ISL456U-TECHNOLOGY AND INNOVATION MANAGEMENT
Chapter 2: Types of Innovation
Introduction
Innovations mainly vary based on scope, effects, and technological nature. As such, the sources of innovation may vary greatly, as can their influence on their field or organizations. While there is no general taxonomy to describe different types of innovations since there are strong links between each type of innovation, certain types are prevalent in management literature:
• Product versus process innovation • Radical versus incremental innovation • Competence-enhancing versus competence- destroying innovation • Architectural versus component (modular) innovation
Product Innovation Versus Process Innovation
The scope of the innovations is determinant in the distinction between product and process innovations. In other words, a product innovation is forming a new product category or implementing alterations to existing products for the benefit of customers, process innovation is defined as tools, devices, and knowledge in throughput technology that mediate between inputs and outputs (Ar & Baki, 2011).
Due to this distinction, product innovation refers to a new product, commercialized invention or artifact while process innovation refers to new factors such as systems and techniques to increase product quality or production – essentially to increase efficiency and effectiveness within an organization.
Product innovations are directly visible to customers, while process innovations are not experienced directly and are only observable by the consumers through the outcomes of those innovations. Hence, the consumer may be immediately aware of a new product or service, but will only gradually feel the effects of process innovations since they mainly target cost improvements, efficiency and effectiveness.
Despite these distinct characteristics, process and product innovation are closely tied to each other as well and the nature of this relationship could be as follows:
• New processes may lead to the introduction of new products and services • New products and services may lead to the introduction of new processes • A product innovation for one company may simultaneously be a process innovation for another
Radical Innovation Versus Incremental Innovation
The degree to which an innovation represents a departure from existing practices may be used to measure whether
an innovation is radical or incremental. A radical innovation would be both now, and different.
At this point it is important to clarify that this newness may be to a specific business, to the industry as a whole, a country, or the whole world. Similarly, the more an innovation differs from existing practices, the more radical it is. Conversely, whey an innovation is minutely different than the status quo, it is considered an incremental innovation.
While making this distinction is simple to understand, it is difficult to define since the degree of innovation may be relative to the person, industry, organization etc. and how this innovation is perceived. Similarly, the radicalness of an innovation is also relative in terms of time, since the knowledge base related to it increases making this innovation more common and less radical. Therefore, it may be stated that while radical innovations are focused on developing new technologies, markets, business models etc., incremental innovations focus on improving existing systems and products to make them better, cheaper or faster.
While radical and incremental innovations are clearly
differentiated, they are also somewhat connected in that over time, radical innovations often follow a series of incremental innovations. The characteristics of radical and incremental innovations may be summarized as follows:
Incremental innovation:
• Continuous (linear improvement of value acquired by the customer) • Based on old technology • Dominant design unchanged • Does not lead to a paradigm shift • Implies a low level of uncertainty • Improvement of existing characteristics • Existing organization and qualifications are sufficient • The result of a rational response or necessity • Driven by market pull (important in the advanced stage of technology)
Radical innovation:
• Discontinuous (with or without predecessor; essential, nonlinear improvement obtained by the customer) • Based on new technologies • Lead to a new dominant design • Can lead to a paradigm shift • Implies a high level of uncertainty • Introduces a whole new set of performance features • Requires education, now organization and skills • Result of chance or R&D policy, not necessity • Driven by technology (important in the early stage of technology)
Competence-Enhancing Innovation Versus Competence-Destroying Innovation
When an innovation builds on the existing technology, knowledge and competencies, it is considered a competence-enhancing innovation. When, however, an innovation replaces a technology or method, the organization’s competences are rendered obsolete and is therefore considered to be a competence-destroying innovation. This is often the case when an innovation is radical or disruptive. For example, while central processing unit (CPU) architectures have evolved over time, microprocessor technology has revolved mainly around x86 or x64 architectures and instruction sets. Therefore, the existing knowledge base for programming has been largely sufficient for the past few decades. Conversely, the introduction and proliferation of digital photography has rendered the tools and methods of analog photography largely obsolete. Competence-destroying innovations such as the shift from analog to digital have the potential to change the structure of a whole field or industry, as companies that fail to adapt to this new knowledge base face existential threats that may lead to their collapse. Despite the fact that both types of innovation are associated with system-wide organizational change, competence- destroying innovations are negatively associated with incumbent performance while competence-enhancing innovations are positively associated with incumbent performance. Competence-destroying innovations may also be subcategorized as new product classes, and product substitutions. These are exemplified below.
New product classes:
• The introduction of airlines in transportation • The invention of cement • The invention of the printed press
Product substitutions:
• The transition from steam to diesel and electric locomotives • Airlines moving from piston to jet engines. • The use of transistors instead of vacuum tubes in computing
Similarly, competence-enhancing innovations may be subcategorized based on major product improvements and incremental changes, as exemplified below.
Major product improvements:
• The transition from jet engines to turbofan engines in airlines • Recyclable packaging materials • The introduction of electric typewriters as opposed to mechanical typewriters
Incremental product changes:
• Numerical control machine tools and CNC machines • VHS and Beta magnetic recording tapes
Architectural Innovation Versus Component Innovation
A systems approach posits that all entities are actually systems that are composed of components, and each component is also another system of components itself, which continues until a single unit or element of a system is reached. For example, a bicycle is a system comprising of a frame, wheels, tyres, a seat, brakes etc., and each of these components is also a system of components: the seat is a system of components including padding, a metal or composite stem, a metal or plastic frame, a covering material made of leather or synthetic fiber and so on. Innovation in one or more components that does not significantly influence the overall system is known as a component or modular innovation. The introduction of carbon fiber as a stronger, lighter construction material has allowed bicycle seat stems to become lighter and stronger but has not significantly altered the general shape and function of the bicycle seat, or bicycle as a whole. These kinds of innovations are easier to conduct, and merely require knowledge or expertise on specific components.
Architectural innovations are disruptive in nature, as they require changes to the whole configuration of the system as well as how the components interact with each other. Therefore, architectural innovations require an understanding of the whole configuration of the system as well as how specific components interact with each other and the system as a whole.