Innovation tends to focus around product performance – new products, new updates, new features. That’s why companies often think of R&D investment as the ingredient for innovation. But there’s plenty of innovation to be had in the areas that surround the product. By looking at successful innovators, we can see that they are adept at finding breakthroughs in these surrounding areas. The Ten Types of Innovation is a methodology that is particularly useful at helping us think more broadly, let’s take a look at how it works.
Since the late 90’s, the Doblin group has been working with the Ten Types framework, led by Larry Keeley. Doblin is now part of Deloitte, and the framework has been encapsulated into a book, The Ten Types of Innovation: The Discipline of Building Breakthroughs. The ten types are split into three areas. At the center is the Offering, which contains the core product elements, and how the product is organized and integrated. To the left is Configuration, how the company is organized to make a profit. And to the right is the Experience, how the company interacts with the customer. Let’s look at each of the elements in detail.
Profit Model
- How the organization turns its value into profit. Innovative examples would be Gillette flipping their profit model from expensive razors, with cheap refills, to selling the handles cheaply and charging more for the blades – thus teaching consumers that blades are disposable, and they don’t need to be sharpened and maintained; or Hilti, who provide power tools for the construction industry, and offer a subscription service which means companies no longer need to own the tools, which removes the need to service and maintain expensive equipment.
Network
- The value that is created by working with others. We are evermore connected today, and it becomes essential for firms to work with others, to gain processes, technology, or brand credibility. Open Innovation is itself a form of Network innovation – leveraging the skills and expertise of people outside your firm. The US retail firm Target is a good example, with its extensive partnering network, including Michael Graves, the architect who designed a range of kitchen appliances.
Structure
- How you organize the talent and assets within your company. When done well, these are very hard for competitors to copy. W. L. Gore is famous for its flat organizational structure, teams are often small, and driven by commitments rather than management orders; all employees become shareholders after a year. Zappos, and its Holacracy, would be another structural innovation example.
Process
- How a company goes about producing its products and services – its core operations. Sometimes it’s a patented approach, or a breakthrough methodology such as Toyota’s lean production. Zara has risen to prominence in the retail industry with its reimagining of the fashion supply chain, taking a sketch through to shop floor within weeks.
Product Performance
- The quality, feature set, capability of a firm’s products. This is often considered the total sum of innovation, and revolves around the R&D department. It’s certainly important, but only one of the ten types. Examples could be Dyson’s breakthrough dual cyclone technology with no bag, taking 15 years and more than 5,000 prototypes to produce; or Corning’s Gorilla Glass, a core component of many leading technology brands.
Product System
- How you create additional value by adding other firms’ products and services to yours, or how you combine multiple products to create significantly more value. The web browser Mozilla is built on open-source software, and allows developers to create add-ons to enrich the product. Oscar Mayer offers “lunchables”, combinations of food snacks for school lunches, making it easy for parents, and fun for kids.
Service
- How you make your product easier to use, more enjoyable, or get better value from. Zappos is famous for its customer service, with employees empowered to take the initiative to solve the customer’s issue – whether it means spending hours on the phone with them, or sending them flowers. Men’s Wearhouse offer lifetime pressing on their suits and coats.
Channel
- How you connect with your customer. It differs from Network, in that it’s not about whom you work with to make those connections, but more about the ways in which you connect. Nike’s NikeTown flagship stores offer a rich and unique experience for shoppers, with product launches, and athletic staff, including ex-basketball professionals.
Brand
- Your brand can be a powerful innovation in itself, it can represent the values you stand for, or a simple but big idea that resonates with customers. Virgin is a classic example of brand, led by Sir Richard Branson, and companies such as Virgin Atlantic Airways, Virgin Records, Virgin Trains, and Virgin Galactic; Virgin stands for being different and fun, spicing up the industries in which it ventures. Intel is another powerful brand, making a computer component so valuable that having the “Intel Inside” on the box elevates the value of the overall product.
Customer Engagement
- How you understand and then leverage the desires and needs of your customers. They can be hard to spot, often sitting among one of the other nine types. The question is how to interact with your customers and delight them? Blizzard Entertainment, who makes World of Warcraft, is an expert at customer engagement – understanding what makes users play for hundreds of hours, and what drives them to collaborate and connect with other users. Apple of course is another company that thrives on the engagement of its devotees.
