Types of Innovation Systems: Incremental to Architectural

From incremental innovation to architectural innovation, discover the 4 key types of developing robust corporate innovation with Studio Zao.

A recent study into the key success factors of high-growth companies revealed that 62% plan to invest in technologies and initiatives that lead to higher rates of innovation.

Despite this relationship between a company’s willingness to innovate and its competitiveness, many businesses struggle to build and maintain the capacity to innovate over the long-term. Companies’ inability to execute innovation initiatives often stems from weak or unstructured innovation systems that don’t align with long-term objectives.

So, how can your business align its strategic goals while also promoting an innovative culture and leveraging intrapreneurial talent?

Join us as we take a deep dive into four key types of innovation to help your organisation create a tailor-made innovation system that works for you.

1. Incremental Innovation

For most forward-thinking businesses, incremental innovation should form an integral part of their company DNA. Incremental innovation essentially involves increasing the value of existing technologies and processes to enhance user experiences for existing customers.

Coca-Cola is a great example of incremental innovation in practice. The long-established brand has gradually innovated through introducing new product line extensions like Coca-Cola Cherry and Coca-Cola Zero to keep the brand up to date and aligned to emerging consumer trends.

While it’s easy to let your innovation efforts plateau after building a successful product, incremental innovation is necessary for helping your business move with the times and improve customer experiences through a series of baby steps. Gradual enhancements of internal processes and operations also help your business cut costs, improve efficiency, reduce time-to-market, and boost employee satisfaction.

Incremental innovation provides the strategic advantage of making it quick and easy for your organisation to execute new initiatives. So-called ‘quick wins’ are a powerful way to spread confidence across your teams, test the water, and demonstrate the benefits of enhancing your existing business model — especially if your organisation is resistant to radical change.

2. Disruptive Innovation

Disruptive innovation involves introducing new technologies and processes to develop innovative products or services for your existing market.

This concept relies on the premise that if you already have a loyal customer base, innovation could open doors to additional revenue streams. Disruptive innovation could also cement brand affiliation by enhancing your product/service offerings.

For example, Apple recently created its own TV production studio to offer customers exclusive access to the latest shows and Amazon invested in drone research to provide super-fast delivery to existing customers. Disruptive innovation, like Apple and Amazon’s recent ventures, hook customers into an existing ecosystem and help fight off market competition.

While many businesses make the mistake of trying to reinvent the wheel, disruptive innovation doesn’t necessarily require extreme changes.

3. Radical Innovation

Radical innovation is where the real fun begins. With radical innovation, businesses give birth to entirely new technologies to new customer segments which allows them to dominate entire markets and pave the way for drastic change.

One of the biggest challenges of radical innovation is identifying market gaps and developing new technologies to solve specific pain points. If your business can separate itself from rivals through radical innovation, you’ll have free rein to dominate a niche market.

Whether it’s a FinTech company making its $3.5 billion fortune by reducing the cost of international transaction fees or Steve Job’s shaking the world with the release of the first iPhone in 2007, radical innovation can help companies take huge leaps forward and change the direction of entire industries.

While we’ve become accustomed to these enterprising success stories, it’s important to acknowledge the risk-return tradeoff of most radical innovations. The potential for high-reward is prefaced by the guarantee of a high-risk undertaking.

Pivoting your business model or investing in a new venture is inherently risky business. Research suggests that 95% of all product innovations fail, so adopting a lean startup model to systematically reduce risk and collect evidence about your experiments is vital for sustainable growth.

4. Architectural Innovation

Last but not least, architectural innovation refers to a business adapting its existing technology to fill a gap in a new market.

Architectural innovation is particularly exciting if your business is geared towards economies of scope. Adapting to meet the needs of a new market means you can diversify your revenue streams and boost sales in a cost-effective manner.

If we use the early days of Amazon Web Services as an example, the e-commerce giant identified licencing web servers and cloud-computing services as an opportunity to generate additional revenue streams, without investing in new resources or technical expertise.

How to Choose the Right Innovation Type For Your Organisation

Every business has a unique set of requirements, assets and limitations that determine the most appropriate innovation systems to help them thrive. Whether it’s finding a system that suits a remote workforce, leveraging economies of scope by utilising existing inventories or tailoring your approach to convince reluctant individuals about the benefits of change, your innovation system must reflect your company DNA.

Striking a balance between different approaches in your innovation portfolio is vital for spreading your bets and systematically reducing risk through a series of acute experiments.

Yet, the backbone of any successful innovation systems is combining strategy alignment with a pro-innovation culture and intrapreneurial talent. Here at Studio Zao, we help organisations create bespoke innovation systems to align stakeholder goals, identify strategic gaps in the market, understand company ambitions, and create a balanced approach that we can weave together to meet their specific needs.

We provide advice on how much focus and investment should be directed towards different types of innovation and how you can develop internal procedures to optimise the execution of your innovation system. Specifically, we’re interested in how your business can embrace intrapreneurship and enable powerful innovations from within. Check out our white paper to learn more about how to unleash internal talent to develop and execute bespoke innovation systems.