Innovation has become a buzz word for many business gurus. It is being used as a key performance indicator (KPIs) for measuring business progress. Yet, innovation is actually being defined more in terms of how it impacts a company and how the impact is measured rather than what the KPIs are for. Innovation can be defined by Mark Levinson and Robert Kaplan as an “increment in the standard of living of the population” – pitting the new against the old or the familiar. Innovation can also be defined as “a set of human activities and reactions which tend to substantially alter the rate of progress of an activity”.
As we said in an earlier article on innovation management, when people refer to innovation they are usually referring to different types of innovation. The purpose of this article is to discuss how each of these different types of innovation can help to improve your business. Innovation can be thought of as a set of activities which have an effect on a company and which, if successful, can create new market opportunities. They can be disruptive, introducing radical change, or both. Innovation can also be a process in which something new is developed and used in an enterprise, or an event where something old or obsolete is modified or made better. Whatever the activity, innovation is most often associated with risk and change; therefore, creating an innovative culture, promoting open communication lines, and involving employees in the process of innovation are all strategies to manage incremental innovation.
Disruptive innovation occurs when new ideas or concepts are introduced into an enterprise that change and create a radical shift in the way things are done. Examples include the invention of the telephone, radio, television, or internet. These kinds of innovations require immediate and significant adaptation to existing practices, policies, and procedures. While such disruptive innovations can create great value, the drawback is their steep price and their potential for creating large-scale conflict. This may result in high costs and reduced profit; however, such cost-savings may eventually create a net positive effect by creating larger markets and reducing the price tag on many goods and services.
Integrative innovation occurs when new ideas are combined with existing knowledge or practices. For example, innovations in manufacturing and research, such as those related to advanced manufacturing, scientific research, and development, are considered integrative. Similarly, innovation can also occur within established procedures or processes, such as those related to the design of products and services. While many businesses do not consider these forms of integrated innovation, they are a vital part of ensuring the success and profitability of any business.
Price leadership is related to a company’s ability to control the cost of introducing new innovations into the market. The primary function of pricing is to provide customers with a sufficient amount of choice to make a decision as to the course of action that they will take. Therefore, a company that has a strong price leadership position is more likely to attract and retain customers, which can lead to overall increased profitability. Additionally, companies that have an established reputation for providing low prices for products and services will have an advantage when it comes to competing with other companies for new business.
These four aspects can be combined to highlight an overall picture of innovation. However, it should be noted that these concepts cannot be used in a vacuum without other specific factors. In particular, a company must have a plan that clearly identifies the purpose of the innovation, the steps required to bring it to market, and a realistic assessment of the cost of implementation. Furthermore, people need to understand the risks associated with introducing new ideas, and need to understand the benefits that they will achieve through those innovations. Only then will a successful innovation be undertaken.