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 organisation itself). Three elements of innovation are idea, implementation and impact, elaborated with an example as:
Suppose, you are running an aluminium fabrication business. You want to increase your profits in the next 3 incoming months. The only way out in order to maximize your profits is through cost reduction. Well, you brain storm 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 as 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:
1. Process Innovation
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 which would maintain the updates of all departments thus eased up the process. Every department remains aware about the condition of product from warehouse to customer. This is called as process innovation.
2. Product 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.
3. Customer Experience
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 no a days 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 customer and hence is an innovation.
4. Business model Innovation
The Indian Premier league introduced by Lalit Modi is the way of playing 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.