TYPES OF INNOVATION

OUTLINE

Concept of Innovation
Product Innovation, Process Innovation, Marketing innovation
Radical and incremental innovation
Sectoral innovation
Organizational innovation
Disruptive and Sustaining innovation
Inclusive, Frugal, and Grassroot Innovation
User-centered vs manufacturer-centric innovation
INNOVATION
As per Schumpeter, Innovations includes.
• New consumers’ goods.
• New markets.
• New forms of industrial organization that capitalist enterprise creates.
• New method of production or transportation.
Oslo Manual
(1997)
• Technological product and • Non-technical marketing and
process innovation (differential • Expanded scope to organizational innovation.
impact on the society). service sectors.
Oslo Manual Oslo Manual
(1995) (2005)
PRODUCT INNOVATION

• OECD (2005) defines product innovations as “the introduction of a good or

service that is new or significantly improved with respect to its characteristics or
intended uses.”

• It includes significant improvements in technical specifications, components and

materials, incorporated software, user friendliness or other functional
characteristics.

• Product innovation covers both goods and services.

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Examples of product innovations (OECD, 2005) are:
• Cameras in mobile telephones
• Fastening systems in clothing
• Breathable textiles
• Light but strong composites
• Environmentally friendly plastics
• GPS in transport equipment
• Household appliances
• Anti-fraud software
• Inbuilt wireless networking in laptops
• Programmable radiators or thermostats
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Product innovations can involve two generic types of products: goods and services.
Goods include tangible objects and some knowledge-capturing products over which ownership rights
can be established and can be transferred through market transactions.
Services are intangible activities that are produced and consumed simultaneously and that change
the conditions (e.g., physical, psychological, etc.) of users.
The attributes or experience of a service depend on the input of users.
Services can also include some knowledge capturing products.

Sources: OECD, 2018

 PROCESS INNOVATION

• Process innovation as defined by OECD (2005) refers to the “the implementation of a new or significantly
improved production or delivery method.”

• It also includes new methods, techniques, software and equipment in ancillary support activities.

• This kind of innovations are like installation of new or improved manufacturing technology, new
equipment required for new or improved products, etc.
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Examples of process innovations (OECD, 2005) are:

• Laser cutting tools.
• Automated packaging.
• Computer-assisted product development.
• Digitization of printing processes.
• Computerized equipment for quality control of production.
• Improved testing equipment for monitoring production.
• Portable scanners/computers for registering goods and inventory.
• Introduction of bar coding or passive radio frequency identification (RFID) chips to track materials.
• Introduction of software to identify optimal delivery routes.
• New or improved software or routines for purchasing.
• Accounting or maintenance systems.
• Introduction of electronic clearing systems.
• New or significantly improved computer networks.
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• Both new and improved business processes can be motivated by goals to implement business
strategies, reduce costs, improve product quality or working conditions, or to meet regulatory
requirements.
• A business process innovation can involve improvements to one or more aspects of a single
business function or to combinations of different business functions.
• They can involve the adoption by the firm of new or improved business services that are delivered
by external contractors, for instance accounting or human resources systems.

Sources: OECD, 2018

MARKETING INNOVATION

Marketing innovation is “introducing new marketing methods involving significant changes in product
design, product placement, and product promotion or pricing (OECD, 2005).
Objective of the marketing innovation is better addressing of the customer needs, penetrate new
market or new positioning a firm's product on the market with objective of increasing firm sales.
The implementation of a significant change in the design of a furniture line to give it a new look and widen its
appeal.
First introduction of direct selling or exclusive retailing
ORGANIZATIONAL INNOVATION
Organizational innovation is “implementation of a new organizational method in the firm's business
practice, organization or external relations”.
Organizational innovation improves the firm performance by reducing administrative and transaction cost
and the workplace satisfaction.
First introduction of management systems for general production or supply operations such as supply chain
management, business reengineering, lean production, quality management system.
First establishment of formal or informal work teams to improve access to and sharing of knowledge from different
departments, such as marketing, research and production.
First use of outsourcing of research or production.
NATURE OF INNOVATION

Innovation

Incremental Radical
 RADICAL/DISRUPTIVE INNOVATION
• A radical or disruptive innovation has a significant impact on market and on the economic activity of firms.

