Innovation is a way of practically applying new business ideas by creating a product or a service to fulfill unmet customer needs. There can be four innovation types identified in the modern technologized world. A person or a company can come up with a new product, service, business model, process or they can simply improve an existing product with new modifications.
Innovation ideas can come from inside the organization as well as outside the organization. It can be through experience, brainstorming, new thinking, and researches. No matter how the idea is initiated, it can be helpful as long as it can add value to the product and innovation management plays an important role in that. Apart from that, the innovative idea should be able to satisfy a currently unsatisfied customer need in the market segment.
There are various types of innovation that can have an impact on the product or service. the most commonly used innovation types differentiation is between four levels of innovation.
This is one of the most common innovation types that can be seen in the modern business world. Under this innovation type, the business organizations use the existing market and existing technology to introduce innovative production. This is done by improving an existing product by adding more features to it or changing the existing design of the product by adding value to it. This can be considered as least risky of all the innovation types. Since the customers are already aware of the product, creating an improvement in the product will most likely create a positive impact on the customer demand as they can gain more value from the product.
The most common example for incremental innovation is the mobile phone market where the phone companies use innovation to improve the features of mobile phones and release aiming at the same market segment.
According to disruptive innovation, businesses are using new technology for products or services and introduce it to the existing market. The companies are using new technologies, business processes, or disruptive business models in the same existing target market. There is a possibility that the new technologies can create confusion in the target market customers in the initial stage. However, the business has the possibility of taking over the target market after some time due to the new technology advantages they have.
The introduction of e-commerce websites can be identified as a perfect example of disruptive technology. They use new technology to reach the existing market segment.
This is the innovation type where the businesses try the existing technologies in new target market segments. Tech companies such as Google and Amazon are using this innovation type mostly. They use the existing technological expertise and domain and apply those in a different market segment as a way of opening new opportunities in the market and expanding the customer base for the product.
This innovation type can be a risky model to a certain extent as reaching a new market can create confusion in the target market. Due to this reason, architectural innovation needs a higher amount of researches on the new target market.
Under radical innovation, businesses approach new markets using new technology for products. This is considered the riskiest out of all four innovation types. Even though this is considered the most stereotypical way that people see when it comes to innovation, this is the rarest form of innovation in the business world due to the high risk involved. The introduction of Netflix can be identified as an example of radical innovation. Since it entered a market and took over the home entertainment industry by innovative changes.