“Any sufficiently advanced technology is indistinguishable from magic”
Arthur C. Clarke
Although technology is intimately linked to innovation, its relationship with it is different from how it is commonly considered, especially by the public and the media, but also within companies and among professionals (even those related to innovation).
Many times, it is implied that innovation occurs exclusively thanks to technology, even it would seem that innovation is... technology. We have already discussed what innovation is before.
But then:
What is technology for innovation?
Technology is an enabler for innovation. It's a tool, a facilitator, a catalyst (we can find more analogies, but let's leave it there).
Technology is always a means and not an end in itself. This happens both when applied to digitize tasks, business processes, and even entire jobs, and when improving a business model through digital transformation to generate new business, with technology enabling possibilities that couldn't be implemented without it. And, of course, it can also play the same role at the pinnacle of the pyramid in terms of value creation and difficulty: innovation.
So, technology can enable and help some innovations to occur (and indeed, it often does), but the application of technology is not a sine qua non condition for innovation to take place.
The height of confusion in this world of innovation, prone to vague and even contradictory definitions, is when technological innovation is mentioned. I admit I don't know what it is. If we are referring to a new advance in technology, I would call it: an advance in technology... Because we had already said that innovation was something very specific and had nothing to do with advances in technology. You can google 'technological innovation' if you don't believe me about vague and contradictory definitions.
But then: Is there innovation without the application of technology?
Yes. In fact, there are several types of innovation, and technology can help facilitate them, but it is not a necessary condition, even though it is present as a catalyst in many innovations.
Let's take a look.
The 4 types of innovation
Product (or service)
Business processes
Business model
Organization
These are the 4 types of innovation that I handle because managing a larger number becomes difficult for me, and then I forget. A list of 10 types is not easily manageable (in my opinion), so over the years I have distilled all types into these 4 broad categories.
We can find authors who distinguish 10 types, such as Larry Keely in his Ten Types of Innovation, a book I recommend to anyone interested in delving into this topic. We can even find articles and authors who distinguish even more granularity.
However, all innovations that appear in longer lists can easily be classified into one of the 4 broad categories I propose above, and that can simplify things for you. For example: an innovation in packaging or branding is ultimately a product innovation. An innovation in the use of sales channels or in how you make money (profit model) is an innovation in the business model.
Therefore, I suggest we use 4 types of innovation and not 102, but you decide.
Let's go with the 4 types:
Product Innovation
Probably the most well-known of all. It needs little explanation: if innovation is new ideas applied that create value (solve a problem), product innovation materializes that value into a product.
A Tesla is a car that represents a product innovation (and also more types of innovation, but let's focus on this angle). It is a product that solves a problem in a new way.
An iPhone was also a product innovation (and of more things: we are already seeing that many times several types of innovation happen at the same time...).
Innovation in business processes
A business process is an activity that occurs in a company and is repeated over time. It does not start and end, like a project, but occurs continuously and typically crosses different areas of a company (Sales, Purchasing, Logistics, Finance, etc.).
For example: if a customer buys something from a company, it is likely that a salesperson will have sold it and that information can go through purchasing to order the product, which will then be provisionally stored and distributed thanks to Logistics, and the operation will be accounted for, billed and charged from Finance. That is a business process.
Innovating in business processes is doing something new that creates value to a certain process.
When Inditex is able to restock merchandise twice a week in its stores and is also able to go from the design table to having a garment in a store in 15 days, it is innovating in business processes. Typically, the fashion sector did not handle these business processes, which turn those who practice them into Fast Fashion companies. Everything used to happen much more slowly, generating much less variety of garments and slower adaptation to consumer trends and preferences.
Innovation in Business Model
Perhaps my favorite type of innovation because of the flexibility and number of variables it allows playing. Also, because it is one of the most impactful.
A business model is something as simple and as complex as the way a company operates, how it carries out its strategy. We can't delve into that today, although at LAUREON, designing, redesigning, and improving business models is our day-to-day.
What interests us today is that something new can be done that solves a problem in an existing business model, or create a different one to solve that problem.
The business model known as the Long Tail is a model that Amazon has capitalized on extremely well.
Previously, in the retail sector there were only physical stores and the square footage of the store dictated how many items could be on display and in stock. Therefore, only the best-selling items ended up being in the store. For example: the old record and CD stores only had a limited number of items on display: the bestsellers (tough luck if you were passionate about Gregorian chant sung by Russian monks or guitar virtuosos).
