8 Types of Innovation in Business and How to Use Them

types of innovation, types of innovation strategy, types of innovation examples

8 Types of Innovation in Business and How to Use Them

Innovation is crucial to business success, requiring companies to continuously innovate and adapt to changing market conditions. There are various types of innovation, including disruptive, incremental, and drastic, each with a different objective. According to Peter Drucker’s quote, successful entrepreneurs possess the traits of courage and adaptability.

Innovation can be transformed into innovative products or services. Companies that want to transform should understand how to use it, as 65% of innovation and human resources departments expect transformation to provide new opportunities for profitability. Understanding how to convert ideas into innovative products or services is essential for companies looking to transform and succeed in the competitive market.

What Does Innovation Mean?

Innovation is proposing an alternative to a certain process, offering economic and behavioural benefits, solving problems, or making daily life more practical. It can be related to products, services, procedures, markets, production methods, or technology, resulting in sustained and indispensable changes. Technology plays a crucial role in supporting and enabling innovation, as without it, it may not be possible to scale businesses.

To innovate, businesses must exceed stakeholder and market expectations, requiring speed, quality, and precision. Business innovation typically involves two phases: developing new ideas and applying these concepts practically. While creativity is part of innovation, it is not the same if an idea doesn’t work in the real world. In summary, innovation is about going beyond and exceeding expectations in various aspects of life.

Types of Innovation?

There are different types of Innovation that a company can use to make its business better; they include the following:

Product Innovations

Product innovation is one of the types of innovation that means making a product work better and look better by changing or upgrading its features. It could mean making a new product or improving or adding features to one that already exists. As a product designer or head of manufacturing and production, you might consider using new products to meet changing customer needs or help the business enter a new market. To stay profitable and ahead of the competition, a business may use this type of innovation as a preventative step to become more cost-effective or competitive.

As an example of product innovation, a company that makes party materials might switch from selling disposable plastic cups and plates to ones made from paper that can be recycled. After surveying customers and researching the market, the company may decide to do this after learning that many customers prefer to buy from companies that offer environmentally friendly products.

Service Innovation

You can bring service innovation into a business as a service manager or boss by improving a service idea or bringing it to a new market. This could also mean giving customers a current product or service in an easier, faster, and cheaper way or adding value-added services to an existing service. This innovation could be a good way for a business to set itself apart from its rivals. One example is ride-sharing services that offer cheap transportation and a delivery service so customers can send goods to different places.

New ways of doing things

A business process expert or specialist can come up with or use a variety of ways to change the raw materials that a business has to work with. These methods can involve a variety of skills, tools, and technologies. A business might use process innovation to make the making and delivering of its goods or services more efficient and cost-effective. This idea could be about making a product or making secondary or supporting business processes better. By using new tools or ways of doing things, a company can help process innovation.

A coffee roaster selling large bags of roasted coffee beans to different cafés is an example of process innovation. The roaster can add software for managing products and sales that will automatically refill a client’s normal amount of coffee every month. This new idea doesn’t change the quality of the coffee itself, but it does change how customers get it by ensuring they never run out.

Innovations in technology

Business researchers, project managers, and systems experts can all use new technologies. Adding new and better automatic technology, software, or machinery, or making processes cheaper and more effective, can lower product variation and raise quality. New technologies may make the customer or client experience more efficient or linked. This can be seen in a gym with treadmills that record a person’s activity and store the data in the cloud. The gym might also think about making a phone app that lets people see how they’re doing.

Business Models Innovation

A business owner might find that business model innovation helps them solve certain problems. When a business innovates its business model, it changes how it works and makes money, as well as the people it targets, how it targets them, and what it uses to target them. When a company innovates in this way, it also changes its decisions and how it adds value. Adding new ideas to an existing business plan may require taking calculated risks. Additionally, it helps you stay on top of trends, keep the market from getting too crowded, or deal with changing profit margins.

One example is an online makeup store that is having difficulty making sales because more beauty stores sell the same things. The store might look at its business plan again and switch to giving monthly subscription boxes with carefully chosen makeup products with a theme. This business model helps the company plan its product demand better and ensure a steady income stream.

