Types of Innovation that Can Create a Market for Your Business

The application of innovation cannot be generalized. This depends on the status or level of your company, whether it is a stable and established company or your business is still relatively new and developing. There are various ways to create value, achieve differentiation, and outpace competition.

In your company, innovation has various meanings, from making gradual improvements to existing products to creating technology with new breakthroughs or developing completely new markets.

In an online course on Disruptive Strategy, Professor Clayton Christensen from Harvard Business School, outlines three types of innovation, namely:

1. Sustaining Innovation
2. Low-end disruption
3. New-market disruption

Types of Innovation According to the Strategy

How to take advantage of each innovation depends on your company or business' place in the market. The following is an explanation of each type of innovation and how to apply it to achieve long-term business success.

Sustaining Innovation

Sustaining innovation is the improvement of existing products. Companies pursuing continuous innovation develop enhanced versions of their top-tier products to target their most profitable customers willing to pay for improved performance.

In this case businesses will benefit as they can leverage their current processes and cost structures. Later, companies can maintain or increase their profit margins.

In Disruptive Strategy, Christensen briefly describes the characteristics of sustaining innovation in the context of better products that can be sold to the best customers, in order to reap better profits.

An example of a company or brand that implements this is Apple every time it launches a new version of its iPhone. Meanwhile, with every release, Apple always highlights the latest features which are often breakthroughs, such as the triple camera system on the iPhone 11 Pro. In this case, Apple means that it is still building a pre-existing market and value network.

Continuous innovation is a method when leaders of a company or a field are responsible. They can usually be said to be successful because they listen to existing customers and use them to develop superior products and services. However, in the process they create opportunities for new companies to enter the lower end of the market.

Low-End Disruption

Entering low-end disruption or low level disruption, namely when a business is at the bottom of the market with a fairly good product at a cheaper cost. Christensen describes this as “disruptive innovation.” This means that smaller companies with fewer resources start to move upstream and eventually gain legacy customers who then adopt them into the mainstream.

“If you get to the bottom of the market, you create a situation where big companies are motivated to run away, rather than fight you,” Christensen said in Disruptive Strategy.

According to Christensen, large companies usually won't fight back because there's no advantage in it. Additionally, it is very difficult for a company to pursue an opportunity where there is no profit to be made.

Low-level disruption is the process by which new entrants usually win or gain more profits than existing companies or businesses. One example of a company that uses low-end disruption is Airbnb.

In 2007, Airbnb founders Brian Chesky and Joe Gebbia had the idea to rent out the air mattresses in their apartment to people attending a design conference in San Francisco.

While not an ideal sleeping situation, the innovation turned out to be good enough for the three guests at a much cheaper price than staying in a hotel. Currently, Airbnb is an online marketplace that operates in the accommodation rental sector.

They also offer holiday destinations with a total of more than seven million accommodations and 50,000 entertainment facilities to tourists from all over the world. Hotel visitors have turned to Airbnb and are generating more room or room bookings.

New-Market Disruption

New-market disruption is when a business creates a new segment in an existing market to reach underserved customers. Through new performance measures, they transform products and services that were once expensive and unaffordable into something more achievable and accessible to a larger population.

According to Christensen, low-end disruption does not create new markets, but rather gains market share against old ones. New market disruptors compete with existing or established companies or players by pursuing new customers that these companies are not interested in. Because of this, selling products becomes simpler to them.

Again, through Apple we can see the innovation they are doing. Apple's iPhone has been an ongoing innovation, previously serving as a new market disruptor.

The use of the iPhone disrupted the laptop market by allowing customers to connect to the internet and easily access their favorite applications from a device they could hold in the hand.

There are many ways to pursue innovation. If you are growing your business, think strategically about improving your business products both personally and as part of the company. Today, various innovations can help maintain competitive advantage.

It is important for company executives to be able to carry out new innovations and develop businesses that are able to compete, survive and excel. Through the Business Development Planning program, you can get various perspectives on mature business planning to minimize risks that can disrupt company performance so that you can keep the market stable.