From technological to marketing and social innovations, businesses can leverage various types of innovations to improve their operations, differentiate themselves from their competitors, and meet the evolving needs of their customers. In this article, we will explore the different types of innovations and how they can benefit businesses in different ways.

Innovation Matrix

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Sustaining innovation refers to the gradual improvement of a product or service, with each iteration making the product slightly better and reducing defects. This type of innovation targets high-end customers who demand better performance and are willing to pay more for an improved version of the product. Alternatively, the improved product may be cheaper, leading to higher volumes and profits.

The iPhone is an example of a sustaining innovation, where newer versions of the phone appeal to the same customer segments and sustain the existing business model in the premium segment of the market. The characteristics of sustaining innovation include a focus on profitable segments, sustaining or improving market position, improving and growing existing value networks, incremental changes, and the risk of being disrupted.

​​Incremental, disruptive, sustaining, and radical innovations are important concepts to describe the technology and impact of innovation. However, innovation is not limited to these categories. A more pragmatic and holistic approach is required to achieve concrete and actionable results. This section will introduce other types of innovation that can unlock new value in different parts of your business.

​Service innovation involves the creation of a new or significantly improved service concept, product, or process in a new or existing market. It can be a new customer interaction or distribution channel, a system that improves delivery processes, or new solutions in the customer interface. Differentiating a business through service innovation helps respond better to customer needs and expectations, creating more value and generating new revenue streams.
 
A big part of a successful business is the ability to make your customers lives easier and the better you’re able to meet the needs and expectations of the ones you serve, the brighter your future looks like. Service innovation is a great way to:

• Differentiate: How you respond to the needs of your customers plays a significant role in how people perceive your brand. Products and technologies can be easy to copy, which is why you can use service innovation to differentiate your business.
• Deliver more value: Exceptional and consistent customer service, smooth order processing, inventory management and troubleshooting all contribute to value creation and the happiness of a customer.
• Generate more revenue: By focusing on service innovation, you can unlock new business opportunities and find new revenue streams.

 
UberEATS

Uber is an example of a company that has used service innovation to create further growth outside of its core business. UberEATS has used Uber's strengths and unique capabilities to enter adjacent markets, such as restaurant and grocery home delivery businesses. Uber’s unique capabilities enable rapid market entry:
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• Brand recognition: Uber’s strong and globally recognized brand has enabled them to enter adjacent markets fast.
• Technology infrastructure: Uber has built a multi-sided technology platform that can be used to exchange value with customers, organizations and other entities in adjacent markets.
• Network of couriers: Uber has one of the widest drivers’ networks (around 3 million drivers) across the globe that they can use to deliver adjacent services.

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Business model innovation involves a fundamental change in how a company delivers or captures value from the market. It includes strategy, resources, capabilities, channels, and values, and often happens through new pricing mechanisms, revenue streams, or distribution channels.

• Strategy: Strategy is the plan for gaining competitive advantage by harnessing the capabilities and resources of the organization, for example marketing, operations, finance and R&D.
• Resources: In this context, we refer to the tangible resources the organization has at its disposal, such as technological and financial resources.
• Capabilities: Capabilities refer to people and the unique skills and knowledge inside your organization, including management skills.
• Channels: Distribution channels are the marketing channels through which you get your product in the hands of your customers.
• Values: Values guide organizational thinking and actions and represent the foundation on which the company is formed.

Business model innovation is a fundamental change in how a company delivers value to its customers or captures it from the market. In practice, it often happens through the development of new pricing mechanisms, revenue streams or distribution channels but isn’t limited to them.

Signs that indicate that your business is at risk of being disrupted:
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• Saturated market
• Outdated technology
• Undesirable changes in industry conditions
• Unwillingness or inability to keep up with global trends
• Low customer satisfaction

 
iTunes v Spotify

Purchasing music, for example, has transformed twice in the past couple of decades. iTunes is an interesting example of disaggregation business model – a strategy that breaks down or separates something into constituent parts or elements.

Before iTunes started to sell single tracks, you either had to buy the entire album to hear your favorite song or sit by the radio at the right time to be able to record it.

Later, Spotify took the digital music business to a completely different direction with its freemium streaming model by cutting out the middleman and dealing with customers directly online to which Apple now has had to respond with its own Apple Music service.

