In this video, you will discover a definition of innovation, the different types of innovation and the

stages of innovation.

Innovation can be defined as the multi-stage process whereby organizations transform ideas into
new or improved products, services or processes, in order to advance, compete and differentiate
themselves successfully in their marketplace.

It’s important to emphasize that an innovation should be perceived as new by users. It’s also
necessary to distinguish innovations from inventions. Innovations are commercial and practical
applications of ideas or inventions.

The different forms of innovation can be classified in several ways: according to their output, their
level of novelty and their source.

According to their output, we can distinguish, among others, the following types of innovations:

 Product innovations reflect the development of new or improved products, such as

phablets, this new class of mobile devices designed to combine the size format of
smartphones and tablets.
 Service innovations refer to the development of new services, such as Airbnb, an online
community marketplace that connects people looking to rent their homes with people who
are looking for accommodations.
 Process innovations are the implementation of new or significantly improved processes in a
company, such as the use of a new 3D modeling software for developing new products.
 Organizational innovations describe, for example, the creation of a new division in a
company.
 Finally, business model innovations refer to novelties in the plan implemented by companies
to generate revenue and to make a profit from operations. For example, over the past
decade “freemium”—a combination of “free” and “premium”—has become the dominant
business model among internet start-ups and smartphone app developers. Users get basic
features at no cost and can access richer functionality for a subscription fee.

In the MOOC Creative Box we are focusing on product and service innovations and you will discover
how companies generate product and service innovation ideas.

Secondly, according to their level of novelty, we can distinguish incremental and radical innovations.

 Incremental innovations reflect small continuous improvements. For example, new

generations of smartphones have new features but don’t modify deeply how consumers use
this product.
 Radical innovations are different. They represent a drastic change in the way that the
product or the service is consumed. Autonomous, driverless cars, which are capable of
sensing their environment and navigating without human input, are radical innovations.

Finally, according to their source, we can distinguish technology-push and market-pull innovations.

 Technology-push innovations are built on scientific discoveries or innovative technologies,

which are used to develop new product ideas. These innovations are developed by engineers
and scientists. For example, bioscience companies carry out chemistry research in the

Mooc Creative Box – ESSCA School of Management

www.essca.fr
 expectation of producing a chemical compound that might become a commercially
exploitable drug. In the Automotive industry, Laser-Based Lighting Devices for cars are
illustrative examples. While technology-push innovations are widely used in several
industries, such as automotive and pharmaceutical industries, their success is not guaranteed
as they don’t always meet market needs.
 That’s the reason why Market-pull innovations are more and more widely used. Market-pull
innovations are initiated by marketing experts who propose new ideas based on the
observation of customer needs. For example, in food industries, the role of the customer is
powerful and it leads to the development of market-pull innovations, such as the Coca-Cola
Life. This is the Coca-Cola Company’s first reduced-calorie sparkling beverage which is
sweetened with cane sugar and stevia leaf extract to allow 35 percent fewer calories than
other leading colas. The company has developed this innovation in order to meet customer
needs for healthier foods and drinks.

In our MOOC, we will concentrate on market-pull innovations which guarantee a better market
success.

After discovering the different classification of innovations, let’s explore the stages of innovation.
Stages of innovation refer to all the steps taken during an innovation process which usually start
from idea generation and end with the market entry.

Idea generation is the first stage and includes activities to state consumer needs, to identify gaps in
the market and to generate several innovation ideas.

Then, during the idea screening, the company decides which ideas to pursue and which to discard,
considering, for example, competition, needs of the market and the strategy of the company. The
technical feasibility of the ideas, as well as resources they will require in development, should also be
taken into account.

Then, during the phase of concept testing, companies estimate the market’s reaction to the new
product.

The objective of the next phase, the business analysis, is to establish the relevant price level for the
innovation and assess its potential profitability.

After business analysis, marketing experts establish the marketing plan and suggest improvements
for enhancing the marketing mix.

Then the company markets innovation and closely monitors this activity in order to make
modifications if necessary.

It’s important to highlight that only a very small number of innovation ideas will be turned into a new
product or service and actually launched on the market.

It’s also necessary to add that creativity tools and techniques can be used at each stage of
innovation.

Our MOOC centers on the stage of innovation idea generation and business analysis including the
assessment of the relevant launch price of an innovation.

To complement this video, we recommend reading the book “Innovation Management and New
Product Development” which is the reference book of this MOOC.

Mooc Creative Box – ESSCA School of Management

www.essca.fr