Innovation is not only the lifeblood of businesses, but of entrepreneurs too. Every day, entrepreneurs both large and small wake up and think, “how can I change the world today?” Some entrepreneurs think of small, incremental innovations to improve existing products and markets. Others think of large, paradigm-shifting innovations that will take years and many millions of dollars before they become reality. But every innovation, no matter large or small, is equally important.
Innovation is a loosely-defined enough word that it functions as an umbrella for many different types of change and progress. Everyone in the entire innovation ecosystem, from investors and funders all the way through consumers, are becoming increasingly aware of the way innovation impacts their lives. It’s easy to forget how much progress humanity has made in the past 150 years alone, but humanity’s continuous embracing of progress and technology proves our appreciation for centuries worth of exponential innovation.
As a result, every breadcrumb of innovation should be treasured, as we never know what may lead to the next big leap for mankind. What seems trivial today could ultimately be what lets us become a more efficient, sustainable, and ultimately happier society. Keeping an open mind can make the difference, and anyone has the potential to be an innovator.
Down below are six different models of innovation, starting with the broadest scope before narrowing down. While inspiration can strike out of nowhere, these six models can potentially help an entrepreneur hone their inspiration into innovation.
Six Models of Innovation
1. Three Horizons Model
First featured in The Alchemy of Growth by Mehrdad Baghai, Stephen Coley, and David White in 1999, the three horizons framework broadly presents three areas for innovation within a company over the course of time.
Horizon 1
In Horizon 1, companies are focused on its core businesses as well as strengthening the ones that maximize profits and cash flow. “Here the focus is on improving performance to maximize the remaining value.”
Horizon 2
The next step is for companies to detect and pursue emerging opportunities and new ventures that could benefit the company in the future.
Horizon 3
Finally, companies will look for long-term options and decisions that could impact future growth: “for instance, small ventures, such as research projects, pilot programs, or minority stakes in new businesses.”
The three horizons model is tried and true, helping executives all over the world balance the immediate concerns of a company with medium- and long-term growth. However, as Steve Blank points out in the Harvard Business Review, it’s important to take the time-based definition of the model with a grain of salt. In the 21st century, disruptive Horizon 3 ideas arrive faster than ever, to the point that they can even compete with Horizon 1 product lines.
2. Innovation Ambition Matrix
Refining on the three horizons model, Bansi Nagji and Geoff Tuff of the Harvard Business Review developed the Innovation Ambition Matrix. Instead of focusing on profit over time, this matrix is based on two main dimensions, products and markets. In that way, the Innovation Ambition Matrix gives specific areas for companies to innovate in: existing products/markets, adjacent products/markets, and new products/markets.
This model is great because it seemingly gives a straightforward, step-by-step plan. It leaves the timing and prioritization to leadership, as every company will be operating on a different timeline, but it is a simple and effective strategy that has worked time and time again. For instance, consider the early history of Apple. It first perfected the all-inclusive personal computer with the Apple II before expanding into peripherals such as printers. It then developed the graphic user interface for the first Macintosh, a revolutionary invention that changed the personal computer market and made it truly accessible to all.
3. The Innovation Matrix
This commonly used Innovation Matrix is even more specific than the Innovation Ambition Matrix, looking at technology instead of products in general. As a result, this matrix puts forth four distinct forms of innovation.
Incremental Innovation
Consisting of a majority of what we consider innovation, incremental innovation is a series of small improvements that can be made to a company’s existing products and processes. An example of this is Amazon, a company that has made a series of small improvements in its logistics systems and made it one of the best in the world. While previously reliant on ground shipping that took an average of 4-5 days, they were able to get their shipping times down to 2-days for Prime customers, and then down to same-day for some areas. In addition, though they started as an online bookstore, they’ve slowly expanded their product offerings over the years and adapted their logistics systems to accommodate the changes.
Architectural innovation (a.k.a. ‘recombinative’ innovation)
Architectural innovation consists of taking an approach, technology, or methodology from one field to another. For instance, many industries have adopted the assembly line methodology from Henry Ford into their businesses, like fast food restaurants.
