Innovation is a  term often abused through advertising, marketing, and business meetings. Innovation means to introduce something new. A more expansive definition of innovation is — the result of a multi-stage process whereby organizations, teams, and individuals take an idea and transform it to make an improved product, service, or process to compete in the marketplace.

Definition of Innovation

Ideas made real— that is my definition of innovation. Without execution, ideas are just hobbies, not innovation. A spark that turns into an actual product, service, or capability, innovation is about making life better.

Grouping innovation can be done in many different ways, starting with the uses/context of innovations. It can also be grouped by departments of organizations such as marketing, IT, sales, R&D, etc. Another way to categorize it is by looking at who is implementing the innovation. There are thousands of different ways to organize innovations.

I’ve spent forty years of my career in the innovation game, and there are always new academic papers trying to categorize it. We will boil it down to the uses of innovation and the impact of design to give you a simple mental picture.

The Uses of Innovation

The uses of innovation break down into a couple of different groups. Firstly, institutional innovation deals with organizations focused on changing their policies, processes, business models, regulations, etc.

The second area is technological innovation: the scientific know-how, expertise, chemistries, and anything that involves technology. The last area is social innovation, which focuses on improving how we respond to social needs in an organization, affecting employment, ecology, social purposes, and quality of life.

The Impacts of Innovation

The impacts of innovation fall into three categories. Firstly, incremental innovation is a series of improvements made to a company’s products or services. These are typically low-cost and low-risk innovations but can have a significant impact if done correctly.

Next, there are breakthrough innovations, which create new markets and value networks, and disrupt established markets. These get the attention of the marketplace and set a new player as the market leader.

Thirdly, there are disruptive or killer innovations, which are technologies or any form of innovation that significantly affects the way a market or industry functions, typically involving some element of technology, science, or materials that people build on top of. These are things that significantly alter what you or your competitors will be using going forward.

An example of a killer innovation would be the invention of silicon microprocessors. People have created software, browsers, and AI on top of these processors, but the processors themselves are the killer innovations. To qualify as a disruptive or a killer innovation, you have to create a barrier of entry.

Your competitive success is somewhat based on the fact that you have created a foundational position difficult for others to compete. When it comes to innovation impacts, you will most often see incremental innovation. Breakthroughs are much less frequent, riskier, and have a higher investment level but yield a higher reward. For most of us, it is more useful to build on top of these breakthrough innovations and take advantage of what they offer.

The Relation of Innovation Uses and Impact

I think about the relation of innovation uses and impact in a 3×3 format of what I call the “innovation matrix.” The innovation matrix breaks it down horizontally into social innovation, institutional innovation, and technological innovation. Going vertically on the left-hand side, I label it as an incremental, breakthrough, and disruptive/killer innovation. Now, to use this matrix, take your pipeline of innovations and place them in the grid, you think they fit in. This may challenge you to think differently when it comes to making innovation investments.

Another way to use the matrix is by taking a new idea, placing it into the matrix, and narrowing down the impacts and uses it has. I have also used this innovation matrix to break down investment spend on each of the areas. The innovation matrix helps put the uses and impacts of innovation into context. I use the innovation matrix for my organization and coaching or mentoring CEOs and CTOs.

To know more about what innovation is, listen to this week's show: What is Innovation?