platform Innovation: Platform leaders create foundational
or ingredient systems on which third parties can build
further value.
• Success here relies on architectural leadership, relationship building, and
creating benefits for the entire ecosystem. (Intel andMicrosoft).

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II- Customer Intimacy
• Thisgroup ofinnovation typesare less riskyand less powerful, butcan givea
companymoney backthrough costand efficiencysavings.Duetoits lower power
potential,this group isbetter suitedfor maturemarketswhere marketshare is
more likely to beconstant.
• 5-Line-ExtensionInnovation:Line-extensionsintroduce newsub-categorieswithin
existingofferinggroups.
• Much of the infrastructure stays the same, but user-facing features orpackaging changes sufficiently to
create novel products and services.
• Examples are SUVs for an auto manufacturer orlaptops for a computer manufacturer.
• 6-EnhancementInnovation:Thisis a smaller,more targeted,modificationor feature
enhancementtoan existingofferingsuch as Teflon coatingfor pans or higher pixel
ratingsfor digitalcameras.
less risky and less powerful

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II- Customer Intimacy (cont.)
•7- Marketing Innovation: Marketing innovation uses new
or highly effectivemarketing campaigns such as viral
strategies, social media, or crowd sourcing to outpace
competitors.
•8- Experiential Innovation: Thiscategory occurs most
frequently in service offerings, or by adding a service to an
existing product.
• Here the overall experience of a offering is enhanced through
personalization, 1:1attention, or a higher level of value add.

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III- Operational Excellence
• LikeCustomerIntimacy,theOperationalExcellencezone is less riskyand less
powerful, but can givea companymoney backthrough costand efficiencysavings.
Duetoits lowerpowerpotential,this group isbettersuitedformaturemarketswhere
marketshareis morelikelytobeconstant.
• 9- Value-EngineeringInnovation– The goal in thiscategory is to decrease costs
in manufacturing/development for existing offers withoutchangingtheir
composition. Optimizingcomponentparts and theoverall assembly / creation
process are tactics here.
• 10- IntegrationInnovation– This is the flip-side of value-engineering
innovation–thecustomer’s cost of ownership is decreased by simplification
and/or consolidation intoa singleentity thatcan be managed more effectively
thanmultiplepieces.

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III- Operational Excellence (cont.)
•11- Process Innovation: The goal ofthis type of innovation is
to reduce waste and cost from processes thatsupport and
enable the offer, rather than offer itself.
• Inventory management andquality programs can be used here.
•12- Value-Migration Innovation: This type ofinnovation is
described in Adrian Slywotzky’s book Value Migration.
• Companies taking this approach will move away from segments of the
value chain which are commoditized to segments which are richer in
profit andgrowth opportunities.

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IV - Category Renewal
•This phase comes into play when a business is declining and
must be wound down or immediatelyexited:
13. Organic Innovation: Re-positioning a company to a growth
category is the goalof organic innovation.
• Examples are IBM moving from hardware/software to
services and Microsoft moving into browser software.
14. Acquisition Innovation: This strategy equates to mergers and
acquisitions, either as a buyer or seller.
•Harvest and Exit – This decision effectively closes out a line
of business.

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From strategic point of view
• The innovation ambition matrix goes one step further than
the three-horizon model.
• Their framework isbased ontwo main dimensions: Products (new
products versus existing products) and markets (new markets versus
existing markets).
• Basedon the two dimensions mentioned above, they distinguish three main
types of innovation:
1) Core,
2) secondary and
3) transformation innovations (figure 4).

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Figure 4: Nagji and Tuff’s Innovation ambition
matrix

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What is the type?
• Private speed radars ?
•What type?
•Read (this article).

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