​Each horizon represents a different time frame, risk level, and potential for growth. In this article, we will explore the McKinsey Three Horizons of Growth framework in detail, including its benefits and challenges, the process for applying it, and examples of companies that have successfully used this approach. Each horizon represents a different time frame, risk level, and potential for growth. Lets takes a closer look at each of these horizons.

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​Horizon 1 represents the core business of the organization and includes its current products, services, and markets. The focus of Horizon 1 opportunities is on optimizing and improving the existing business model, products, and services to maintain competitiveness and profitability. Horizon 1 opportunities may include improving operational efficiency, optimizing pricing strategies, and expanding the customer base.

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​Horizon 2 represents emerging opportunities that have the potential to become a new source of growth for the organization. These opportunities may involve expanding into new markets, developing new products or services, or creating new business models. Horizon 2 opportunities may require more investment and risk than Horizon 1 opportunities but offer greater potential for growth. The goal of Horizon 2 is to create a pipeline of opportunities that can be developed over time to sustain the organization's growth.

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​Horizon 3 represents opportunities that are further out in the future, often involving new technologies, markets, or business models that do not yet exist. These opportunities require significant investment and may take longer to develop, but they have the potential to become significant sources of growth in the future. Horizon 3 opportunities may involve exploring new and emerging technologies, developing new business models, or entering entirely new markets. The goal of Horizon 3 is to create a portfolio of options that can be pursued as the organization's core business matures and new opportunities emerge.

The McKinsey Three Horizons of Growth framework helps organizations to balance short-term and long-term growth opportunities, prioritize investment in innovation and growth, and allocate resources effectively across different horizons. By evaluating growth opportunities across different horizons, organizations can create a more comprehensive and strategic approach to growth and innovation.

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• Oversimplifies complex issues: The framework can oversimplify the complexities of growth and innovation, leading to a potential oversimplification of the strategic planning process.
• Focuses more on internal growth: The framework focuses primarily on internal growth opportunities, which may not account for external market forces or competition.
• May not account for unique industry factors: Different industries may have unique factors that affect growth opportunities, which may not be captured in the framework.
• Requires significant investment in horizon 3 opportunities: Pursuing horizon 3 opportunities can be risky and require significant investment, which may not always yield the desired return on investment.

While the McKinsey Three Horizons of Growth framework provides a useful structure for evaluating growth opportunities, it should be used in conjunction with other strategic planning tools to ensure a comprehensive analysis of growth opportunities.

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Here are some examples of companies that have successfully used the McKinsey Three Horizons of Growth framework:
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• Amazon: Amazon has successfully used the framework to grow its business by focusing on all three horizons simultaneously. Horizon 1 for Amazon includes its core retail business, while Horizon 2 includes its expansion into new markets such as AWS, Prime Video, and Echo. Horizon 3 includes its exploration of new technologies such as drones, artificial intelligence, and autonomous vehicles.
• GE: GE has used the framework to transform its business by divesting its Horizon 1 businesses such as appliances and lighting, while investing in Horizon 2 businesses such as aviation, power, and healthcare. GE is also exploring new technologies such as additive manufacturing and digital twins, which fall under Horizon 3.
• Toyota: Toyota has used the framework to diversify its product portfolio and expand into new markets. Horizon 1 for Toyota includes its core automotive business, while Horizon 2 includes its expansion into hybrid and electric vehicles, and Horizon 3 includes its exploration of new mobility solutions such as autonomous vehicles and connected cars.
• Apple: Apple has used the framework to launch new products and enter new markets while maintaining its core business. Horizon 1 for Apple includes its core product lines such as iPhones and Macs, while Horizon 2 includes new products such as Apple Watch and HomePod. Horizon 3 includes Apple's exploration of emerging technologies such as augmented reality and self-driving cars.

These are just a few examples of how companies have successfully used the McKinsey Three Horizons of Growth framework to balance short-term and long-term growth opportunities and allocate resources effectively.

​Design thinking involves understanding the needs and perspectives of users, generating and testing ideas, and refining solutions through rapid prototyping and iteration. Originally developed in the context of product design, design thinking has since been applied to a wide range of fields and industries, from healthcare and education to finance and public policy.

​In this article, we will explore the basics of design thinking, its key principles and practices, and its applications in the enterprise. We will also examine the benefits and challenges of using design thinking, and offer some tips for incorporating it into your organization's innovation process. Whether you are a business leader, designer, or innovator, understanding the principles and practices of design thinking can help you create more customer-centric, effective, and impactful solutions that meet the needs and expectations of users.

