How were last year’s operational profits gained from innovation projects distributed across different types of innovation?
Please distribute 100 percentage points across the following innovation types. Please make a rough but realistic estimation
Important terminology
- Classification of innovation – types and degree of innovation:
Innovation is an invention for new products, services, processes, production methods, organizational forms or a vital improvement to existing systems and its successful realization. Successful realization is documented in improved profitable growth of the company. Innovation can be classified with regards to its type and its degree (see figure).
|
Innovation Type |
Incremental Innovation |
Radical Innovation |
|
Product innovation |
· Product line extension · “Face lift” · Additional features · Improved quality Example: Offering the food product in different sizes for single households and large family households. |
· Totally new product introduced into a new market · Based on an evidently different technology · Creating new customer value Example: MP3 |
|
Service innovation |
· Service improvement · Introduction of new service option Example: Pick-up service |
· Totally new service offering · Creation of a new market · High increase in customer value Example: Express parcel courier instead of normal mail service |
|
Process innovation |
· Small increase in productivity Example: Shortening a process step |
· Introduction of totally new production processes Example: Self-service bakery |
|
Organisational innovation |
· Small changes to the organizational structure Example: Reducing the interfaces to the customer |
· Totally new organizational model Example: Risk-sharing partnerships |
|
Business model innovation |
· Completing the existing network with additional partner Example: Integrating additional distributor for additional market or geography |
· Using of totally channels to sell product/service offerings (sell directly online) Example: Online direct marketing for instead of brick and mortar business. |
There are five different types of innovation that are differentiated in the IMP³rove assessment tools:
- Product innovations: Product innovation addresses product related issues such as product functionality and performance, product systems and product design. It encompasses a change to a product that a company offers in the marketplace or the introduction of an entirely new product. It is the most easily recognized type of innovation because consumers see the changes first-hand.
- Service innovations: Service innovation includes introduction of a completely new service or changes to a service that a company offers in the marketplace. To companies operating in the service industry this is usually the most important type of innovation. However, manufacturing companies can also successfully complement their products with service innovations.
- Process innovations: Process innovations address changes in the core processes of a company. Often these result from changes in the process technologies used by the company. Usually these processes are invisible to the consumer but often vital to a product’s or service’s competitive positioning .
- Organizational innovations: Organizational innovations address changes within the organisational structure of a company. These changes include e.g. the shift from a functional organisation to a project-driven organisation. It may also involve organisational changes in the integration of external partners in alliances and networks.
- Business model innovations: A business model describes how a company creates, sells, and delivers value to its customers. There are four main areas where the business model can drive innovation: value proposition – what is sold – how it is created and sold and the target customer – to whom it is delivered.
The degree of innovations is positioned on a continuum between incremental innovations and radical innovations.
- Incremental innovations lead to small improvements to existing products, services, processes, organisational and business models. It often is an exercise in problem-solving where the goal is clear, however, the means how to get there needs to be solved. Usually, tasks of incremental innovation projects are relatively low in uncertainty and complexity, and therefore in risk.
- Radical innovations result in totally new products, services, processes, organizations or business models. Radical innovations seek for the yet unresolved challenge to generate a significant value to the customer. Usually radical innovation projects are of high uncertainty and complexity, and therefore of high risk.
