What is our current understanding of innovation and how many types of innovation do we know? Broadly, innovation landscapes are characterized by well-established categories, such as product, process, organizational, and marketing innovation, explained and theorized in terms of their links with technological innovation. However global challenges and changes in the structure of knowledge production, have led to diverse innovations, and recognizing and classifying such innovations is more complex, fragmented, and geographically dispersed than ever before. The progressive incorporation of hidden and non-technological innovations, together with the emergence of the fourth industrial revolution, is contributing to change our understanding of innovation and its measurement. This article provides an overview of the most salient types of innovation in recent decades, enabling both researchers and practitioners to navigate the complex web of innovation definitions and typologies. Innovation studies face the challenge of finding a comprehensive and inclusive definition that captures the significance of innovation, and overcoming the terminological ‘Babel'ization and increased fragmentation of the field of innovation research.
1. Introduction
The vast body of existing literature leaves little doubt about the relevant role of innovation to the dynamics of economic growth and socioeconomic development (Chen, Yin, & Mei, 2018; Fagerberg, Martin, & Andersen, 2013; Lundvall, 2016). Overall, innovation describes a sense of purpose to the evolution of humanity, explained in terms of creative capacity of invention as a source of technological, social, and cultural change. At the same time, innovation has become a Holy Grail in economic growth and sustainability agendas worldwide (OECD, 2016; Fagerberg, 2018). Despite the vast body of literature available, it is very difficult to provide a comprehensive definition of the term and clearly describe its nature. Innovation is a multidimensional concept that includes varied meanings and definitions from the perspective of different disciplines, some of them co-exist in emergent fields such as innovation studies (IS) (Fagerberg & Verspagen, 2009), while others are considered “outsiders” (Chen et al., 2018; Cunningham, 2013; Edwards-Schachter & Wallace, 2017).
Several authors have tried to capture the essentials of innovation and establish common innovation typologies (Garcia & Calantone, 2002; Linton, 2009; Oke, 2007). However, as of yet innovation is an umbrella term involving a myriad of innovation types described as “buzz words” or “container concepts.” Innovation is not only “technological” but also “social,” “cultural,” “institutional,” “inclusive,” “green,” “eco,” “open,” “user-driven,” “lean,” “low-cost,” “grassroots,” “public,” and “transformative” (Edwards-Schachter, 2016). The appearance of new definitions indicates evolution of the concept of innovation and the influence of historical and sociocultural contexts where innovation types emerge (Fagerberg & Verspagen, 2009; Godin, 2015; Gupta et al., 2003).
Recent contributions from mainstream Innovation Studies (IS) are stimulating a debate among innovation scholars about the future of IS (Fagerberg et al., 2013; Lundvall, 2013; Martin, 2016; Fagerberg, 2018). This discussion involves the lack of attention to the interrelationship between technological and non-technological factors that influence the generation and diffusion of successful innovation, social dimensions of innovation processes, and the type of value generated, among others. Martin (2016, p. 434) notices, “the growing amount of innovative activity that is going on but it is just not visible using existing measurement instruments.” Furthermore, Fagerberg et al. (2013, p. 11) affirm that “the way in which we conceptualize, define, operationalize, and analyze ‘innovation’ is rooted in the past, leaving us less able to grapple with other less visible forms of innovation” Martin (2013, p.11). uses the term “dark innovation” instead of the more common “hidden innovation” (Miles & Green, 2008) to name innovations which, in his words, “have been ignored or are essentially ‘invisible’ in terms of conventional indicators” (Martin, 2016, p. 434). Dark innovations include user innovations and innovations that are based on design, branding, software or other intangible investments rather than R&D together with “below-the-radar” innovation activities, particularly in developing economies in particular social innovation social innovation. Martin (2016) concludes that “the challenge to the next generation of IS researchers is to conceptualize, define, and come up with improved methods for measuring, analyzing and understanding ‘dark innovation.’”
This paper contributes in providing an overview of the most salient innovations in recent decades, some of them well established, and others new entrants and evolving concepts. The principal purpose is to provide a “big picture” that enables researchers and practitioners to navigate the complex web of meanings and types underlying the changing nature of innovation.
2. Reviewing the nature of innovation process: some core aspects and new incumbents
Classical definitions of innovation derive from the economic and managerial strands of IS, being the principal focus the role of technology and evolution in the production and application of scientific and technological knowledge (the couple research and development, R&D) over time. According to Martin (2016, p. 434), innovation in the 1960s related exclusively to manufacturing in developed countries, it was technology-based, involved prior R&D, developed by large companies, often on the basis of R&D conducted in their own labs, and frequently involved patenting. He acknowledges that most indicators developed to measure such innovations may be “missing” much of the innovative activity that is opposite, i.e., incremental, not in the form of manufactured product innovations, involves little or no formal R&D, and is not patented.
“Invention,” “novelty,” and “change” describe the nature of innovation. Together, they comprise a set of characteristics according to the process and elements involved, such as purposes, actors, drivers and resources, inputs, activities and outcomes, value generation, structural and institutional context, and other contextual factors. It is noteworthy that all these elements/aspects have experienced and continue to experience rapid changes that challenge the classical scope and definitions of innovation as technological innovation.