Combinations of types are most powerful
When a company works to combine multiple types of innovations, they often produce powerful results. The authors of the book studied companies considered innovative in 2011, grouping them into average and top innovators, and found that top innovators (those repeatedly launching successful offerings) were integrating twice as many types of innovation as the average innovators.
(Source: Ten Types of Innovation)
(Source: Ten Types of Innovation)
Compared to the S&P 500, companies that integrated multiple types of innovations were more successful over a period of time. You can see clearly the results of those companies with five or more of the ten types.
“Almost all of the enterprises that we celebrate as leading innovators routinely use multiple types of innovation – and handily outperform the average firms that innovate more naively … Significantly, the top innovators outperform the S&P 500. Integrating more types of innovation can help deliver superior financial returns.”
(Source: Ten Types of Innovation)
Nike Example
A Product Performance company at its core, Nike has made leading sportswear and equipment for decades. In 1985 they made a remarkable innovation, by signing then rookie basketball star Michael Jordan to endorse the Nike brand. This trend of sportstar endorsements continues strongly today, to help the likes of Nike and Adidas maintain market dominance.
In 1990, Niketown was launched – a Channel innovation, to present ‘retail as theatre’. The flagship stores cost millions, and were clearly never going to produce a return on investment by selling goods in store. Instead the initiative was funded by the advertising budget; the stores could do more to build Brand innovation than any ad campaign.
In recent times Nike has launched Nike+, a leading Product System which is integrated into the sportswear range, and allows runners and athletes to track their movements. It also integrated with Apple products in a Network innovation. These steps alone touch on half of the ten types, and as a result Nike is consistently one of the leading brand names in the world.
Method Example
Founded in 2000, Method is a design and sustainability conscious home care products company. In 2012 they were acquired by Ecover to form the world’s “largest green cleaning company.” The products kill germs, but are produced without the use of toxic chemicals. Method follows a Process called greensourcing, which tracks the environmental impact of making its products, and it outsources production to many subcontractors to keep the company agile and nimble (Structure).
The Brand is built around the values of greensourcing, and has built a strong following among design and lifestyle blogs, with the packaging created by industrial designer Karim Rashid. Method has a community site called People Against Dirty, which offers deals, stories, and insights to future products. The movement brings in people who are more broadly supportive for environmental sustainability, as well as developing Customer Engagement. With its core Product Performance offering, Method innovates around half of the ten types like Nike.
Ten Types for Idea Campaigns
If you’re stuck getting ideas beyond product performance, you could launch a series of idea campaigns to tackle different aspects of the ten types. If you really want to push for diverse thinking, imagine running ten campaigns to gather input on the full spectrum. While R&D is the typical audience for product innovations, consider how useful HR would be for thinking through Structure innovations; Sales and Finance for Profit Model innovations; Marketing for Brand and Customer Engagement innovations.
The ten types enable you to structure the thinking, and focus collaborative participation on one particular area – this focus, as always, can help produce high quality ideas. The framework is easy to understand and communicate, and therefore a useful way to engage your audience.
The book also includes ‘innovation tactics’, which are small sources of inspiration to generate new thinking under each of the ten types. For example, here are a few tactics listed under Profit Model:
- Forced Scarcity: Limit the supply of offerings available, by quantity, time frame, or access, to drive up demand and/or prices.
- Metered Use: Allow customers to pay only for what they use.
- Microtransactions: Sell many items for as little as a dollar – or even only one cent – to drive impulse purchases.
- Risk Sharing: Waive standard fees or costs if certain metrics aren’t achieved, but receive outsize gains when they are.
There are hundreds of tactics listed on the ten types website, you can also purchase a deck of cards representing the tactics, which are helpful for running a workshop around the framework. If you’re running idea campaigns, you could add the tactics into your inspiration spaces, or as seed ideas to a campaign, to provide food for thought for your community.
One of the best uses of the framework is to help engage the entire business in thinking through innovation possibilities, as Larry Keeley puts it:
“The most innovative organizations rely on systems of individuals and teams working across functions in their organizations. Innovation isn’t the work of only scientists, engineers, or marketers; it’s the work of an entire business and its leadership.”
This article was originally posted on the HYPE Innovation blog.
Tim Woods 