• Such innovation changes the structure of the market, create new markets or render existing products obsolete.

• It might not be apparent.

• In Schumpeter’s view “radical” innovations create major disruptive changes, whereas “incremental” innovations
continuously advance the process of change (Schumpeter, 1942).
Source: Radical and incremental innovation, Innovation Policy Platform
INCREMENTAL INNOVATION
• Incremental innovation concerns an existing product, service, process, organization or method whose
performance has been significantly enhanced or upgraded.
• For example,
• a simple product may be improved (in terms of improved performance or lower cost) through use of higher
performance components or materials
•a complex product comprising a number of integrated technical subsystems that may be improved by partial
changes to one of the subsystems.
• Incremental innovation are most prevalent.
• Radical innovation is generally a complex process, rather than a discrete event, and generally implies a difficult,
lengthy and risky process.
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• The diffusion of radical innovations nearly always depends on incremental improvements, refinements &
modifications, the development of complementary technologies, and organizational change.

• The contributions of incremental innovations to address socio-economic challenges are substantial and important
in development context.

Source: Radical and incremental innovation | Innovation Policy Platform

SECTORAL INNOVATION
•Innovation differs by sector.
•Some sectors are characterized by rapid change and radical innovations, others by smaller,
incremental changes.
•In high-technology sectors, R&D plays a central role in innovation activities, while other sectors rely
to a greater degree on the adoption of existing knowledge and technology.
•Low- and medium-technology industries (LMTs) are often generally characterized by incremental
innovation and adoption.

Source: Radical and incremental innovation | Innovation Policy Platform

 ORGANIZATIONAL INNOVATION

• Organizational innovation is “implementation of a new organizational method in the firm's business practice,
organization or external relations”.
• The activities oriented toward the organizational change can be consequently linked to the organizational
innovation (Tether & Tajar, 2008).
• It includes renewing the organizational systems, procedures, routines to encourage the team cohesiveness,
coordination, collaboration, information sharing practice and knowledge sharing and learning (Van der Aa & Elfring,
2002).
• Such innovation improves the firm performance by reducing administrative and transaction cost and the workplace
satisfaction.
OTHER CONCEPTS OF INNOVATION

•
DISRUPTIVE INNOVATION

•Disruptive innovation generates new markets and values, in order to disrupt existing ones.
• Significantly alter and improve a product or service in ways that the market did not expect.
•By discovering new categories of customers,
•By lowering costs and enhancing quality in the existing market.
• Reinvention of technology is also considered as disruptive innovation.
• Simply invention of all together.
• Examples: Airbnb and Uber.
 SUSTAINING INNOVATION
• Sustaining innovation focus on growing by improving products, extending their function, and targeting their
innovations toward the higher end of the market.
• To improve existing products.
• The “innovator’s dilemma”

Sustaining • Between holding onto an existing market by doing the same, yet slightly
Innovation better.

Disruptive • Capturing new markets by embracing new technologies and adopting

Innovation new business models.
 INCLUSIVE INNOVATION

• Inclusive innovation, i.e., innovations in products (goods and services) and/or processes and product delivery
systems, which address the needs and improve the welfare of the excluded due to poverty, handicap or location.
• Inclusive innovation may foster inclusion in production, in consumption, in the innovation process itself and by
promoting the agency of the excluded.
• They may also contribute to environmental and social sustainability
• Inclusive innovations are gaining momentum in some emerging markets such as India and China, with
governments having declared it a policy priority.
• Most of the inclusive innovations have not reached enough scale to make a significant impact.
Source: https://www.innovationpolicyplatform.org
CONTINUED …
• Inclusive innovation impact on people at the bottom of pyramid.
• Frugal innovation.
• This innovation may include:
• Reverse diffusion
• Reverse engineering
• Juggad: Developed by local or indigenous people for their self-use or for the use of local
community. These are quick fix solutions which are only temporary and not long term.
• Repurposing
 FRUGAL INNOVATION
• Frugal innovation is the ability to generate considerably more business and social value while significantly reducing
the use of scarce resources.

