Before we go too much further it will be worth defining our terms. What do we mean by innovation? Essentially we are talking about change, and this can take several forms; for the purpose of this article we will focus on four broad categories (the 4ps of innovation).
1) Product innovation – change in the things (products / services) which an organization offers.
2) Process innovation – changes in the ways in which they are created and delivered
3) Position innovation – changes in the context in which the products/ services are introduced.
4) Paradigm innovation – changes in the underlying mental models which frame when the organization does.
For example a new design of car, a new insurance package for accident prone babies, a new home entertainment system would all be examples of product innovation. A change in the manufacturing methods and equipments used to produce the car or the home entertainment system or in the office procedures and sequencing in the insurance case would be examples of process innovation.
Sometimes the dividing line is somewhat blurred – for example a new jet powered sea ferry is both a product and a process innovation. Services represent a particular case of this where the product and process aspects often — for example is new holiday package a product or process change.
Innovation can also take place by repositioning the perception of an established product or process in a particular user context.
For example an old established product in the UK is Lucozade – originally developed as a glucose based drink to help children and invalids in convalescence. These associations with sickness were abandoned by the brand owners. Smith Kline Beecham, when they re-launched the product as a health drink aimed at the growing fitness market where it is now presented as a performance enhancing aid to healthy exercise. This shift is a good example of position innovation.
Sometimes opportunities for innovation emerge when we reframe the way we look at something Henry Ford fundamentally changed the face of transportation not because he invented the motor car ( he was a comparative latecomer to new industry) nor because he developed the manufacturing process to put one together (as a craft based specialist industry care making had been established for around 2-years) His contribution was to change the underlying model from one which offered hand handmade specialist product to a few wealthy customers to one which offered a car for Everyman at a price they could afford. The ensuing shift from craft to mass production was nothing short of a revolution in the way cars (and later countless other products and services) were created and delivered. Of course making the new approach work in practice also required extensive product and process innovation —for example in component design in machinery building in factory layout and particularly in the social around which work was organized.
Recent examples of paradigm innovation – changes in mental models – include the shift to low cost airlines, the provision of online insurance and other financial services and the repositioning of drinks like coffee and fruit as premium designer products. Although in its later days Enron became infamous for financial malpractice it originally came to prominence as a small gas pipeline contractor which realized the potential in paradigm innovation. In a climate of deregulation and with global interconnection through grid distribution systems energy and other utilities like telecommunications band width increasingly became commodities which could be traded much as sugar or cocoa futures.
From Incremental to radical Innovation
A second dimension to change is the degree of novelty. Clearly, updating the styling on our car is not the same as coming up with a completely new concept car which has an electric engine and is made of new composite materials as opposed to steel and glass. Similarly increasing the speed and accuracy of a lathe is not the same ting as replacing it with a computer controlled laser forming process. There are degrees of novelty in these, running for minor incremental improvements right through to radical changes which transform the way we think about.