2.1. Tangible versus intangible inventions as a source of innovation
Innovation is considered as both the process and outcome of creating or inventing something new and valuable that produces broader effects in the economy and technological advances. In Nelson & Winter's classical essay (1977, p. 36), the term innovation was used “as a portmanteau to cover the wide range of variegated processes by which man's technologies evolve over time.” Freeman (1974, p. 22) defined innovation related to invention as intrinsic to technological change: “an invention is an idea, a sketch, or a model for a new or improved device, product, process, or system.” Although closely linked, invention and innovation are very distinct: a requisite is the successful introduction or commercialization and marketing of an invention. Schumpeter (1934, p. 88) affirmed, “as long as they are not carried out into practice, inventions are economically irrelevant” and, more explicitly, Freeman (1974, p. 22) maintains, “an innovation in the economic sense is accomplished only with the first commercial transaction.”
Two aspects related to invention as a source of “dark innovations” should be considered. On the one hand, as Porter (1990) highlighted, inventions need not result in something tangible. He defined innovation as “a new way of doing things (termed invention by some authors) that is commercialized” (p. 780). Social inventions and service social inventions are not R&D based technological inventions (Conger, 1974, 1984). Conger (1974) refers to “social service inventions” (p. 93) as social innovations to alleviate social needs.” On the other hand, the relevance of inventions is in terms of societal demand (the emergent social market) and the production of social impact. One of the challenges to IS, as highlighted by Martin (2016), is the transformation in the concept of progress and societal goals, “from innovation for wealth creation to innovation for wellbeing (or from “more is better” to “enough is enough” (p. 436). Another related issue that needs more attention is the difference between disruptive and radical innovations attending to the different types of inventions and the process of introduction and/or recombination of ideas and the “degree of novelty.”
2.2. Purpose and responsibility of innovation: from economic growth to sustainability transition
A decade ago, a report published by the Organization for Economic Cooperation and Development (OECD) pointed out the emergence of a “new nature of innovation” that differentiates it from innovation in the industrial era (Prahalad, McCracken, & McCracken, 2009). According to this report, there are four trends or drivers that explain the gradual transformation of how companies innovate, namely global challenges and changes in the public sector and welfare policies, global knowledge sourcing, collaborative networks, and new ways of co-creating value with customers and tapping into knowledge concerning users. A study covering six decades of social innovation (Edwards-Schachter & Wallace, 2017) shows that the consolidation of technological innovation was in parallel with the growth of environmental concerns, encompassing successive calls to our innovation capacity to answer survival challenges (see, e.g., Fairweather, 1972; Meadows, Goldsmith, & Meadows, 1972). More recently, such claims are referred to “grand challenges” involving “wicked” problems that are “complex, systemic, interconnected, and urgent” (Mazzucato, 2017, p. 5). Mazzucato (2017) highlights the need to establish “mission-oriented innovation policies” and Fagerberg (2017, p. 3) affirms, “innovation must play an important role in the transition towards sustainability” facing the challenge “to provide good models for how policy may help in mobilizing innovation for this purpose.” Although many types of innovation have emerged since 1960, driven by the aspiration of changing our production and consumption systems and global environmental concerns (Edwards-Schachter, 2016), mainstream attention is a recent phenomenon focusing on technological solutions rather than the necessary changes in social practices; i.e., in social innovations (see, for e.g., the discussion paper Twenty challenges for innovation studies, Martin, 2016). Narrowly connected with the double challenge represented by the global environmental crisis and the new wave of technological advancements commensurate with the fourth industrial revolution (4IR) is the management of risks and generation of a new incumbent: Responsible Innovation.
2.3. From the central role of firms to multi-stakeholder collaborative innovations
For the mainstream of IS and the early theories, in the so-called Schumpeter “Mark I” pattern, individual “heroic” entrepreneurs mostly develop innovations. However, the central agent of innovation processes, especially attending to their economic effects, are large firms, considered by the Schumpeter “Mark II” pattern. Both scopes are central to entrepreneurship studies (Lundvall, 2013). At the macro level the Schumpeterian perspective links the notion of innovation to the dynamic process of “creative destruction” by which old structures (and ideas) are replaced by new ones, which remains the most influential aspect of the post-industrial society (Schumpeter, 1942).
Lundvall (2013, p. 33) suggests that innovation as interactive learning process should be the core of IS. In his words, “the closest we get to such a core in innovation studies is the conceptualization of innovation as an interactive process involving many actors and extending over time.” The analysis focuses on individuals with heterogeneous skills or organizations with heterogeneous capabilities that interact with each other. They typically engage in information exchange, problem solving, and mutual learning as part of the process of innovation. During this process, they establish “relationships” that may be interpreted as forming organizations, networks, clusters, or even “innovation systems.” Such “many actors” are not only individual entrepreneurs and firms but also other agents belonging to the public and third sectors, e.g., activists, social entrepreneurs, NGOs, government agencies, and states. Ample literature exists about cross-sector partnerships, but attention to “innovation processes” is very recent. Garud, Tuertscher, and Van de Ven (2013) analyze innovation processes considering the participation of firms, multi-party networks, and communities. Additionally, intrinsic to the interactive process of learning is the notion of social practice and the contribution of evolving social practices to both social and technological change, which lacks in the mainstream IS field, and is studied in management but not linked with innovation (Edwards-Schachter & Wallace, 2017).
3. Innovation types
3.1. Technological innovation
The inheritance of Schumpeter's typology remains in the classic concept of innovation centered on technological innovation. In his own words: “the opening of new domestic or foreign markets and the organizational development from the craft shop and factory,” such as steelmaking, “illustrate a process of industrial mutation that incessantly revolutionizes the economic structure from within, which is destroying the old structures and creating a new one” (Schumpeter, 1942, pp. 82–83). This concept with focus on the manufacturing sectors and strongly based on research and development (R&D) is present in the categories established by manuals for statistical measurement of innovation in the business sector accompanied by non-technological forms of innovation (e.g., OECD, 2005; 2017).