• “Doing more with less”.

• Frugal innovation is a whole new mindset, a flexible approach that perceives resource constraints not as a debilitating
challenge but as a growth opportunity.

Sources: Radjou and Prabhu, 2013

 CONTINUED …

• Emerging markets such as India, China, Africa, and Brazil are a breeding ground for frugal innovation.
• Jugaad Innovation (Radjou and Prabhu, 2013) create frugal solutions that deliver more value to customers at lower
cost.
•Examples
• Kenyans today rely on M-PESA, a service that enables them to save, spend, and transfer money using their cell
phones.
•SELCO provides solar energy at very low prices to over 125,000 households in remote Indian villages.
•Gustavo Grobocopatel, an Argentinian farmer, who overcame scarcity of land and skilled labour by subcontracting
all farming work to networks of small firms.
 GRASSROOT INNOVATION

• Developed by individuals or groups at the grassroots level either for their own use or for the use of their community.
• Objectives to strengthen the grassroots technological innovations and outstanding traditional knowledge.
• To make their work easy and solve personal problems or communal problems (Kumar & Bhaduri, 2014; Rao, 2006).
• National Innovation Foundation (NIF) in India: Its mission is to help India become a creative and knowledge-based society by expanding policy and
institutional space for grassroots technological innovators.
• NIF scouts supports and spawns' grassroots innovations developed by individuals and local communities in any technological field, helping in
human survival without any help from formal sector.
• NIF has pooled a database of over 3,25,000 technological ideas, innovations and traditional knowledge practices (not all unique, not all distinct)
from over 625 districts of the country.
Examples are:
• Walnut processing
• Solar ironing carts
• Mango variety round the year
• Seed extractor
 USER-CENTERED VS MANUFACTURER-CENTRIC INNOVATION

• Users that innovate can develop exactly what they want, instead of relying on manufacturers
• Users are firms or individual consumers that expect to benefit from using a product or a service.
• Manufacturers expect to benefit from selling a product or a service
•The manufacturers using patents, copyrights, and other protections to prevent imitators from free riding on their
innovation investments.
•In this traditional model, a user’s only role is to have needs, which manufacturers then identify and fill by
designing and producing new products.
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• The “functional” source of innovation depends upon the functional relationship between innovator and
innovation:
•An innovation is a USER innovation when the developer expects to benefit by USING it;
•An innovation is a MANUFACTURER innovation when the developer expects to benefit by SELLING it.

• The user and manufacturer categorization of relationships between innovator and innovation can be extended to
specific functions, attributes, or features of products and services.

• For example, householders are the users of the switching attribute of a household electric light switch—they
use it to turn lights on and off. What about electrician?
 CONTINUED …

•Neglect of user innovation in public statistics and innovation survey.

•Producers' innovations are advertised.
•Producers have no motivation to give credit to user.

• Recent drivers
•Internet and Social media networks.
•Facilitator and Main sources of User-driven innovation-Linux.
•Firefox and digital products based on user-generated content.
 EXAMPLES
Printed
Industrial circuits CAD software
products

Library information systems

Surgical equipment
Apache OS server software security features
Consumer goods
Extreme sporting equipment
Mountain Biking equipment
UNDER THE RADAR INNOVATION
• Certain innovative activities, projects, or advancements that occur discreetly or remained as unnoticed
by from the mainstream attention.

• It involves efforts that may not receive widespread recognition or visibility but still contribute
significantly to advancements and improvements.

• Such kind of innovation is also called as Quiet innovation, Low-profile innovation, Unrecognized
innovation, Unheralded innovation, Subtle innovation, Unnoticed innovation, Hidden innovation.

• E.g. certain surgical techniques, or treatments for specific conditions, biodegradable materials, eco-
friendly packaging, etc.