Perhaps, you have got this into your ears many times that innovation is all about thinking in a unique way. It is true but only half. In fact, innovation is about when an idea is implemented to create an impact. An idea is a thought that pertains to solve a particular problem(whether it is the problem of a customer or organization itself). Three elements of innovation are idea, implementation, and impact, elaborated with an example as:
Suppose, you are running an aluminum fabrication business. You want to increase your profits in the next 3 in the coming months. The only way out in order to maximize your profits is through cost reduction. Well, you brainstorm an idea which allows you to save your costs. When you implement this idea, it really brings down your costs which means your profits are increased right. This is called innovation- coming up with an idea, which is implemented to create an impact.
Business-week publishes a list of innovative companies every year. As per this magazine, there are 4 main types of innovations described as follows:
When Flipkart.com launched its operations in 2007, all of the work was carried out manually. There was no concept of using enterprise resource planning software. As the business grew up, the details of customers, warehouses, logistics, etc was difficult to manage manually. This problem was solved when it employed an ERP software that would maintain the updates of all departments thus eased up the process. Every department remains aware of the condition of the product from the warehouse to the customer. This is called process innovation.
When TATA launched Nano vehicle for lower sections of society in India, it increased their sales and revenues. This is called as product innovation.
CUSTOMER EXPERIENCE INNOVATION
Again let me take the example Flipkart.com. When it launched a Flyte application in 2013 probably, it enhanced the experience of book lovers. We know it nowadays it is very difficult to carry a book along. This problem was removed out by the application which you need to install, sign up, purchase, and read your favorite stuff on it. This increased the experience of customers and hence is an innovation.
Business model Innovation
The Indian Premier league introduced by Lalit Modi is the way of playing an old cricket game in a new fashion. When an innovation redefines its offer, customer, distribution and money-making technique, it is called as business model innovation.