Marketing Innovation

Marketing innovation can bring a product or service to a new market or help a company get a bigger share of an existing market by letting more people know about what it offers. Businesses can connect and engage with new customers better if they find new ways to use a current product or point out qualities that customers might not know about.

A menswear store that specialises in developing and making custom tuxedos for male grooms is an example of this. The store could get more customers by advertising to women or non-binary people who might want to wear a suit to their wedding.

Architecture Innovation

This new idea is about how a company uses different parts of a system to make something better. It may also involve reviewing these combos again to see what could be done better. This could mean improving one of the main business systems, like the accounting, manufacturing, inventory, or networking systems already in place. The most important parts of the system are not changed, and this is done without altering or changing these parts. This happens all the time when companies make technologies for industrial use but then change how the parts work together to make smaller versions of the product for sale in stores.

Social innovation

Social innovation is all about adopting or making new business practices or tools that help it do its job. For-profit and non-profit organisations often use social innovation to improve many different areas of society. Telling people about these new ideas can help them see the business in a better light and make it more sustainable. For example, a company that makes certain goods might switch to using less energy-hungry machines to reduce its use of fossil fuels and let customers know about this in print ads.

Benefits of the Different Types of Innovation

Business innovation brings numerous benefits that can significantly enhance a company’s growth, efficiency, and competitiveness. Here are some of the key benefits:

Gain a competitive advantage

Innovation can help develop unique products and services that set a company apart. Over 80% of digitally mature companies cite innovation as one of their core strengths.

Meet customer demands

Sixty-five per cent of fast-growing companies say they collaborate with their customers on potential innovations. Businesses that try to understand better and respond to customer needs through ongoing innovation do a better job attracting new customers and retaining existing clients.

Drive business growth

Innovation can position a company to identify better and seize new opportunities. It may also create opportunities to diversify revenue streams or expand into new markets.

Increase efficiency and productivity.

Innovation can result in increased productivity as companies find ways to improve existing processes, streamline operations, and implement new forms of technology.

Better equipped to deal with changes

Innovation prepares a company to identify emerging trends and anticipate shifts in the market in advance rather than reacting to changes that catch them off guard..

Attract and retain talent.

Innovation can create an environment that engages workers and increases job satisfaction and employee retention. Many top companies give their employees a designated amount of time each week to work on product innovations.

Promote resilience and sustainability.

Innovation equips a business to navigate economic downturns and changing consumer behaviour.

Increased efficiency

Business innovation happens by making existing business processes less costly, time-consuming, and more sustainable. Those changes save time and make it easier for an organization to quickly adapt to industry shifts. 


In addition to these benefits, innovation can help solve problems, generate profit, increase market share, and outperform competitors.  It can take many forms, from enhancing existing products or services to expanding the business or changing direction completely. The approach to innovation will depend on the specific business and its goals.


How Is Innovation Used in a Business?

Innovation is crucial for businesses to adapt to market changes, foster growth, differentiate themselves from competitors, meet customer demands, increase efficiency and productivity, and drive profitability. It helps businesses understand and respond to customer needs, improve processes, streamline operations, and implement new technology. Innovation also provides a competitive advantage, increases profitability, adapts to market changes, and drives growth by opening new opportunities and diversifying revenue streams.

What is an example of a company that used innovation?


Apple is a prime example of product innovation. Despite not being the initial creator of touchscreen devices, Apple’s distinctive edge lay in its meticulous attention to user interface (UI) and user experience (UX), creating devices that were not only accessible but also garnered a dedicated following. The introduction of the iPhone, with its seamless touch interface and intuitive design, set a new standard for the entire smartphone industry.


Toyota, a renowned Japanese automotive manufacturer, has embraced a continuous improvement philosophy called kaizen. Instead of pursuing risky, radical transformations, Toyota focuses on core developments that compound over time. This approach has allowed Toyota to stay at the forefront of the automotive industry, introducing incremental manufacturing processes, fuel efficiency, and vehicle safety innovations.


Ford introduced the pioneering concept of an assembly line to enhance automobile production in 1913. Through innovative practices, Ford successfully slashed the time required to manufacture a car from 12 to less than 2 hours. Beyond the assembly line, Ford has continued to innovate, incorporating automation, advanced materials, and digital technologies into its manufacturing processes.


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