With the advent of the Internet and the Web (enabling technology...), a model was launched where any item could be listed in the online 'store' (even Gregorian chants sung by Russian monks) because it didn't take up physical space. Having an online catalog allows you to list 10, 100, or 1,000,000 items for the public, which is impossible in a physical store.
If, in addition, the arrival of your online store is global, it turns out that you will discover that in your city there were very few, but in the world there is a respectable number of fans of Russian Gregorian chant... And now you can reach all of them.
The long tail of non-bestselling items represents a very interesting aggregated volume of sales, sometimes equal to or greater than that of bestsellers. Hence, the name Long Tail, I don't know what you were thinking.
Come on, another example: a franchise. The first person who thought they could 'package' their business model, their type of store/restaurant, their business processes, branding, and products and could give it, 'turn-key', to someone else 1,000 km away to operate a store just like theirs but without having to build the entire brand from scratch was implementing an innovation in the business model.
And where was the technology in that? Nowhere. Entrepreneurial creativity generated the innovation. In this case, technology was not an enabler.
Organizational Innovation
This is one of the least known, less showy or less famous types of innovation, but it is nonetheless equally interesting and very powerful. It is about innovating in the use of the company's resources: assets of all kinds, HR, etc.
An innovation in your recruitment process, that is, something that solves the recruitment problem in a new way, will be an innovation in the organization (as well as in the business process, quite possibly).
Southwest Airlines, the famous Low Cost travel airline, only flew Boeing 737 aircraft until 2011. This is not typical of airlines, which select the type of aircraft according to the length of the route to optimize costs.
Southwest, however, decided that it would only operate one type of aircraft. It would be more inefficient in the use of the aircraft itself for certain routes, but how did the decision pay off? Because all its pilots, crew members, ground staff, mechanics, etc. would have to know only one type of aircraft, which greatly lowered the cost of overall operations and training, while giving it flexibility in staff mobility.
This decision was an organizational innovation.
On the existence of God and non-fattening cereals...
Those of us who are over a certain age know that carbohydrates and sugar will provide you with so many calories that you will have to run a lot to keep from getting fat. Let's say: you're going to get fat, and with sugar you're going to get worse.
God could have settled the debate about its existence by making cereal a super tasty, sweet, slimming food. “I can't keep eating bowls of milk with sugary cereals because I'm going to get boneless, this can't go on, I have to eat lettuce and quinoa to put on some weight”.
At that point, God would have settled any debate: if eating cereal by the bowlful would make you thin, there would be no doubt that it exists. However, God missed that opportunity to be recognized, so the debate persists.
This doesn’t mean that there have not been those who have wanted to honor Arthur C. Clarke's famous third law, which opens this article, and make an innovation, in this case, indistinguishable from magic. Eating cereals that are healthy, are not fattening, but still taste as good as usual? Magic.
That is why they are called Magic Spoon and have created cereals with a high protein content and hardly any carbohydrates and sugars.
What kind of innovation is this?
That's right: product innovation.
And also of business model, because these cereals are not sold on supermarket shelves, but are sold directly to the consumer, bypassing the distributor and retailer in a Direct-to-Consumer model. Moreover, their target audience is not children or teenagers, but grown-up people who long for the cereals they ate as children and have long since discarded from their diet (a missed opportunity, God).
As we can see: various types of innovation often coexist in many businesses.
This is what I love about Innovation, with capital letters: how you can take a product category as 'stale', as cereals, so old that it has remained unchanged for decades, that is declining due to new nutritional knowledge and awareness, that has everything going against it... and suddenly someone is determined to make magic and turn the product around by innovating. It's like a Rocky movie, but in business strategy.
Technology here acts as an enabler on the Direct-to-Consumer side and, surely (I don't know), on the food side to create cereal with these characteristics, but the innovation is not technological (of course), it is product and business model innovation.
Corollary
It is possible to innovate without technology being essential to do so, although it is a great enabler, and it can be done in 4 ways that generate different types of impact, but that work better the more we are able to make them work at the same time.
Also: you can innovate in everything, because if anyone has recovered cereals (until now in a downward spiral towards ostracism) as full citizens of the 21st Century diet, it is that you can innovate in everything.
At LAUREON we work with scientific researchers with cutting-edge R&D who want to transform their R&D into innovations that have an impact on people's lives and have results in the market, but also with companies in traditional sectors such as catering or professional services. With this, I want to invite everyone to discard the idea that if they are not in the world of software or technology, innovation is not on their side.
In all cases, it is possible to design innovative business models that include one or more of the 4 types of innovation that we have discussed.
And that is very interesting...