Innovation is not peanut butter.

You can’t smear it all over something and enjoy the deliciousness.

In other words, “Innovation” is not a one-sized-fits-all term.  If you apply it to everything new and different that you’re doing, you’ll be confused, frustrated, and ultimately left with very little to show for your efforts.

In a previous post, I defined Innovation as something different that creates value.  For companies to increase their odds of creating value, however, they need to develop a language and discipline around at least three different types of innovation.

Why do I need different types of innovation?

Imagine if we used the word “Cat” to describe every feline from a house-cat to a lion.  If you proudly proclaim that you just got a new cat, people might wonder whether that purchase was truly legal.  If you yell, “There’s a cat behind you!” people might not react with the level of urgency required.

Specificity enables rapid understanding which leads to better decision making.

Labeling everything new and different with the term “innovation” can result in dramatically under-resourcing some efforts and prematurely canceling others.  After all, launching an entirely new business model takes far more time, money, people, and patience than launching an improved version of an existing product.  You need a language that reflects that.  

Why do I need at least three types of innovation?

Because, after decades of research and application, academics and practitioners alike seem to agree that two is too few and, since three comes after two and three seems to work, you need at least three.  (Doblin said 10 but that feels like too many to remember).

Which three should I use?

The three that best reflect your company’s strategies, priorities, and culture.

I know that’s a bit vague, but the truth is that there is no one right answer.  The only “right answer” I’ve ever seen is the one that sticks, that advances key corporate strategies, and that enables thoughtful decision making.

Start Here

When one of my clients is at the very beginning of building their innovation capability, we start simple

1. Core Innovation is improvements to what they currently do
2. Adjacent refers to innovations which combine existing and new elements (e.g. selling an existing offering to a new customer, selling a new offering to an existing customer, or monetizing an existing offering in a new way)
3. Breakthrough innovations change everything (e.g. new offerings to new customers, monetized and delivered in new ways)

We then develop a high-level innovation process that can apply to all three (this helps with communication across the company and reinforces that everyone can participate in innovation). From there, we create more detailed structures, processes, tools, trainings, and timelines for each type of innovation to ensure that we have a balanced innovation portfolio, allocate appropriate levels of resources, and set realistic expectations with regards to timelines and ROI.

But what about (fill in the framework here)?

Again, the two most important things about innovation types are that (1) you define them and (2) they are practical, actionable, memorable, and enable progress against your strategic priorities.

That said, there are other Innovation Type frameworks from which you can draw inspiration.  Here are three of the most popular

McKinsey’s 3 Horizons Making its debut in the 1998 book The Alchemy of Growth, McKinsey’s 3 Horizons frameworks remains a favorite amongst consultants and executives (but not Steve Blank, who thinks it no longer applies).

The book argued that for companies to kick-start growth or continue to grow rapidly, they need to simultaneously focus on three “horizons of growth:”

1. Horizon 1 ideas drive continuous improvements in existing offerings, business models, and capabilities
2. Horizon 2 ideas extend the core to new customers or markets
3. Horizon 3 ideas create new capabilities or businesses in response to disruptive opportunities or threats

Clayton Christensen

In his 2014 Harvard Business Review article, “The Capitalist’s Dilemma,” Professor Christensen wrote that the terms he famously coined, “disruptive” and “sustaining” innovation, are not types of innovation, rather they describe “the process by which innovations become dominant in established markets and the new entrants challenge incumbents.” Innovation types, however, should describe the outcome of the innovation.  The three he identified are:

1. Performance-improving innovations that replace old products with new better models
2. Efficiency innovations that enable companies to sell existing products to existing customers at lower prices
3. Market-creating innovations that combine an enabling technology that rapidly reduces costs with a new business model to reach new customers, resulting in the creation of (as the name implies) entirely new markets.

P&G

From 2000 through 2012, P&G, under the leadership of CEO AG Lafley,  improved its innovation success rate from 15% to 50% and doubled the average size of successful initiatives.

One of the first steps in achieving these dramatic results was to define 4 types of innovation.

1. Commercial innovations that increase trial and use of existing products
2. Sustaining innovations that make existing products better, faster, cheaper, or easier to use
3. Transformational innovations that deliver a step-change improvement in a product’s performance, ultimately setting new performance expectations for a category
4. Disruptive innovations (new brands or business models) that “win through simplicity or affordability”

OK, I’m on-board.  How do I start?

My clients and I follow these four steps:

1. Put a stake in the ground and name 3 types of innovation. Don’t overthink it.  Just pick three types and go on to step 2
2. Share the types (names and definitions) with people and see how they react. Do they immediately understand?  Do they look confused?  Do they recoil in horror?  Get curious about their reactions and ask for feedback.  Refine your types and their definitions until a majority of people immediately understand (note: you’re not going for 100% agreement because that never happens, you’re going for “good enough with no one violently disagreeing)
3. Map your innovation initiatives to each type.
   • Are there types with no initiatives? Is that type critical to achieving a strategic priority or key metric?
     • If yes, you have a gap in your portfolio.
     • If no, get rid of the type.
   • Are there initiatives with no types? Is that initiative critical to achieving a strategic priority or key metric?
     • If yes, create a type to describe that (and hopefully other) initiatives.
     • If no, get rid of the initiative.
4. Share your innovation portfolio with key decision-makers and start developing your innovation strategy.

Congrats, you have a working draft of your Innovation Types!  You’ve taken a crucial first step in your journey getting real results from innovation.  Reward yourself with some peanut butter!