The first and second editions of the Oslo Manual, 1992, Oslo Manual, 1997 used the technological product and process (TPP) definition of innovation with a focus on technological development of new products and new production techniques by firms. The latest edition of the Oslo Manual recognized the importance of innovation in less R&D-intensive industries, such as services and low-technology manufacturing, and expanded the definition to include organizational and marketing innovations (non-technological innovations). This edition, currently under revision, establishes that an innovation “is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations” (Oslo Manual, 2005, p. 46). These innovation types represent the different ways by which firms make changes to improve their performance and economic outcomes, and ultimately contribute to the accumulation of knowledge.
Ample literature has contributed to the understanding of the nature of technological innovation, particularly analyzing the dynamics of technological change and technological innovation systems. Garcia and Calantone (2002) point out that technological innovations have two “forces” from which discontinuities may originate, from a marketing direction, or from a technological direction. They affirm, “product innovation may require new marketplaces to evolve, and/or new marketing skills for the firm. Similarly, product innovation may require a paradigm shift in the state of science or technology embedded in a product, new R&D resources, and/or new production processes for a firm. Some products, of course, may require discontinuities in both marketplace and technological factors.
As we commented earlier, typically, technological innovation is investigated by linking inputs in terms of investment in R&D to outputs in terms of patents or new products and manufacturing processes. Being at the core of the National Innovation System construct, a recent update recognizes the existence of a distortive implementation and “bias” that are “reflected in studies of innovation that focus on science-based innovation and on the formal technological infrastructure and in policies aiming almost exclusively at stimulating R&D efforts in hi-tech sectors”1 (Lundvall, 2016, p. 223).
Currently, a few interrelated trends related to technological innovations co-exist, as follows:
(i)
New technological waves of the fourth industrial revolution(4IR). Mobility, cloud computing, the Internet of Things (IoT), artificial intelligence (AI), augmented reality (AR) and big data are enabling a future of “smart everything” and empowering businesses, consumers, and society as a whole (OECD, 2017). Some of these technologies are participating in distributed manufacturing, or mixed activities between manufacturing and technological services and self-service technologies (Meuter, Ostrom, Roundtree, & Bitner, 2000) and information and communication technology (ICT) or tech-social innovations,
(ii)
Pre-existent technological gaps between countries that could likely increase in the future. Digital transformation is not affecting regions and sectors equally: headquarters of the top 2000 R&D corporations worldwide are concentrated in just a few economies—notably the US, Japan and China—and about 70% of their total R&D spending is concentrated in the top 200 firms (OECD, 2017). Such inequalities and attention to innovation processes in the context of developing countries are considered by the notion of “inclusive innovation” (Cozzens & Sutz, 2012; Johnson & Andersen, 2012) and “innovations below the radar” (Pansera & Owen, 2018).
(iii)
Narrowly related to the above is the demand for innovation that is oriented toward sustainability (Pansera & Owen, 2018) and the need to study innovation beyond Western paradigms, considering paradigms and experiences from emerging economies, such as China and India (Chen et al., 2018).
From other perspectives, Lam (2005) and Gault (2018) highlight the role of organizational innovation, considering that it could be a necessary precondition for successful technical innovations. Organizational innovations focus on aspects that improve organizational structures, learning processes, and their adaptation to the environment (including institutional frameworks and markets). A diversity of organizational innovations, which are also mediated by technologies, affect the organization's capabilities as well as the quality and efficiency of work, enhance exchange of information, and improve the organization's ability to learn and utilize new knowledge and technologies.
With a broader scope, Tidd et al. (2005) refer to the “4Ps” of the innovation mix, which includes the two traditional categories product and process, besides position and paradigm. Position-based innovations refer to changes in how a specific product or process is perceived symbolically and how they are used. It comprises the re-positioning of an established product or a brand, e.g., gaining reputation through innovative Corporate Social Responsibility (CSR) practices or even in a “negative sense,” as the rebranding of Volkswagen that launched an all-new Jetta compact car after the company's global emissions big scandal (Jung, Chilton, & Valero, 2017). The last category, paradigm-based innovation, relates to the mental or cognitive models that shape what an organization or business is about; considering their behavior regarding grand challenges and/or sustainable development agenda. While the first two innovation types are unequivocally technological, the others may or may not be mediated by a technology.
3.2. Product innovation
Product innovation is the most popular innovation type. Gault (2018, p. 619) defines product innovation as “a product, made available to potential users, that is new or significantly changed with respect to its characteristics or intended uses.” The author also accentuates the intrinsic interaction between product and process innovations, referring to production or delivery innovation resulting from the implementation of a new or significantly changed production or delivery process, which includes significant changes in inputs, infrastructure within the institutional unit, and techniques. In a broader sense, the innovation process describes the single phases of a complete product life cycle from invention and development until market introduction and eventually followed by the product's broader diffusion. The creative phase (emergence and combination of ideas) differs from the invention itself and the development of a product ready for “sale.” Depending on the organizational behavior, e.g., decision-making processes and interrelationships with the surrounding environment, innovations may follow (more or less) linear procedures, be (more or less) planned or placed in closed or open settings. Currently, the general trend is the application of new ideas to products that increase their economic and/or social value (at the core of the “value proposition” of firms). This process is usually interactive and involves a diversity of actors and settings, e.g., developed in the context of firms but also other organizations from the public or civil sectors, such as the case of a public spin-off, a social enterprise, or a social start-up.