​Design thinking is a problem-solving approach that puts the user at the center of the process. It is a methodical, human-centered approach to innovation that involves empathy, collaboration, experimentation, and iteration. The goal of design thinking is to create solutions that are both desirable for users and feasible for businesses or organizations to implement.
 
The design thinking process typically involves five stages:
 

• Empathize: In this stage, the focus is on understanding the users' needs and perspectives. This involves observing and engaging with users to gain a deeper understanding of their motivations, behaviors, and pain points. The goal is to develop empathy for the user's experience.
• Define: Once you have gathered insights from users, you can begin to define the problem you are trying to solve. This involves synthesizing your research and identifying the key issues and opportunities that will guide your design process.
• Ideate: In this stage, the focus is on generating a wide range of ideas that could potentially solve the problem. This involves brainstorming and ideation sessions where the team comes up with as many possible solutions as possible.
• Prototype: Once you have identified some potential solutions, you can begin to create prototypes. These can be rough mock-ups or models that allow you to test and refine your ideas. The goal is to create prototypes quickly and inexpensively to get feedback from users.
• Test: In the final stage of the process, you will test your prototypes with users to get feedback on what works and what doesn't. This feedback will help you refine your ideas and create more effective solutions. You may need to go back through the process multiple times to refine your ideas and create a solution that meets the user's needs.

 
Overall, design thinking is a highly collaborative and iterative process that focuses on creating solutions that are both user-centered and practical. It is often used in product design and development, but can be applied to a wide range of fields and industries.

Design thinking has many applications in the enterprise so lets take a closer look at a few examples:​
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• Product development: Design thinking can be used to develop new products that meet the needs and preferences of users. By using a human-centered approach, organizations can create products that are more intuitive, user-friendly, and effective.
• Service design: Design thinking can be used to design and improve services that meet the needs of customers. By understanding the customer journey and experience, organizations can create services that are more personalized and engaging.
• Process improvement: Design thinking can be used to improve internal processes within organizations. By identifying pain points and areas for improvement, organizations can streamline processes, increase efficiency, and reduce costs.
• Innovation and ideation: Design thinking can be used to generate and refine new ideas within organizations. By involving a diverse group of stakeholders in the ideation process, organizations can generate more innovative and diverse ideas.
• Organizational culture: Design thinking can be used to promote a culture of innovation and collaboration within organizations. By encouraging experimentation, learning, and collaboration, organizations can foster a more innovative and creative culture.

 
Design thinking can be applied to many different areas within an enterprise, from product development and service design to process improvement and organizational culture. By using a human-centered, iterative approach to problem-solving, organizations can create more effective, efficient, and innovative solutions that meet the needs and expectations of users and stakeholders.

Indeed, design thinking has become increasingly popular in enterprises as a way to foster innovation, improve customer experiences, and drive business growth. However, as with any approach or methodology, there are benefits and challenges to using design thinking in the enterprise.

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• Customer-focused: Design thinking puts the customer at the center of the process, which can lead to solutions that better meet their needs and expectations. 
• Iterative: Design thinking is an iterative process, which allows for continuous testing, feedback, and refinement of ideas, leading to better solutions.
• Collaboration: Design thinking encourages collaboration and cross-functional teamwork, which can break down silos and encourage knowledge sharing and innovation. 
• User empathy: Design thinking involves empathizing with users, which can help organizations better understand their customers and create more meaningful experiences.
• Agility: Design thinking encourages experimentation and risk-taking, which can lead to faster innovation and more agile decision-making.

 

• Time-consuming: The design thinking process can be time-consuming, especially in large enterprises with complex processes and multiple stakeholders.
• Resource-intensive: Design thinking requires resources such as time, personnel, and technology, which may be a challenge for some organizations.
• Unclear ROI: It can be difficult to measure the ROI of design thinking, especially in the short term, which may make it difficult to justify the investment.
• Resistance to change: Some employees or stakeholders may be resistant to change or new ways of working, which can make it difficult to implement design thinking in the enterprise.
• Lack of expertise: Design thinking requires specialized expertise, including research, design, and facilitation skills, which may be in short supply in some organizations.

 
Overall, the benefits and challenges of design thinking in the enterprise depend on the specific context and goals of the organization. While there are some challenges and risks associated with design thinking, many organizations have found that it can be a powerful tool for driving innovation and improving customer experiences.

