We’ve already talked in our other articles many times that innovation can be a real turning point for business, be them big or small.
But with so many models of innovation, figuring out the best fit for your company can be confusing. Do you go with traditional, established approaches like acquisitions and partnerships, or embrace newer concepts like innovation labs and hackathons?
This guide breaks down the key traditional and modern models, explores the 4 Ps and 5 Cs of innovation, and will ultimately help you decide which model best aligns with your business goals.
What Are Models of Innovation?
A business innovation model is in its essence a structured approach a company uses to transform new ideas into actionable strategies, products, or processes. Whether traditional or modern, these models help companies harness creativity and bring about real-world results that align with their objectives.
Some companies prefer to lean on traditional models for stability…while others pivot to modern approaches for flexibility and speed.
Let us explain.
The Main Business Innovation Models
So yes, if you want to keep your business thriving, innovation is the key!
And there are quite a few ways to go on about it:
- Incremental Innovation: It’s similar to when you upgrade your phone. You get a slightly better camera, a faster processor, but it’s still basically the same phone (this is seen as a safe bet, but it won’t revolutionize industries).
- Disruptive Innovation: Think Netflix ditching DVDs for streaming. It was a risky move, but it completely changed the game. This is where you take a big leap, challenge the status quo, and potentially create a whole new market.
- Open Innovation: It’s true, sometimes the best ideas come from outside your company. And that’s exactly where open innovation comes in. You team up with universities, startups, or other businesses to share knowledge and resources. It’s like having a bunch of brilliant minds working together to solve problems and create something remarkable.
Learn more: Challenges in Open Innovation in Business (And How to Effectively Overcome Them)
Traditional Business Innovation Models
Traditional innovation models focus on steady, dependable growth and have been around for years. These methods— acquisitions and joint ventures—have demonstrated success, especially when expanding into new markets or integrating new technology.
Acquisitions
Acquisitions involve a larger company buying a smaller one to bring in new technologies or ideas. These are widely popular because they allow companies to grow quickly without having to develop everything from scratch (i.e. without a need to reinvent the wheel).
Real-Life Example: Alibaba’s acquisition of the food delivery startup Ele.me for a staggering $9.5 billion. This deal helped Alibaba compete with rival Tencent’s services and expand its ecosystem, cementing its position as a leader in digital services.
Why companies choose acquisitions: Because they diversify corporate strategy and enable companies to harness new technologies without starting from scratch. It’s a fast way to enter new markets and reduce competition.
Things to keep in mind: While acquisitions offer great rewards, they come with risks – they are costly and can be challenging to integrate smoothly into an existing company structure.
Joint Ventures
Alternatively, a joint venture is a partnership between two companies that pool resources to reach a common goal, being particularly effective for companies aiming to enter new regions where local expertise and network are indispensable.
Real-world example: The partnership between Grab and oBike exemplifies how joint ventures can strengthen a company’s market position. Integrating GrabPay into oBike’s app enhanced both companies’ user experiences while expanding their reach.
The strategic edge: Joint ventures bring together complementary strengths and reduce the risks of going solo. Hence, this often leads to shared risk and lower costs.
Challenges to consider: Success heavily relies on having clear goals and aligned visions between the partnering companies.
Modern Business Innovation Models
In contrast, modern innovation models bring a fresh approach that suits fast-paced industries.
Innovation Labs
In their essence, innovation labs are dedicated spaces where employees can brainstorm, prototype, and test new ideas without the constraints of typical corporate structures.
Why they work: Innovation labs work because they provide a safe and inspiring environment for employees to think creatively, experiment freely, and collaborate effectively (i.e. freedom from traditional constraints).
Success story: Alibaba’s DAMO Academy, launched with a $15 billion investment, is a prime example. This global network of labs focuses on cutting-edge research, from AI to quantum computing, positioning Alibaba to compete with tech giants like Google and Amazon.
Challenges: While innovation labs offer freedom, they need strategic alignment to ensure projects contribute to company goals.
Hackathons
On the other hand, Hackathons are events where teams come together for a limited time to solve specific problems and develop solutions. Originally a popularized Silicon Valley phenomenon, hackathons are now widely used across various industries to quickly create innovative ideas and products.
Real-world example: Baidu’s hackathons in 2013 aimed at green technology led to the creation of the Social Smart Home app, which optimized energy use in smart homes by detecting human presence (this demonstrated how hackathons can yield practical, impactful innovations).
Benefits: Hackathons inspire quick thinking, encourage collaboration, and offer a hands-on way to develop prototypes that can be refined post-event.
Tips for success: Set clear objectives and provide follow-up opportunities post-hackathon so that promising ideas can be fully developed.
4 Ps of Innovation Model
When exploring types of innovation models, understanding the 4 Ps—Product, Process, Position, and Paradigm—will ultimately help you pinpoint where your innovation efforts should be directed.
- Product Innovation: Developing new or significantly improved products (i.e. Apple’s incremental updates to its iPhone series).
- Process Innovation: Improving how products are produced or services are delivered, such as automating a manufacturing line.
- Position Innovation: Changing how a product or service is perceived, like rebranding an energy drink as a health booster.
- Paradigm Innovation: Shifting fundamental business approaches. Uber, for instance, reimagined the taxi industry, turning traditional business models on their head.
5 C’s of Innovation
Similarly, to effectively implement an innovation process model, focus on the below 5 C’s:
- Culture: Create an environment that encourages innovation and tolerates failure.
- Context: Align innovation efforts with current market trends and consumer needs.
- Capability: Invest in the right tools and skills to bring ideas to life.
- Creativity: Foster diverse thinking to ensure unique solutions.
- Collaboration: Work both internally and with external partners to amplify results.
So… Which Innovation Model Is Right for YOUR Company?
Choosing the right model requires a balance between ambition, resources, and market dynamics.
Lost? Here’s a quick rundown:
Small Businesses and Startups: Disruptive and modern models like hackathons offer the agility needed to break into competitive spaces.
Established Corporations: Incremental and open innovation approaches, such as acquisitions and joint ventures, provide the stability needed for sustainable growth.
Tech-Driven Sectors: Innovation labs are ideal for tech companies looking to stay ahead of trends and develop advanced products.
Wrapping Up
Alright, that was a crash course in innovation models – traditional, modern, the whole shebang! Hopefully, your head isn’t spinning too much.
The key takeaway here is that there’s no one-size-fits-all approach. Whether you’re a new startup or a corporate giant, there’s an innovation model out there for you.
The trick is to think about your company’s goals, resources, and industry. Are you looking to disrupt the market with a brand new idea? Or maybe you want to refine your existing product line? Once you know where you stand, you can pick the model that best propels you forward.
Remember, innovation is not only about fancy ideas. It’s about creating a culture that embraces creativity, experimentation, and (let’s be honest) a little bit of messiness. So don’t be afraid to get your hands dirty and see what you can come up with!
Enjoyed this? Read more of our popular guides below:
The Ultimate Guide to Understanding the Innovation Process in Business for Growth
A Complete Guide to Innovation Management: Strategies, Techniques, and Systems
An Easy Guide For Businesses to Master Innovation Portfolio Management