A major impact in the last decade related to product innovation is based on the seminal book Democratizing innovation (Von Hippel, 2005). The author shifts attention from inside to firms' external actors, affirming that “users of products and services—both firms and individual consumers—are increasingly able to innovate for themselves.” He highlights the existence of great advantages of user-centered and user-led innovation processes over the manufacturer-centric innovation systems applied for hundreds of years. In the “manufacturer-centered” approach, the mechanisms to protect inventions and innovations as intellectual property (patents) are very relevant. Under the “user/consumer-centered” view, users are considered to be the actual developers of most new products, and generally share their innovations freely.
User-driven, user-centered, or user-led innovations connect with the realm of market and social demand, steadily increasing as enabling computing and communication technologies improve and, overall, increase social welfare (Baldwin & Von Hippel, 2011; Von Hippel, 1976). Nevertheless, involving users in the development of products and services is not a new concept. Several studies show the benefits of user/customer feedback and their integration into innovation processes, e.g., user involvement in living-labs for co-creating products or aiding users in tailoring standard product offerings for them. This innovation way, however, is very different from the establishment of user innovation communities that totally supplant the manufacturer/producer role (e.g., WikiHouse is an open source building system to design, print and assemble low-energy homes, and Poppy is an open-source platform for the creation, use, and sharing of interactive 3D printed robots). Notably, the progressive co-existence of a range of users' role in both product and service innovation together with the recent trends in virtual customer environments and knowledge brokers for supporting the innovation process (Verona, Prandelli, & Sawhney, 2006) as well as the focus on design-driven innovations (Sanders & Stappers, 2008; Verganti, 2008). In fact, mutual interaction between users and producers is seen as a strong driver of non-technological and social innovations (Edwards-Schachter, Matti, & Alcántara, 2012). Despite that, user-driven social innovation or products developed by new incumbents are not explicitly addressed, the latest edition of the Oslo Manual recognized the “user friendliness” characteristic of a product, and a recent paper of Gault (2018) emphasizes the role of users and customers as drivers of product innovation.
Bstieler et al. (2018) recently highlighted major “hot topics” and research trends in new product development (NPD) in relation with open innovation2 and 3D printing, Internet of Things (IoT), big data/analytics, and sustainability-focused innovation. Many companies (traditional and social enterprises) use some form of open innovation to tap outside knowledge, expertise, or technologies that facilitate NPD (Chesbrough et al., 2014; West, Salter, Vanhaverbeke, & Chesbrough, 2014). In this respect, open innovation constitutes a strategic tool that can enhance firms' NPD efforts either by enabling them to source knowledge from external innovators (i.e., an outside-in approach) or by allowing their under-utilized ideas and technologies to be incorporated into others' innovation processes (i.e., an inside-out approach). At the same time, open innovation enables companies and other organizations to explore new market (and “social” market) opportunities while minimizing risk and costs, gaining in flexibility and responsiveness.
3.3. Process innovation
Despite the fact that process innovation is one of the traditional categories defined by the Oslo Manual (2005) and is closely related to product innovation, it has received very little attention in innovation literature (Hullova, Trott, & Simms, 2016; Reichstein & Salter, 2006). Various authors refer to the relationships between both product and process innovations, as mutual sources of innovation, i.e., product innovation that creates the need for process innovation and vice versa, process innovation that generates the need for a product (Damanpour & Gopalakrishnan, 2001; Hullova et al., 2016).
Reichstein and Salter (2006, p. 653) define process innovation as “new elements introduced into an organization's production or service operations—input materials, task specifications, work and information flow mechanisms, and equipment used to produce a product or render a service—with the aim of achieving lower costs and/or higher product quality.” The implementation of new or significantly improved production methods and techniques may involve changes in equipment or production organization or both. Marketing methods to increase organizational productivity are also components of process innovation.
A growing worldwide phenomenon associated with the improvement of process innovation in corporations and startups is the emergence of design thinking and lean thinking, which includes the use of a wide range of new material-processing technologies as well as new work practices on the coordination of human resources. Lean thinking and lean methodologies constitute a structured approach that helps in developing early-stage ideas and concepts (i.e., inventions) into marketable products, processes, or services (Hines, Holweg, & Rich, 2004; Krafcik, 1988). Taj and Morosan (2011) highlight the relevance of lean manufacturing to the current adaption of corporations to short product life cycles, growing product complexity, and rapid advances in technologies by continuously engaging in manufacturing process innovation.
Many industries have experienced a paradigm shift from standardized, big scale manufacturing to production that is more flexible and low-volume manufacturing or rapid adaptation to market demand. Overall, lean manufacturing and manufacturing process innovation are new methods that organizations can adopt to innovate with limited resources in the context of accelerating pace of technological development. Related with other emergent innovation practices, such as open production and open innovation, the lean approach is used by early-stage firms or companies to bring products and services to market sooner and with fewer resources, minimizing risk while increasing customer value (Lager, Tano, & Anastasijevic, 2015; Schuh, Lenders, & Hieber, 2011).
3.4. Service innovation
Given the relevance of services to the largest part of employment and output in economic growth, innovation in services has lately been noted but not considered as extensively as in manufacturing (Gallouj & Toivonen, 2011; Gallouj & Weinstein, 1997; Linton, 2009). Innovation in service sectors can differ substantially from innovation in many manufacturing-oriented sectors, being often less formally organized, more incremental in nature, and less technological (Gallouj & Weinstein, 1997; Oslo Manual, 2005). Overall, to produce a service is to organize a solution to a problem (a treatment, an operation), which does not principally involve supplying a good, being usually intangible combinations of processes, people skills, and materials (Goldstein, Johnston, Duffy, & Rao, 2002). Services innovation comprises activities, such as transport and logistics, information and knowledge-based services, food, healthcare, education, among other. Broadly, services are characterized by intangibility, heterogeneity, inseparability, and perishability, referred to as IHIP characteristics.