Innovation architecture, which we covered in a previous article, refers to the process and systems that organizations use to manage and drive innovation. It involves creating a framework for generating, evaluating, and implementing ideas, as well as allocating resources and managing risk. Design thinking can complement and add value to innovation architecture in several ways:
 

• User empathy: Design thinking emphasizes empathizing with users to understand their needs and preferences. By incorporating user insights into innovation architecture, organizations can develop more customer-centric solutions that are more likely to meet users' needs.
• Iteration and experimentation: Design thinking encourages rapid prototyping, testing, and iteration. This iterative approach can help organizations refine and improve ideas more quickly, allowing for faster innovation and better solutions.
• Collaboration and cross-functional teamwork: Design thinking emphasizes collaboration and cross-functional teamwork, which can help break down silos and encourage knowledge sharing and innovation. By involving a diverse group of stakeholders in the innovation process, organizations can generate more diverse and innovative ideas.
• Human-centered design: Design thinking focuses on designing solutions that are intuitive, user-friendly, and easy to use. By incorporating human-centered design principles into innovation architecture, organizations can create solutions that are more likely to be adopted and embraced by users.
• Problem-solving: Design thinking is a problem-solving approach that encourages creative and innovative thinking. By using design thinking as part of innovation architecture, organizations can create a more structured and systematic approach to problem-solving that is more likely to generate breakthrough solutions.

 
Design thinking can complement and add value to innovation architecture by bringing a user-centric and creative mindset to the innovation process. By incorporating design thinking principles and practices into innovation architecture, organizations can generate more innovative and impactful solutions that better meet the needs of users and stakeholders.

​Here are some tips for incorporating design thinking into an organization's innovation process:
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• Start with empathy: Begin by understanding the needs, preferences, and pain points of your users and customers. Use methods like user research, interviews, and observation to gain insights into their experiences.
• Foster a culture of innovation: Encourage experimentation, learning, and collaboration within your organization. Create spaces for brainstorming and idea generation, and encourage diverse perspectives and backgrounds.
• Iterate and prototype: Use an iterative approach to problem-solving, prototyping and testing ideas as you go. Create low-fidelity prototypes to quickly test and refine your ideas based on feedback from users and stakeholders.
• Use visual thinking: Incorporate visual thinking and design methods like sketching, storyboarding, and mind mapping to help generate and communicate ideas more effectively.
• Involve cross-functional teams: Involve individuals with diverse skills and expertise in the design thinking process. This can help bring different perspectives to the table and lead to more innovative and effective solutions.
• Measure success: Use metrics and data to measure the success of your design thinking initiatives. This can help you track progress and identify areas for improvement.

 
By incorporating these tips into your organization's innovation process, you can leverage the principles and practices of design thinking to develop more effective, user-centered, and innovative solutions. Remember that design thinking is an ongoing process that requires continuous experimentation, iteration, and learning. With time and practice, you can develop a culture of innovation and creativity that helps drive growth and success for your organization.

An effective innovation architecture should include the following elements:
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• Strategy: A clear and well-defined innovation strategy that aligns with the overall business strategy and goals.
• Culture: A culture that fosters creativity, risk-taking, and continuous learning.
• Leadership: Leadership that supports innovation and is committed to providing the resources, support, and encouragement needed to drive innovation forward.
• Processes: A structured approach to innovation that includes ideation, prototyping, testing, and implementation.
• Tools: The use of tools and technologies to support the innovation process, such as ideation platforms, project management software, and data analytics tools.
• Metrics: The use of metrics to track and measure the success of innovation efforts, such as revenue growth, cost savings, and customer satisfaction.

By building a strong innovation architecture, organizations can improve their ability to generate new ideas, develop and test those ideas quickly and efficiently, and bring successful innovations to market.​

There are several frameworks that can be used for innovation architecture, depending on the needs and context of the organization. Here are some examples:
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• Design thinking: This is a human-centered approach to innovation that emphasizes empathy, collaboration, and experimentation. It involves several iterative stages, including understanding the user, defining the problem, ideating potential solutions, prototyping, and testing.
• Lean startup: This framework emphasizes rapid experimentation and feedback in the development of new products or services. It involves creating a minimum viable product (MVP) to test the market, and then using feedback to refine the product and iterate until it meets the needs of the customer.
• ​Doblin’s Ten Types of Innovation Framework: In the Ten Types of Innovation framework, the different types of innovations are divided into three main categories: configuration, offering and experience. In layman’s terms, business model, product and marketing.
• Agile: This is a project management framework that emphasizes flexibility and collaboration in the development of new products or services. It involves breaking down projects into smaller, more manageable parts, and then iterating through cycles of planning, execution, and review.
• Open innovation: This framework involves collaborating with external partners, such as customers, suppliers, or academic institutions, to generate new ideas and solutions. It involves leveraging the knowledge and expertise of a wider network of stakeholders to drive innovation.
• Business model innovation: This framework involves rethinking the way that the organization creates and captures value. It involves analyzing the current business model, identifying opportunities for improvement or disruption, and then developing and testing new models that better meet the needs of the market.