Disruptive Innovation
These innovations create new value networks within existing markets and have the potential to disrupt the entire market when the innovation reaches a large enough scale. A prime example of disruptive innovation is Netflix, which fundamentally changed the way audiences consumed movies and television when it introduced streaming. It displaced both traditional video rental services (including its own DVD-rental business) and broadcast television, creating a new market.
Radical Innovation
These are the rarest types of innovations, requiring new technologies and new industries that have the potential to not only shift the way consumers buy, but also shift the way they think. One example of radical innovation is the Internet. The Internet required the development of new technologies and solutions at scale, and once it began being implemented into people’s homes, it changed the way we interact with the world forever.
This matrix is proof that not all innovation has to be radical innovation. Innovation can come from something as simple as looking at a product a different way and finding a new purpose for it. We’ve always heard about accidental inventions, but it takes ingenuity for the inventor to realize a different purpose for their invention. For instance, Percy Spencer, an engineer at Raytheon, accidentally invented the microwave while experimenting with radar when the candy bar in his pocket began to melt. He quickly realized that he had discovered a new way to heat food, but had he not, we likely wouldn’t all have microwaves in our homes today.
4. The Doblin Framework a.k.a. the Ten Types of Innovation
Doblin’s Ten Types of Innovation seeks to break the traditional thinking of executives who believe that innovation simply means the development of new products. There are far more categories of innovation that can provide far better returns on investment and competitive advantages than just product development. Doblin calls their ten types a Periodic Table, arguing that “all great innovations, throughout history, comprise some combination of these ten basic types.”
This framework expands the definition of innovation into areas of business one would not think requires innovation. However, even an innovation in a single category given above can be enough to give a business an edge over competitors. For instance, if a company finds a novel new way of acquiring new clients, they could surpass competitors even if they have similar product offerings.
There are other models that are similar to Doblin’s Ten Types, such as Lean Ventures’ 9 Types of Innovation.
5. Boston Consulting Group’s Six Innovation Models
This model breaks down companies that innovate into recognizable archetypes, even personality types. Though this may seem like a strange exercise, it forces entrepreneurs and business owners to think about their company as an entity and not just as a business. This can be important in understanding how customers and the general public may perceive your company. For investors, it can help them figure out if they want to invest in one company over a competitor. In addition, modeling one’s company after a larger successful company can provide inspiration and a goalpost of achievement to reach for.
6. The Four Type of Innovators in Business
Business Content Specialist Megan Doyle breaks down businesses into archetypes in this model similar to the one above. However, this model is a matrix, comparing internal/external focus and high/low capital. This model seemingly inspects the innovation ecosystem as a whole. Many of the examples given per category are beyond the scope of single companies, instead focusing on collaboration or education. This is where we see the true impact of innovation and how innovation does not happen in a vacuum. Cross-collaboration across companies and industries are crucial to sparking innovation.
There is no shortage of ways to define innovation. Innovation applies just as much to product development as it does to employee management. While the three horizons model gives a basic, broad framework for how executives should think and plan, BCG’s Six Innovation Models can help an entrepreneur figure out what kind of company they are in the here and now. Ultimately, an entrepreneur has to find what’s best for them and their company.
As entrepreneurs embark on their journeys, they should keep in mind that innovations, large and small, will be what makes a difference down the road. Many get bogged down in the everyday matters of management, but it’s this long-term strategic focus that can be the decisive factor down the line. It may be frustrating not getting immediate results, but as they say, slow and steady wins the race.
Innovation is not necessarily a time machine. One does not have to deliver the promises of the future here in the now. Simple, incremental improvements to a product that is used by a few can be as game-changing as a radical invention that benefits all. Even if one’s innovation only helps the life of one individual, it is worth it simply to improve the life of that one individual. Collectively, innovation adds up. Entrepreneurs everywhere should be proud of their commitment to progress and change, no matter how small or big.