Goldstein et al. (2002) admit that the concept of service includes the service strategy of what to deliver and how the service delivery system is designed. Furthermore, they present the view that the concept of service t is the core element of service design, since it ensures integration between strategy and customer needs, as well as functions as a mediator between customer needs and the strategic intent of the organization. Service innovation comprises both innovation in specific services and service systems, which embodies the structure of the system that generates the service, namely the organization and the environment. Nevertheless, the inclusion or not of a technology and the “intangibility” in service innovation are often blurred, for instance, technological services such as cloud computing and banking technological services, self-service technologies, among others. (Evangelista, 2000; Meuter et al., 2000). Evangelista (2000) analyzed sectoral patterns of technological change in the services sectors and Castellacci (2008) proposed a taxonomy that combines the manufacturing and service industries.
The knowledge-intensive business services (KIBS) sector is attracting greater interest in recent years. These firms (KIBS) serve other companies when they intend to design, produce, offer, and sell complex service and product combinations. These firms play a significant role in designing and re-designing services with the application of the latest enabling technologies (Hertog, 2000; Muller & Zenker, 2001). In addition, the historical development of social innovation shows that the services sector is at the core of social innovations and, in some cases, intertwined with technological innovations (Edwards-Schachter & Wallace, 2017).
Debates on service innovation influence not only service companies but also traditional manufacturing firms, which have increasingly started to realize the role of services as a possibility to differentiate their products and gain competitive advantage. Consequently, developing services has become a new strategy for firms across different industries and innovative services have emerged as strategies for achieving sustainable competitive advantage. This type of innovation is often associated with other innovations that are attracting the attention of practitioners and researchers as instruments to foster innovation: innovation in business models.
3.5. Business model innovation
Business model (BM) is considered an important vehicle for innovation but also a source of innovation in and of itself, namely a “BM innovation.” Many authors point out that business model innovation represents a new dimension of innovation, distinct, albeit complementary, to traditional dimensions of innovation, such as product, process, or organizational (Amit & Zott, 2012; Massa & Tucci, 2013, pp. 420–441). Although firms have always operated according to a business model, they traditionally followed similar logics typical of an industrial firm that produces a product or service (in relation with its suppliers) and delivers to customers, and collects revenue. These functions are being transformed by innovative business models emerging from firms and, indirectly, civil society. Several scholars argue that the Internet together with other advancements in information and communication technologies (ICT) acted as catalysts for BM experimentation and innovation (Tidd et al., 2005; Amit & Zott, 2001; 2012).
Firm capacity to innovate correlates with the different functions of its business model, comprising of various aspects/components: value proposition that identifies a market segment and revenue generation mechanism (i.e., utility and purpose of a technology); structure of the value chain required to create and distribute the offering and complementary assets; revenue mechanisms to pay for the offering; estimation of the cost structure and profit potential for a given value proposition and value chain structure; position of the firm within the value network linking suppliers and customers, and formulation of the competitive strategy (Chesbrough, 2010).
Business model innovation is the conscious change of an existing business model or the creation of a new business model that improves its functions and satisfies customer needs better than the existing business models. In this respect, organizational and marketing innovations are central to the introduction of uniqueness in business models. Gault (2018, p. 619) defines an organizational innovation as “the implementation of a new or significantly changed organizational method in the business practice, workplace organization or external relations of the institutional unit.” Fig. 1 shows the scheme of a popularized business model among firms and other organizations: a canvas business model useful to develop the business plan and the exploration of innovation opportunities in the different dimensions or components (Joyce & Paquin, 2016).
The untapped market of the world's poor countries and certain sectors in developing countries represent a large opportunity for companies to serve customers and make profit with social impact. Such business opportunities challenge conventional ways of doing business and companies are urged to rethink every step in their supply chain and develop novel BMs due to the fundamentally different social, economic, and cultural environments that characterize emerging markets. In this respect, digitalization plays a crucial role in the implementation of business model innovations, particularly in digital transformations of the value chain and marketing. Chesbrough (2010, p. 354) argued, “a mediocre technology pursued within a great business model may be more valuable than a great technology exploited via a mediocre business model.” Business model innovations are at the core of current disruptive innovations, widening the classical scope on disruptive technologies (Christensen, 1997; Christensen, Raynor, & McDonald, 2015).
3.6. Disruptive innovation
In his seminal book titled The Innovator's Dilemma, Christensen (1997) describes the notion of disruptive technologies as those that produce a market disruption. This occurs when a new product, notwithstanding its inferior performance on focal attributes valued by existing customers, displaces the mainstream product in the mainstream market. The two preconditions for a disruptive innovation include a performance overshoot on the mainstream attributes of the existing product, and asymmetric incentives between an existing healthy business model and the potentially disruptive business model.
The initial term “disruptive technology” was further replaced by “disruptive innovation,” broadening the application of this theoretical insight to include not only technological products but also a variety of services and business model innovations (Christensen et al., 2015; Hang, Chen, & Subramanian, 2010; Wan, Williamson, & Yin, 2015; Yu & Hang, 2010). In this context, any change in a business model that enables superior or novel value to be delivered to consumers and adopted by them constitutes a disruptive innovation. According to Markides (2006), disruptive innovations can be technological, business models, and radical product innovations. Despite the existence of similarities in the disruptive effects on incumbent firms, these three categories arise in different ways and may have different competitive effects and market responses. Notably, innovations do not have to embody radical advances in either technology or product functionality in order to be disruptive innovations. In fact, disruption refers more to a market/business phenomenon rather than a major technical breakthrough. Breakthroughs are called “radical” in Christenson's model and may or may not be disruptive, while minor or “incremental” innovations can be massively disruptive.
