Types of Innovation

It is remarkable how many people are under the false assumption that companies are either
innovative or not. This is a very polarizing and simplistic perspective that does not take into
account the different types of innovations that companies can and do pursue.

For this post, let’s break down innovation into two dimensions: Technology and Market, which
gives us the following 4 types of innovation:

Incremental Innovation

Incremental Innovation is the most common form of innovation. It utilizes your existing
technology and increases value to the customer (features, design changes, etc.) within your
existing market. Almost all companies engage in incremental innovation in one form or another.

Examples include adding new features to existing products or services or even removing features
(value through simplification). Even small updates to user experience can add value, for example
below is an older version of Constant Contact’s email schedule page:

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There is nothing majorly wrong with this page, however it is easy to see that the page title is
“Schedule”, yet there are no schedule settings anywhere to be seen. In fact, in this version, you
have to click on the yellow schedule button on the upper right-hand corner to actually pop up
the schedule settings. In addition, there is a huge empty space on the right side of the page that
does not contribute much value to the user. Below is a more current version of the same page:

This updated version replaces the “Schedule” title with the title of the email campaign. This
makes it easier for the user to see which campaign they are working on. Actual schedule settings
have replaced the awfully huge empty space on the right-hand side, which makes it possible for
the big yellow “Schedule” button to actually schedule. Also, larger sized form fields have been
introduced to allow easy clicking on those elements. All these changes, which may seem as just
updates, are actually small incremental changes focused on adding more value to an existing
product. They will prove to be incrementally innovative if customers have a better experience
with the product and are able to schedule email campaigns much easier.

Disruptive Innovation

Disruptive innovation, also known as stealth innovation, involves applying new technology or
processes to your company’s current market. It is stealthy in nature since newer tech will often
be inferior to existing market technology. This newer technology is often more expensive, has
fewer features, is harder to use, and is not as aesthetically pleasing. It is only after a few
iterations that the newer tech surpasses the old and disrupts all existing companies. By then, it
might be too late for the established companies to quickly compete with the newer technology.

There are quite a few examples of disruptive innovation, one of the more prominent being
Apple’s iPhone disruption of the mobile phone market. Prior to the iPhone, most popular
phones relied on buttons, keypads or scroll wheels for user input. The iPhone was the result of a
technological movement that was years in making, mostly iterated by Palm Treo phones and
personal digital assistants (PDAs). Frequently you will find that it is not the first mover who ends
up disrupting the existing market. In order to disrupt the mobile phone market, Apple had to
cobble together an amazing touch screen that had a simple to use interface, and provide users
access to a large assortment of built-in and third-party mobile applications.

Architectural Innovation

Architectural innovation is simply taking the lessons, skills and overall technology and applying
them within a different market. This innovation is amazing at increasing new customers as long
as the new market is receptive. Most of the time, the risk involved in architectural innovation is
low due to the reliance and reintroduction of proven technology. Though most of the time it
requires tweaking to match the requirements of the new market.

In 1966, NASA’s Ames Research Center attempted to improve the safety of aircraft
cushions. They succeeded by creating a new type of foam, which reacts to the pressure applied
to it, yet magically forms back to its original shape. Originally it was commercially marketed as

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medical equipment table pads and sports equipment, before having larger success as use in
mattresses. This “slow spring back foam” technology falls under architectural innovation. It is
commonly known as memory foam.

Radical innovation

Radical innovation is what we think of mostly when considering innovation. It gives birth to new
industries (or swallows existing ones) and involves creating revolutionary technology. The
airplane, for example, was not the first mode of transportation, but it is revolutionary as it
allowed commercialized air travel to develop and prosper.

The four different types of innovation mentioned here – Incremental, Disruptive, Architectural
and Radical – help illustrate the various ways that companies can innovate. There are more ways
to innovate than these four. The important thing is to find the type(s) that suit your company
and turn those into success.

Disruptive Innovation

Disruptive innovation, a term of art coined by Clayton Christensen, describes a process by

Some examples of disruptive innovation include:

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 Disruptor Disruptee

Personal computers Mainframe and mini computers

Mini mills Integrated steel mills

Cellular phones Fixed line telephony

Community colleges Four-year colleges

Discount retailers Full-service department stores

Retail medical clinics Traditional doctor’s offices

As companies tend to innovate faster than their customers’ needs evolve, most organizations
eventually end up producing products or services that are actually too sophisticated, too
expensive, and too complicated for many customers in their market.
Companies pursue these “sustaining innovations” at the higher tiers of their markets because
this is what has historically helped them succeed: by charging the highest prices to their most
demanding and sophisticated customers at the top of the market, companies will achieve the
greatest profitability.
However, by doing so, companies unwittingly open the door to “disruptive innovations” at the
bottom of the market. An innovation that is disruptive allows a whole new population of
consumers at the bottom of a market access to a product or service that was historically only
accessible to consumers with a lot of money or a lot of skill.
Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross
margins, smaller target markets, and simpler products and services that may not appear as
attractive as existing solutions when compared against traditional performance
metrics. Because these lower tiers of the market offer lower gross margins, they are unattractive
to other firms moving upward in the market, creating space at the bottom of the market for new
disruptive competitors to emerge.