Overall, the choice of framework will depend on the specific needs and context of the organization, as well as the goals of the innovation initiative. The innovation architect will need to carefully evaluate the strengths and weaknesses of different frameworks to determine which one is best suited to the situation at hand. In the next few sections, we'll explore both 'Design Thinking' and 'Lean Startup'.​

The process for innovation architecture can vary depending on the organization, the specific challenge or opportunity, and the resources available. However, the following steps are often involved in the innovation architecture process:

• Identify the problem or opportunity: The first step is to clearly define the problem or opportunity that the organization is trying to address. This involves understanding the context and scope of the challenge, as well as any constraints or limitations that may affect the solution.
• Conduct research and analysis: Once the problem or opportunity has been identified, the innovation architect will typically conduct research and analysis to gather information and insights that can inform the solution design. This may involve gathering data, conducting interviews, and reviewing relevant literature and market trends.
• Ideate and prototype: With the insights gathered from research and analysis, the innovation architect will then generate ideas for potential solutions. These ideas may be developed into prototypes, which can be tested and refined through feedback and iteration.
• Develop and implement the solution: Once a solution has been designed and refined, the innovation architect will work to develop and implement the solution. This may involve collaborating with other teams or departments, securing funding, and managing the implementation process.
• Evaluate and refine: Finally, the innovation architect will evaluate the success of the solution and make recommendations for any necessary refinements or improvements. This may involve gathering feedback from stakeholders, analyzing performance metrics, and incorporating any lessons learned into future innovation initiatives.

Throughout the process, the innovation architect will need to communicate effectively with stakeholders, build and manage teams, and stay up-to-date with the latest trends and technologies in the relevant industry or market. Flexibility and adaptability are also important qualities, as the innovation architecture process often involves navigating uncertainty and navigating complex challenges.

Google's innovation lab, also known as Google X, is a secretive research and development lab within Google's parent company, Alphabet. The lab was established in 2010 and is tasked with developing cutting-edge technologies and products that have the potential to change the world.

Google X employs a range of innovation architecture frameworks to support its work, including design thinking, agile development, and lean startup principles. The lab's process involves identifying promising new ideas, prototyping and testing them, and then iterating based on feedback and data.
One of the hallmarks of Google X is its willingness to tackle ambitious and unconventional projects. The lab is known for taking on projects that may seem far-fetched or impossible, such as self-driving cars, high-altitude balloons that provide internet access to remote areas, and smart contact lenses that can measure glucose levels for people with diabetes.

Google X is also known for its culture of experimentation and risk-taking. Employees are encouraged to pursue bold ideas and to take risks in their work, with the understanding that failure is a natural part of the innovation process. Despite the secrecy surrounding Google X's work, the lab has produced a number of successful products and technologies. For example, the self-driving car project has been spun off into a separate company called Waymo, and Project Loon has been used to provide internet access to people in disaster-stricken areas around the world.
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Overall, Google X is a prime example of how innovation architecture can be used to support breakthrough innovation and create products and technologies that have the potential to change the world.  ​

​​Innovation architecture is a powerful framework that can help organizations drive innovation and create sustainable competitive advantage. By creating a structured approach to innovation that includes strategy, culture, leadership, processes, tools, and metrics, organizations can improve their ability to generate and implement new ideas.

To build a successful innovation architecture, organizations must be willing to embrace risk-taking, experimentation, and continuous learning. They must foster a culture of innovation and provide the resources and support needed to drive innovation forward.

By implementing an effective innovation architecture, organizations can gain a deeper understanding of their customers, create innovative new products and services, and position themselves for long-term success in the marketplace.

In conclusion, innovation architecture is a critical element of modern business strategy, and organizations that embrace it will be better positioned to thrive in an ever-changing and competitive business landscape.