Many innovations, which can be described as “imitative” can be disruptive because they challenge existing value propositions and business models in the market. There are several examples of different types of innovations that Asian firms had introduced, which proved to be disruptive in the market, such as “cost innovation” (reengineering the cost structure in novel ways to offer customers adequate quality and similar or higher value for less cost); “application innovation” (finding innovative applications for existing technologies or products); and “business model innovation,” adjusting aspects/functions that can be changed quickly and at a minimal cost (Hang et al., 2010; 2015).
The key point to remember is that disruption is a market/business phenomenon and has little to do with technology per se.
3.7. Radical innovation
In contrast to disruptive or sustaining innovation, radical innovation “changes the rules of the game” and occurs outside the familiar realms of standardized. Sustaining innovation refers to the maintenance of a product or service in a market, e.g. certain technology, through relative incremental developments or improvements (incremental innovations). While both incremental and sustaining innovations exploit “the existing,” radical innovation is exploratory and operates with higher levels of uncertainties. Utterback (1994–1996) defined radical innovations or discontinuous change as “change that sweeps away much of a firm's existing investments in technical skills and knowledge, designs, production technique, plant and equipment.”
According to Murmann and Frenken (2006), radical innovations can be defined either in terms of their antecedents (the scope of new knowledge required) or their consequences (the increased performance they make possible). Given these two different characteristics of radicalness, an innovation could be incremental in terms of the new knowledge required but radical in terms of the additional performance achieved, and vice versa. A complete radical innovation requires large amounts of new knowledge and, at the same time, creates large performance improvements to transform industrial structures.
Dahlin and Behrens (2005) developed three criteria that an innovation has to fulfill to be considered radical: (i) existence of a novel invention, (ii) invention must be unique, and (iii) must be able to influence future inventions. Furthermore, for an innovation to be considered radical, the emphasis is a dramatic departure from existing products. Nevertheless, most radical innovations do not satisfy these requirements but take considerable time to become accepted. For instance, a radical innovation is Apple's development of multi-touch interfaces and their associated gestures to control handheld and desktop systems, despite the fact that Apple did not invent them. Multi-touch systems have existed in computer and design laboratories for over 20 years and gestures have a long history. Even other companies had products on the market using multi-touch before Apple. In this example, radicalness is represented by the third condition attributable to the major shift produced in the market; however, it is in the interaction with people that products obtain their meaning (Norman & Verganti, 2014, p. 83).
Such type of innovation studies focus on models and methods used to describe and measure the radicalness of technological innovation, in other words, technological breakthroughs that take place at the “global knowledge frontier.” Examples are the analysis of technology cycles, s-curves, technological trajectories, and technology adoption (Dahlin & Behrens, 2005). A vast body of literature on radical innovations attempts to explain the conditions and factors that influence a firm's capacity for developing radical innovations. Factors such as firm size, age, expertise, skills and dynamic capabilities, R&D teams, resources, technological trajectories, among others, have been extensively analyzed. Notwithstanding that the results are not conclusive, we can observe radical innovations introduced by large corporations and small teams or individual entrepreneurs, supported by private investment or using a crowdsourcing platform. Research shows that radical technological innovation is performed by a formally educated labor force in R&D-intensive companies and is likely to be competence-destroying, often making existent skills (Marvel & Lumpkin, 2007).
Sharma, Thomas, and Konsynski (2017) argue that most radical innovations are analyzed from the developer's perspective, suggesting that radicalness is an objective characteristic, inherent to the technology. Contrary to this view, they consider that radicalness depends on the adopters.
Another distinctive dimension that becomes a relevant driver to current potential radical innovations is design. Such innovations are labeled as design-driven innovations. In fact, radical innovation is the center of attention of design studies, and is taught in design schools and advocated by people discussing innovation related to not only “design thinking” and “engineering design” but also social innovations driven by strategic design (Manzini, 2014; Verganti, 2009). In this respect, radical innovativeness is not exclusive of technological innovations but also social innovations and other forms of non-technological innovations, namely cultural innovations that produce disruptive social changes.
3.8. Design-driven innovation
Design practice, as a driver of innovations, was influenced by the changing landscape of human-centered design research. This approach, which began in the 1970s and became widespread by the 1990s, proved most useful in the design and development of products and services (Sanders, 1992). In a design-driven strategy, the crucial aspect of innovation concerns the skill to understand, anticipate, and influence the emergence of new product and service meanings.
A technology-push innovation starts due to radical changes in technology without any changes in the meaning of products (e.g., color TV sets replacing existing black and white TV sets). Design contributes to meaning-driven innovations, starting from the comprehension of subtle and unspoken dynamics in socio-cultural models and results in radically new meanings and languages, often implying a change in sociocultural regimes. The invention of the mini-skirt in the 1960s is an example: not simply a different skirt, but a radically new symbol of women's freedom that recognizes a radical change in society where no new technology was involved.
What really matters to radical design-driven innovations is the novelty of message and design language, which is significant and prevalent compared to the novelty of functionality and technology (Norman & Verganti, 2014; Utterback et al., 2006; Verganti, 2008). Therefore, to produce design-driven innovations, a company should be able to interpret the meaning that a customer gives to products in a determined sociocultural context.
