There are 4 types of innovation:
- Process Innovation
- Product/Service Innovation
- Customer Experience Innovation
- Business Model Innovation
Process innovation is an incremental innovation where you make improvements in your organization’s internal processes. This may be a supply chain, a distribution channel, your production cost, your overhead, your customer service, …etc. Process innovations are low hanging fruits for every organization and they are easily achievable by documenting processes and incrementally improving the standard procedures to achieve greater efficiencies, productivity and reduce errors.
Process innovations are characterized as incremental innovation primarily because they are the least powerful innovation to address adaptive challenges, changes in the world that we do not have an answer for.
Product/Service innovation is another incremental innovation where you publish a new version or next generation of your product/service. It’s version 2.0 or version 3.0. It may be the new book that you publish each year or the the new an improved conference that you’ve prepared for all year long.
Product/Service innovation is where most organizations focus their resources and attention. They believe that continuing to produce new versions of a winning formula will continue to bring home the bacon. They believe that customers will be loyal to their product and that as long as they continue to improve their product that they will continue to stay in business.
However, product/service innovation is still an incremental innovation because, while they may be a breakout product, they are not as impactful in addressing unknown cultural and market shifts. They are completely useless to address people’s changing tastes, cultural shifts in identity or brand new markets that disruptive technologies introduce to the markets.
Customer Experience Innovation
We’re living in a experience economy. Customer experience innovation is clearly a breakout innovation and potentially a breakthrough innovation. No longer is the product the core innovation, it’s the whole experience and relationship the customer has with your brand and your products that drives the economy. People are not simply paying for the functionality of your product, but they are looking for association and more importantly they are looking for an experience.
Customer experience innovation what Apple is doing. Apple isn’t revolutionary nor are they the first ones to invent the technologies in the iPhone. They are artists in crafting an amazing experience by bringing together all the different, already existing technologies. They’ve even designed your experience walking into the Apple store, picking out your iphone, activating your phone, …etc. The unboxing experience is almost a religious experience because Apple has design every detail of that experience and not simply the box.
Customer experience innovation is where most organizations need to focus as it presents the greatest impact given your current situation. Most organizations have not even touched customer experience innovation and if they begin designing the experience, they would be the best in their class.
Business Model Innovation
The world is changing around us. We know we need to address these changes and challenges, but we have not idea how to address them. They are cultural shifts and socio-economic shifts that we have no control over. It’s a brand new world and a new economy.
When the world changes, you need to completely reinvent yourself. When you are able to completely change the way you do business and you’re willing to change your behavior/culture of your organization, you’ve achieved business model or disruptive innovation.
Adaptive Challenges can not be addressed with incremental, breakout innovations. It doesn’t matter how many improvements you make to your process, or how many new versions of a product/service you release, Adaptive Challenges require us to address with breakthrough/disruptive innovations.
Ideally, you are the one that defines the future or else it will define it for you. If you are able to define and create the new markets, the new customers, the new channels, you will be able to stay ahead of the curve and to last long enough to address the next major shift in the world.