3 Types of Innovation Changing the Future of Business (2024)

Have you ever wondered why some businesses are more successful than others? You may know some for their products, services or other characteristics such as their brand loyalty and engaging ad campaigns. However, one common characteristic these businesses possess is their ability to embrace innovation and creativity.

These businesses include innovative leaders such as Tesla and Meta, which are relatively new companies that have creative business models, as well as Apple and Amazon, which are blue-chip companies that have stood the test of time. Ultimately, innovation is a crucial component in great business strategy that allows companies to adapt in a developing economy.

What is innovation?

Innovation is the process an individual or organization undergoes by developing new products, ideas or methods to solve a problem. Concisely, something is innovative if it’s new and creates value.

An example might involve a company creating cutting-edge technology to accelerate the manufacturing of products. While it may be used as a catch-all term, there are many types of innovation a company might incorporate into their business model.

The 3 key types of innovation

There are various ways a company can innovate and it’s often applied to three general categories: product, process and business model innovation. Businesses should consider implementing these categories in their business strategy.

1. Product innovation

Every year, millions of products are produced by manufacturers for people to use. These products can range from everyday things to innovative upgrades on previous products. If you're using a compact touchscreen phone rather than a brick phone, that’s product innovation. Self–driving cars are also innovative. So, why do companies introduce new products?

Product innovation is the adaptation and development of existing products with the purpose of improving the overall experience for the user. The more innovative products the businesses can deliver, the more positive customer satisfaction and feedback they receive — this helps them stay relevant in an ever-changing society. As a company’s relevancy grows, so should their products.

With NJIT’s mini-mba you can learn more about why companies value product innovation and how to bring your creative and innovative ideas to your company.

2. Process innovation

Process innovation refers to how a business produces, distributes and sells products.

An example is the assembly line, which is often credited to Henry Ford, founder of Ford Motor Company and business innovator. Before the assembly line, manufactured goods were mostly assembled by individuals who would create different parts which would then be brought together at the end for the final product. The introduction of the assembly line created a continuous workflow that accelerated production time for Ford’s company, leading to reduced production costs and higher quality products over time.

The main difference between process and product innovation is that it’s not as noticeable to consumers. Although process innovation is often underappreciated given that the changes are not seen, it can help facilitate product innovation.Process innovation can help a company reevaluate its production methods to improve cost, materials, equipment, quality of products and productivity of workers.

3. Business model innovation

Business model innovation is the process in which a company enhances its business model to create value. Businesses can create value by evaluating their choice of audience, revenue model and method of sale for their products or services.

For example, a company may decide that rather than producing makeup, they want to make hair styling products. The company then assesses how their products are sold, marketed and distributed. At first, the company may decide what price point the hair styling products should be at, and then change it after a few months of data is collected. Business model innovation revolves around a company's determination of what methods of business best fit their value proposition.

Although business model innovation has the highest risk out of all three categories, it has high reward when done correctly. Enrolling in NJIT’s mini-mba program will help you understand more about why business model innovation is critical to business transformation.

4 Tips for creating an effective innovation strategy

An innovation strategy is a precise plan of steps that a person or team executes to sustain the future growth of a business. It can also be described as a detailed roadmap for a company’s future. Here are some strategies that you can use to create an effective innovation strategy:

1. Know your company’s value proposition

Before you start implementing any innovation strategy, you must know what your company’s value proposition is. A value proposition is a summary of a company’s promise of value to consumers – these values give reason to why consumers should buy their products or services.

A value proposition is important to a company’s strategy as it can help a company create an effective marketing strategy to build a customer base, revenue and consumer loyalty. Since the goal of an innovation strategy is to create a competitive advantage, crafting a value proposition will facilitate customers to determine a business’ perceived value in the marketplace.

2. Determine innovation in your context

Since every business has different target audiences and vision propositions, each business must determine the best kind of strategy for what they are trying to accomplish. You’ll need to decide what type of innovation is relevant to your business’ future and determine the best outcome.

Here are some questions you should ask yourself when determining innovation in your businesses’ context:

• Why do we need to innovate?
• What are the key priorities in our strategy?
• How are our competitors innovating?
• What markets could we sell our products and/or services?

3. Observe your customers and gather insight

Another key part in developing an innovation strategy is understanding your customers and knowing what they are interested in. Before you can create your value proposition, you need to identify your target audience and research consumer habits.

To innovate, it’s important to respond to what your customers want. The only way to find out what your customers want is to conduct market research. Having a clear understanding of your target audience will help increase perceived value and facilitate a robust strategy.

4. Have a measure for your success

After you have determined what your company’s value proposition is, target audience and what innovation means in your businesses’ context, you must figure out a way to measure success. An example of measuring success is using innovation benchmarks to track specific metrics such as product performance.

Benchmarks are important because they allow you to measure your company’s performance while simultaneously improving in the economy. Setting measures of your businesses’ performance is integral to knowing if you perform better than your competitors.

Become an innovator with a mini-MBA fromNJIT

In order for organizations to thrive and stay relevant, business leaders must embrace innovation. They should have a fundamental understanding of the types of innovation and how to craft a business model for the future to make the most of their company. Learn more about why entrepreneurial organizations seek opportunities for innovation by enrolling inNJIT’s online graduate business programs!