Norman and Verganti (2014) describe other mechanisms for design-driven innovations labeled as technology epiphanies and market-pull innovations. Technology epiphanies bring a radical change in meaning enabled by the emergence of new technologies or the use of existing technologies in new contexts (e.g., the Wii video game console and the Swatch watch). “Epiphany” is interpreted as “a meaning that exists at a superior position and a perception of the essential nature or meaning of something.” This superior application of a technology does not come from users. Moreover, it is not visible at first because it does not satisfy existing needs. Rather, a quiescent meaning is revealed only when a design challenges the dominant interpretation and creates a new need around this novel meaning.
Market-pull innovation starts from an analysis of user needs and then develops products to satisfy them, usually in co-creation processes (Sanders & Stappers, 2008). Here products may introduce a new meaning or deal with a design that replaces a previous dominant design. Henderson & Clark (1990) introduced the concept of modular innovation, which involves the introduction of new technologies where links to the surroundings are relatively untouched and architectural innovations where components are combined in a new way, implying that the links are disrupted. Another relevant trend in design-driven innovations is the application of design for addressing social needs and providing socially responsible solutions, linked with both technological and social innovations (Morelli, 2007; Manzini, 2014).
3.9. Social innovation
Being a marginalized topic in both economic and sociological theories of innovation,3 social innovation (SI) is gaining recognition from mainstream innovation research. Historically, the notion predates technological innovation and is isolated from the traditional scope on scientific inventions, patents, and technological breakthroughs (Godin, 2015; Moulaert, MacCallum, Mehmood, & Hamdouch, 2013). However, most literature refers to SI as a new phenomenon that emerged in the last decades as innovation research field.
A recent paper analyzing 252 definitions and using the term over the last half century has identified core aspects within three interrelated meanings across time (Edwards-Schachter & Wallace, 2017). The core aspect deals with innovation purpose. It is the orientation of SI to solve societal needs through changes in social practices that contribute to broader changes in socio-technical systems, and the development of non-technological innovations (e.g., social inventions are two women's suffrage laws in 1918 and 1928, introduced and diffused into society by a social movement in the UK). Another central aspect is “who innovates,” being a requisite the participation of civil society actors, social activists, social movements, social entrepreneurs, and NGOs, among others. The development of SIs by the third sector (alone or in collaboration with other actors from the private and public sectors) is contributing to the process of social change. It is responding to the essential problem of how to change the patterns of production and consumption towards sustainable development and the provision of service innovations (with or without technology), especially societal problems concerning most disempowered and frail social groups.
Edwards-Schachter and Wallace (2017) define SI as “a collective process of learning” that involves “the distinctive participation of civil society actors aimed to solve a societal need through change in social practices that produce change in social relationships, systems, and structures, contributing to large socio-technical change.” Mumford (2002), from the field of creativity, defines SI as “the generation and implementation of new ideas about how people should organize interpersonal activities, or social interactions, to meet one or more common goals.” He states that, similar “to other forms of innovation, products resulting from social innovation may vary with regard to their breadth and impact” and “may involve the creation of new kinds of social institutions, formation of new ideas about the government, or the development of new social movements.” (p. 253).
The relationship between “traditional technological” innovation and SI is currently debated. The mainstream recognizes the relevance of SI in producing change in social practices, but its role has been relegated to being a “subsidiary,” a “complement,” or an “inductor” of technological innovation. One of the most influential authors is Gershuny (1982, 1987), who focused on how changes in social practices complement (or favor) technological innovation configuring the emergence of what may be called the “communal,” “household” and “underground” production on a small scale; in other words, the informal economy including voluntary and religious organizations and cooperatives.
A recent book updating innovation systems from Lundvall also presents SI as a “social recipe” that favors the adoption of technological innovations through institutional change, namely “social innovation as the basis for technical innovation,” Lundvall (2016, p. 80). Lundvall argues, “In a period characterized by radical change in the technological basis of the economy, established organizational and institutional patterns might prove to be important obstacles to the exploitation of the full potential of new technology. In such a period, social innovations might become more important for the wealth of nations than technical innovations” […] “institutional change, strengthening the competence and the power of final users, might be one of the social innovations that can give national systems of innovation a stronger position in the world economy.”
A crucial aspect to distinguish between “pure” forms of SI from technological innovation, service innovation, and other mixed forms is the generation of values, being social values and social impact inherent to SI but not necessarily or even absent in the other cases, where economic value prevails. Technological innovation and service innovation may also produce well-being and social impact but they are incentivized by expected profits, while SIs put social benefits at the forefront and seek to empower underserved populations. In this respect, indicators on social impact enable the distinction between SIs from other innovation types (Mulgan, Joseph, & Norman, 2013).
In sum, to date SI is perceived as an independent innovation type but also is seen in inter-dependence with other innovation forms (technological, product, service, organizational, business, and design-driven innovations). Furthermore, multi-stakeholder and cross-sectoral cooperation either develops or introduces SI between the public and private actors, in collaboration with civil society. The emergence of many “mixed” or “hybrid” forms of SI is observed in the last decade. For instance, “grassroots social innovations” (Seyfang & Haxeltine, 2012) with focus on “green” (pro-environmental) innovations, which in most cases comprise specific institutionalization processes (change in consumption patterns, environmental regulations, different types of incentives and “rules of the game” local institutional context.) where the “place” for social practices and changes in social systems appear intertwined with technological inventions and innovations. “Open social innovation” (Chesbrough & Di Minin, 2014) attends to firms' strategies in front of social demand. “Social inclusive open innovation” (Gupta, Dey, & Singh, 2017) emphasize both a firm's openness and the inclusion of poor population segments. “ICT-enabled” and “Digital social innovations” consider the opportunities that offer digital technologies and the Internet to address some of society's biggest challenges (Misuraca, Colombo, Radescu, & Bacigalupo, 2015; The Manifesto for Digital Social Innovation (DSI), 2017).4
Over the past decade, a plethora of non-profit incubators, social accelerators, and hybrid platforms have fueled SI. A recent example is the hub/platform Social Innovation Europe (SIE) created in 2011 to scale-up SI around European countries followed by a recent project to establish a wider social Innovation community of researchers, social innovators, end users (citizens) and policy-makers (EC, 2015). Recent European policies and initiatives fostering the Single Social Market and cooperation between the social economy and business together with social incubation and scaling initiatives are opening the door to new hybrid types of SI (e.g., tech social startups and SI units in large corporations, as part of their CSR practices).
