Four Types of Innovation for an Organizations

Every organization needs to innovate. But what type of innovation to give priority to? This simple matrix with four types of innovation may help.

Innovation basically means introducing something new (‘nova’). This “something new” can be anything and that’s where the problem starts. In two ways.

- First, by an overemphasis on product (or service) innovation, thereby not giving enough attention to other types

- Second, by getting overwhelmed by all the innovation opportunities that are out there.

To solve both problems at the same time, it helps to gain some clarity on what types of innovation there are. To that end, I’ve created this simple 2x2 matrix containing what I think are the four most important types of innovation for every organization.

Let me first explain the two axes. The first is the inward-outward axis. Outward-oriented innovations are those innovations that are mostly targeted at the market, at doing something new for customers. Inward-oriented innovations, on the other hand, are innovating the organization itself.

On the second axis, Operational innovations are typically quite technical and tangible, and focused on the practical work and output. Strategic innovations, on the other hand, regard how the organization is functioning overall and how it creates value.

This leads to the following four types of innovation:

1. Product Innovation: The most well-known type of innovation in which you change, improve or renew an organization’s products and/or services, or create new ones.

2. Process Innovation: Often efficiency and quality-driven to improve the way the organization works on a day-to-day basis. This can concern any type of process.

3. Business Model Innovation: A newer type, focused on changing how the organization creates and captures value. Often focused on developing new revenue models.

4. Management Innovation: Less commonly known but critical, this type concerns innovating how an organization is organized, managed, and led. Often implies decentralization.

All four types are important and with this matrix you can start managing your innovation portfolio. Ask yourself questions like: Do I have sufficient initiatives in all quadrants? And, which type of innovation should get priority now?

Resource Person: Jeroen Kraaijenbrink

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