Chapter 2

FORMS AND TYPES
OF INNOVATION
Learning Outcomes
At the end of this chapter, students should be able

to:
 Distinguish and describe the different forms of
innovation.
 Describe the different types of innovation.
 Analyze the impact of innovation types on
society, human behaviour and business.
Innovation Management All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3
Introduction
 Innovation is about the commercialization of ideas and inventions

and is not a simple and easy process. Much effort and time is
required to successfully commercialize inventions.
 Innovations vary in scope, time for completion and organizational
and societal impacts.
 Innovation consists of diverse activities and processes and different
people interpret innovation differently.
 One of the ways to reduce this difference in innovation
interpretation is to group innovation into various groupings.
 The grouping of innovation is based on two categorizations.
 The different forms of innovation, which indicates the application of the
said innovation
 The degree of newness or originality associated with the innovation
Forms of Innovation
 Product Innovation
 Service Innovation
 Process Innovation
 Component Innovation
 Marketing Innovation
 Organizational Innovation
 Social Innovation
 Business Model Innovation
Forms of Innovation
 Product Innovation
– Product innovation is embodied in the outputs of goods of an
organization.
– Product innovations include consumer products, such as smart
phones and personal health gadgets as well as industrial
products such as machinery and equipment.
– The long-term success of a product-driven organization depends
on developing new products.
– A product family is a set of individual products that shares
common technology and addresses a related set of market
applications.
– Product example: Hewlett-Packard, 3M, Black & Decker, and
Compaq
Forms of Innovation
Product Innovation

Forms of Innovation
– Service innovation is as important as product innovation,
although not as popular. It is usually in the form of new service
applications.
– Most of the time, service innovation is entirely a new business
model. This new business model will contribute to increased
revenue.
– The new service is able to generate higher productivity because
these services are provided with cheaper cost and faster
delivery.
– With appropriate online computer services, cheaper and more
productive methods could be offered to the public.

Forms of Innovation

Forms of Innovation
– Process innovation includes innovations to improve the
techniques or processes used by the organization and often
focuses on improving effectiveness and efficiency.
– Process innovations are considered to have a bigger influence
on society compared to product or service innovations even
though innovation is synonym with product innovations.
– Process innovation can be grouped into two types:
• Technological - related to new types of technology
• Organizational - related to new ways to organize work.
– Organizational innovations contributes to the bigger process,
such as reorganization of the entire industries.

Forms of Innovation

Forms of Innovation
– Component innovation creates an improvement in the
capabilities of the individual components in a system
– Component innovation does not involve a whole new design, but
does involve new or at least significantly different components.
– Component innovation is either about changing the relationships
that transform the entire system or swaps out one for another
that results in an incremental improvement.
– The key feature of component innovation is the use of new or
different components integrated with new components integrate
new technology, but the configuration remains unaffected.

Forms of Innovation

Forms of Innovation
– Marketing innovation focuses on the implementation of a novel
marketing concept in a firm.
– Involves the implementation of a new marketing method, which
results in significant changes in product design, packaging,
product placement, product promotion or pricing.
– The objective of marketing innovation is to increase firm’s
revenue and the purposes of marketing innovation are to fulfill
customer needs, to develop new markets, or to position the
firm’s product on the market.
– Marketing innovation is all about how the new tools are used to
get messages out to the target market effectively. This is to keep
existing customers and at the same time, attract new customers.
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– Management
Innovation
Forms of Innovation

Forms of Innovation

Forms of Innovation
– a dynamic process of creating or modifying an idea and
developing it to produce new groups of products, services,
processes, structures or policies.
– It encompasses how organizations and individuals manage work
processes in areas such as customer relationships, employee
performance and retention, and knowledge management.
– Continuous learning is a requirement of organizational
innovation success. The new knowledge is essential as the basis
for new ways of thinking, creativity and change.
– Organizational innovation therefore requires a culture of
innovation that supports new ideas and new ways of doing
business.
Forms of Innovation

Forms of Innovation
 Social Innovation
– Social innovation refers to new strategies, concepts, ideas and
organizations that meet both social needs and create new social
relationships.
– Social innovation can take place in the government, private and
non-profit sectors and across the boundaries between these
sectors.
– The social innovation emphasizes on three key dimensions:
i. The innovations are usually new combinations or hybrids of
existing elements, rather than being totally new.
ii. The practice involves cutting across organizational and
disciplinary boundaries.
iii. It develops a persuasive new relationship between individuals
and groups.
Forms of Innovation

– A business model must have three core elements to be of value
(1) a unique central idea that defines the business; (2) a grasp of
future market trends, and (3) profitability from an offering that
cannot be easily copied.
– The business model innovation refers to the recreation or
reinvention of a business itself. It is an important tool to capture,
design, innovate and transform the business.
– The business model innovation should be in connection with the
main business goals of the organization.
– A company with a new business model innovation will capture
new market segments.

Forms of Innovation

Types of Innovation
Innovations are usually differentiated based on the

degree of novelty. This types of innovation can be
applied on product, service or process innovations.
 Incremental
 Discontinuous
 Architectural
 Systems
 Radical
 Disruptive
Types of Innovation
 Incremental
– Incremental innovation improves on the design of the existing
components.
– These improvements are not radical changes to the components
but a gradual change.
– Most incremental innovations involve little technological change
rather than the creation of a totally new product.
– The product or services do not require much marketing effort and
has a lower failure risk.
– This type of innovation is the least likely to encounter consumer
resistance.

