Choosing a Business Innovation Classification

by Juergen H Staeudtner

Choosing a Business Innovation ClassificationIdentifying the best way to innovate must include an analysis of the best business innovation strategy. This helps to focus resources on a common objective, to avoid ballast, and it also increases the likelihood of successful innovation. However, it is difficult to get an overview on available and proven techniques because many different classifications are around.

We were assessing different innovation classifications in order to come up with sensible business innovation strategy types and meaningful recommendations. In the following we compare some classifications with the three types that are found to be most lucrative.

Economically successful Innovation Styles

Three Innovation TypesWe decided to adopt the business innovation strategy nomenclature which Booz & Company defined in their well known Innovation 1000 survey. This classification provides only three innovation types, which makes it easier to understand the complicated matter.

According to Booz & Company this business innovation strategies show the best financial performance of large companies. The yearly survey is not restricted to the United States but it helps to remember that most winners are American corporations. Also each company only has one innovation type, although only large corporations were interviewed.

We differentiate:

  • Market Readers excel in the ongoing assessment of market potential. They know exactly what competitors offer and which innovations arise in order to capitalize on proven market trends.
  • Need Seekers are best in understanding consumer and customers (insight and analytics). They actively and directly engage with current and potential customers, and they are also quite good in assessing market potentials.
  • Technology Drivers have a detailed view of emerging technologies and trends and also understand product life cycles quite well. They drive technology forward and are driven by technology. Good technology drivers meet unmet needs of existing customers.

This means it is probably wrong to say that customers always matter most. Market Readers care more about their competition than about their customers, and they succeed.

More detailed Categories of Innovation Types

Nine Innovation TypesA couple of more detailed categories have been defined in recent years. The OVO and Agility Innovation Collaborative Innovation Reference for instance describes nine innovation types nicely so far:

We compared the parameters that characterize the different innovation types with our analysis model and found nice matches. There are some surprises however. For instance it makes sense to differentiate innovation which is driven by R&D departments from innovation which is driven by technology. This OVO and Agility model offers the best match to our classification we found.

Assessing the Doblin model of innovation types gets this clearer. There are many good ideas anchored in this business innovation strategy model, albeit it appears to not be complete. Doblin has a lot of very good approaches, like emphasizing alliances or brand building. However we think it is incomplete and neglects the importance of unmet customer needs or pure technical innovation.

Other approaches to categorize Innovation

Where Good Ideas Come FromA very interesting description of the sources of good ideas / innovation has been written by Steven Johnson. It shows many valuable sources of ideas and lists them, in the summary of the book, in a two-by-two over time. Johnson concludes that the fourth quadrant will be the most important source for ideas in our time.

The fourth quadrant means that most ideas will be brought up not by individuals, but networks and that they will origin without thinking about how to market them. This means it is very likely that we miss important innovations if we focus on how to market them.

Also, we must not forget disruptive or break-through innovation. Clayton Christensen has in fact written a series of very remarkable books. In our experience many companies have difficulties with disruptive innovation. Targeting new markets or completely changing business models is often perceived as high risk. Certainly it also is risky to not be disruptive and be outperformed by new market players.

For this reason it is beneficial that disruptive innovation is not mentioned explicitly in above business innovation strategy nomenclature, but it is associated to all innovation types. Market Readers almost never are disruptive as per definition – being disruptive means to do something different than the market. Technology Drivers and Need Seekers dare to be disruptive, but successful ones understand well that money can be earned with sustaining innovation too.

The Beginning: Innovation Sources by Peter Drucker

Seven Sources of InnovationOne of the first categorization of innovation types we embrace is the one Peter Drucker details in his book Innovation and Entrepreneurship.

When reflecting his remarks we found, that his seven sources of innovation fit quite well to our business innovation strategy grid. Peter Drucker emphasizes the needs of customers (he calls it process needs) and the market, but it gets quite clear that at least the sources Knowledge and the Unexpected encompass technology as well.

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Juergen H StaeudtnerJuergen H. Staeudtner is owner of Cridon, a consultancy and agency for innovation. He has held various positions in management consulting and in line organizations since 1993. He holds a masters degree in mechanical engineering, business administration and fine arts.