I talk a lot about disruption and disruptive innovation. Often it is hard to tell the difference between them. To my mind there are three types of innovation that businesses commonly use.
The three types
All three types of innovation are important for the profitability of a company. I try to draw out what sort of innovation to use in different situations.
Efficiency innovation is all about making processes and systems work better so that value is delivered in the best way possible. This often means replacing people with machines.
Sustaining innovation is all about extending the life of a product or service. A company achieves sustaining innovation by adding features to make the product or service more valuable to the consumer. This is done so that more are sold, it performs better in a competitive market or it can be sold for a higher cost.
It is important to innovate in order to maintain growth for a company. Many companies focus on efficiency innovation because this helps profitability in the short term. Sustaining innovation is also common as it helps to maintain market share. The problem is that both of these are temporary fixes: there is a limit to efficiency. There should be a limit to new features.
Disruptive innovation looks to create value to a different set of customers, or non-customers. Sometimes it comes from combining existing products and services in new ways to create new markets. These can be radically different and set the company on a different path, but this is not always the case. The thing that excites me is that technology today is making disruptive innovation much easier and cheaper to achieve than ever before.
I have developed the concept of Vectors of Disruption to help companies combine technology in tried and proven ways. Using Vectors of Disruption you can power all three types of innovation.
The big win is in creating market disruption. Creating a new market that did not exist before or radically changing a market. This is not new. it has always existed. In order to do it you have to focus on disruptive innovation.