Types of Innovation
 Incremental

Types of Innovation
 Discontinuous
– Discontinuous innovation requires a significant change in
consumer behaviour.
– Consumers may want to use new technology because it creates
substantial benefits.
– Discontinuous innovations are new products perceived by
customers to be radically new and also usually require extensive
technological breakthrough.
– Example: MP3 player; cassette tapes; LP records

Types of Innovation
 Discontinuous

Types of Innovation
 Architectural
– Architectural innovation requires overall reconfiguration of the
design without changing the components.
– The changes are achieved in its design through the changes in
the underlying components and the ways those components
interact.
– The influence of architectural innovation is mostly on industry
competitors and technology users, where the influence is
widespread and complex.
– As an example, the transition of a bicycle from high-wheel to the
safety bicycle was an architectural innovation.

Types of Innovation
 Architectural

Types of Innovation
 Systems
– Systems innovation could be viewed as massive kinds of
activities which require significant resources from many
disciplines.
– It causes complete changes in both social and technical
dimensions, as well as interrelations between the two
dimensions.
– Social dimensions include values, regulations and attitudes,
whereas technical dimensions are infrastructure, technology,
tools and production processes.
– For example, communication networks from fixed line to mobile
phone; satellite operations; and the World Wide Web.

Types of Innovation
 Radical
– Covers both the newness and the level of change in the
innovation.
– Impact the most in terms of product and service
commercialization that consists of significant technological
contents.
– May offering wholly new customer benefits, provides significant
changes towards positive customer expectations.
– Example: the introduction of wireless telecommunication, where
product development requires new manufacturing and service
processes.
– This type of innovation requires newness in every facet of the
innovation.
Types of Innovation
 Radical

Types of Innovation
 Disruptive
– Disruptive innovation usually replaces an earlier technology.
– Usually, initial product/services introduced were inferior
compared to the existing product/services available in the
market, but simpler and convenient.
– Disruptive technologies usually are more flexible, cheaper and
applicable to bigger segments.
– Established and large companies are more accustomed to
sustaining innovations to meet the needs of high-end customers.
– These companies have to innovate, otherwise they leave the
door open for new entrants who will make advancements to their
products and ultimately compete for the high-end customers.

Product Classifications
 An Improvement to the current product

 A novel (New) replacement product
 A new-to-the-market product
 A breakthrough product
 A me-too product

 An Improvement to the current product

– These include improvements that are more than just cosmetic
and provide defined benefits to users.
– These products are able to sustain business as well as market
share.
– They are more than just slight improvements and may carry
innovations on the technology front or considerable change in
the design of existing products.
– Examples: copiers, personal computers and automobiles.

 A novel (New) replacement product

– The product serves the same purpose as the current product.
However, the development of the new product does not occur
very often. In every new product, significant improvement is
always focused on new features.
– One of the strategies employed is repositioning, where the
products are existing products, but targeted at new segments or
new markets to increase market share, to fight local brands, etc.
– Another strategy is cost reductions in which these products are
functionally similar to the existing product, but launched at a
reduced price.
– Marketing innovations is another strategy more into improving or
altering existing products in terms of packaging, branding and
easy availability, rather than a change in the substance of the
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itself.
Management
 A new-to-the-market product
– Entrepreneurs usually enter business with new products,
processes and services to the marketplace. These products are
absolutely new to the world and will create their own market.
– Significant improvements with these products are not born out of
a major invention but offer superior performance, hence
replacing existing products.
– Examples are Apple computers and Magnetic Resonance
Imaging (MRI).

 A breakthrough product
– Product or process breakthrough seldom occurs. Breakthrough
means coming up with something new (not to be compared to
any existing item). Usually the breakthrough product is in the
areas of technology and markets.
– Technological innovations are products that are really innovative
and have the highest degree of innovation. These products will
create new industries.
– Examples include 3M Post-it notes, gene technology, lasers and
facsimiles.

 A me-too product
– A me-too product is a product introduced into the market in direct
competition with one already in the marketplace (same
functions). The product may not even have extra features, but
has a better distribution system or delivery, even a better
marketing system.
– An example of a me-too product is Dell computers. Dell is
available via direct selling, which is completely different to that in
its class. Dell customers can make purchases via the official
website and Dell sends the order straight to the customer’s
home.

Summary
 The innovation types and forms outlined in this chapter are not
entirely watertight and there will be some overlaps.
 Judgments are required to decide the innovation category.
 What really matters is the outcome from the process of attempting
to categorize an innovation.
 The categorization of innovation and the form of categorization
indicates that innovations are not homogeneous.
 The categorization of innovation might be the best explanation to
the different responses to the introduction of new technologies.
 Systemic linkages between knowledge and the market known as
the genesis of innovation shall be discussed in the next chapter.


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FORMS AND TYPES

At the end of this chapter, students should be able

Innovation Management All Rights Reserved

 Innovation is about the commercialization of ideas and inventions

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 Business Model Innovation

Innovation Management All Rights Reserved

 Business Model Innovation

Innovation Management All Rights Reserved

Innovations are usually differentiated based on the

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 An Improvement to the current product

Innovation Management All Rights Reserved

 An Improvement to the current product

Innovation Management All Rights Reserved

 A novel (New) replacement product

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

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