Three Types Of Corporate Innovation

It’s not uncommon for minds to automatically think about technology when they hear the word “innovation.” However, while technology can be a catalyst for innovation, it’s not necessarily a form of innovation on its own. When it comes to corporate innovation, startup expert Steve Blank believes that there are three different kinds of innovation that can happen. Below is a video of Blank explaining the three ways that corporations and businesses can really innovate; disruptive innovation, business model innovation, and product innovation.

Before you watch him explain the difference, let us quickly break them down for you.

Disruptive Innovation

In the world of business, the term “disruption” gets thrown around a lot. But what does it actually mean? Disruptive innovation are the ideas that change the way markets, and sometimes the world, works. For example, Uber is often thought of as a disruptive company because they changed the way that people move around cities. Yes, it’s much like a taxi service, but it can be ordered on demand from your phone, gives dynamic pricing, and all the transactions happen behind the scenes, making the experience almost frictionless for riders. Now, Uber and companies like it are the norm for how people get around in major cities around the world.

While this may be a type of innovation that companies strive for, it’s incredibly hard to do. Disruptive innovation is a lot of blue sky thinking and then tinkering and testing to see if and how it can actually work. Blank believes that disruptive innovation doesn’t belong in a business or functional unit within a company. This type of innovation needs its own space and time to make things happen. Because you can’t put this type of innovation challenges on to teams that already exist to perform other functions, wanting to create disruptive innovation is a great reason for a company to start their own innovation lab.

Business Model Innovation

Unlike other forms of innovation, Business Model innovation isn’t about creating something new. Instead, it requires looking at what your company is already doing and thinking about it in new and different ways, making small tweaks along the way to find a brand new way of doing business. This one can sometimes be a bit hard to explain, but Karan Girotra and Serguei Netessine say it very simply and eloquently in their article Four Paths To Business Model Innovation :

“At its simplest, it demands neither new technologies nor the creation of brand-new markets: It’s about delivering products that are produced by technologies to markets. And because it often involves changes invisible to the outside world, it can bring advantages that are hard to copy.”

As an example of business model innovation, Blank points out how Apple was once actually known as “Apple Computers.” However, along their journey, they started to create products far beyond just computers (through product innovation, which we will get to next). When they finally stepped back and took a look at what they were currently doing, they realized that they were so much more than a computer company, so they changed their name and their entire business model to better fit who they were and where they saw themselves going. Blank also tells a good story of how Pepsi Co innovated on their business model, but you’ll have to watch the video for that one.

Product Innovation

Product innovation is probably the most common type of innovation and what most people think about when they hear the word. Product innovation doesn’t mean changing your entire business or the world, but instead, it has to do with changing and improving your offerings. This can be done through two subgroups of product innovation; radical and incremental innovation. We can use the Apple example started above to explain these better.

One of the first big hits Apple had beyond building computers was the iPod. The iPod was an MP3 player. Apple did not invent MP3s (so this wasn’t a disruptive innovation), but they did figure out a great way for people listen to them. For Apple though, this was very different than products they were making previously. For them, this was a radical product innovation.

The iPhone was also a radical innovation for the company. The first iPhone was released in 2007, and since then, at least one new model of the iPhone has come out every year. Every time Apple puts out a new iPhone they are building on the previous model to make it better and better. This is incremental innovation. Incremental innovation means building on or slightly tweaking an already existing product and putting it out to the market as something that is “new,” “updated,” or “better than ever.”

Hopefully, this short primer gives you a good idea of the different kinds of corporate innovation that intrapreneurs and companies can think about. Here’s Steve Blank explaining them in his own words:

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