The 4 types of business innovation

Business innovation concept

One of the first definitions of business innovation was provided by the Austrian economist Joseph Schumpeter, who introduced this concept into the business sphere in his work The Theory of Economic Development, conceiving it as  “the introduction of a new good (product) for consumers or one of higher quality than before, the introduction of new methods of production for a sector of industry, the opening of new markets, the use of new sources of supply, or the introduction of new forms of competition that will lead to a redefinition of the industry”.

Meanwhile, the European Commission, in the Green Paper on Innovation, published in 1995, describes entrepreneurial innovation as “A synonym for successfully producing, assimilating, and exploiting novelty, in the economic and social spheres, in a way that provides unprecedented solutions to problems and thus makes it possible to respond to the needs of people and society.”.

In this same vein, the Organisation for Economic Co-operation and Development (OECD), in the Oslo Manual of 2005 defines it as “the introduction of a new, or significantly improved, product (good or service), process, marketing method or organisational model into the firm's internal practices, workplace organisation or external relations”.

Types of business innovation

Within the Business innovation, we can also find numerous classifications. One of the most recent is the one proposed by Steve Blank, a respected Silicon Valley (California) entrepreneur and academic and proponent of the Lean Startup method with his work The Four Steps to the Epiphany.

For this expert, Business innovation can be divided into the following groups:

• Individual initiative. This type of business innovation refers to the organisation's own capacity to create a company culture that fosters the creativity of workers and enables professionals to to implement their own ideas or projects. One example would be Google, which has specific programmes for individual innovation, offering employees the possibility to dedicate 20% of their working day to their own proposals.  
• Process improvement. This is entrepreneurial innovation par excellence, meaning the introduction of novelties in products, services or processes as mechanisms for continuous improvement without modifying the company's activity or business model. Within this group would be found new iPhone models launched by Apple, the implementation of a Mobile support as an alternative to Edenred's Ticket Restaurant or the streamlining of Inditex's distribution system.  
• Continuous innovation. In this case, business innovation occurs through the incorporation of new lines of business into the business model, stemming from a constant review of the company. This is, for example, the case of Amazon, which marketed the Kindle e-book as added value. It is even possible for continuous innovation to end with a comprehensive modification of the business activity itself, as happened with Tiffany’s jewellery, which began by selling stationery, or Nokia, which manufactured paper before selling mobile phones.
• Disruptive innovation. This is possibly the most difficult model to achieve, as it involves the emergence of a new industry, not just for the company or its target audience, but for society as a whole. This type refers, for example, to the emergence of the car, television, computers, the internet, etc.