3.10. Responsible innovation
Responsible research and innovation (RRI) and Responsible innovation (RI) represent a meta-category of innovation that emerged in Europe and the United States (US) in the past decade. The European Commission (EC) introduced RRI as a crosscutting issue to open a debate about collective responsibility in the production and applicability of knowledge facing the current global challenges and dilemmas related to the fourth industrial revolution (EC, 2012; Owen, , Bessant, , & Heintz, 2013; Stilgoe, Owen, & Macnaghten, 2013; Von Schomberg, 2011). Responsible innovation (RI) is rooted in notions such as “responsible development” “responsible research,” and “responsible knowledge-based innovation,” and earlier discussions in programs such as the Ethical, Legal, and Social Implications (ELSI) related to the Human Genome Project in 1988. It is also present in the Ethical, Legal and Social Aspects (ELSA) and responsible nano-science programs in the US and Europe (Hellström, 2003; Owen et al., 2013). Fagerberg et al. (2013) explicitly refers to the need for “socially responsible innovation,” as part of the challenges of the field of SI.
The most popular definition of RRI was proposed by von Schomberg as “a transparent, interactive process by which societal actors and innovators become mutually responsive to each other with a view on the (ethical) acceptability, sustainability, and societal desirability of the innovation process and its marketable products.” Overall, RRI claims co-responsibility of societal actors (researchers, citizens, policy makers, businesses, third-sector organizations), in an expected participatory process, in which technological and scientific advances and innovation become more transparent and properly embedded in society. A normative framework proposed by the EC is used for implementing RRI, and includes six interrelated dimensions or “components,” such as science literacy and scientific education, public engagement, gender equality, open access to scientific knowledge, governance, and ethics. All are being implemented under the Horizon2020 Program.
Despite reaching a consensus on the relevance of RRI, the term has sparked many controversies regarding content and scope on technological innovation, practical implementation, and the limited attention paid to gaps between developed and developing countries (Blok & Lemmens, 2015; Macnaghten et al., 2014). Lubberink, Blok, van Ophem, and Omta (2017) conducted a systematic review of the field in a business context, concluding that RRI overlaps other innovation types in addressing grand societal challenges and the focus on sustainability as a desirable outcome of innovation. Examples are innovations in the green and circular economy, sharing economy, and social economy, aiming to develop responsible and sustainable innovations. The authors argue that RRI may provide opportunities to enable participation of stakeholders from the private, public, and civil society to steer innovation processes and outcomes towards more sustainable, societally desirable, and ethically acceptable solutions. Responsible innovation not only demands new corporate practices in terms of innovation activities (as corporate social responsibility, CSR and corporate social innovation, CSI) but also in firms' business models and their roles and responsibilities for the political and socio-economic system in which they operate attending to dimensions of social justice/inclusion and sustainability.
Responsible research and innovation (RRI) and Responsible innovation (RI) may have great influence over innovation systems considering that their implications to the governance of innovation processes are crucial for the formation of RRI capabilities through formal and informal education. One emergent associated form of innovation is transformative innovation, defined as a high system-level innovation that attempts to transform socio-technological innovation systems and the entire economy. “Transformative innovations” can be distinguished from “radical innovations” in that while the latter disrupt existing technical competences, the former also involve substantial changes in markets and linkages with users in direct integration with “transformative” innovation policies (Scrase, Stirling, Geels, Smith, & Van Zwanenberg, 2009, p. 15).
The educational implications of RRI in the context of knowledge and learning in society indicate that new approaches may reinforce previous efforts to integrate awareness on collective responsibility, such as science, technology, society, and environment (STSE), sustainability education and Nature of Science (NOS), and Nature of Science and Technology (NoST) (DeVries, 2005; Hodson, 2014; Lederman, 2013). However, to date, efforts to integrate such approaches do not deal with innovation. In fact, the concept of innovation is practically missing or misunderstood in formal education, with the exception of specific higher educational programs (Edwards-Schachter & Greca, Forthcoming). Typically, NOS refers to the epistemology of science, science as a way of knowing, or the values and beliefs inherent to scientific knowledge and its development (Lederman, 1992; 2013). In this respect, RRI provides the opportunity to debate about the role of innovation and enables a deeper understanding of the interrelationships between technological innovation and the broad nature of innovation, content, and the boundaries of the Nature of Science, Technology, and Innovation (NoSTI). From my perspective, NoSTI comprises three interrelated but different “natures” embedded in social, economic, cultural, and political contexts: (i) “nature” of science and scientific production; (ii) “nature” of technology and technological knowledge production, and (iii) “nature” of innovation, which in turn involves technological and non-technological innovations.
Integration of the NoSTI approach from the RRI perspective to educational settings enables a better understanding of the meaning of innovation and innovation typologies and, at the same time, favors a renewed perspective on sustainability and the practical implementation of transformative governance, which are crucial for every country in the 21st century.
4. Final remarks
Overall, the most accepted interpretation of the nature of innovation deals with the notion of “novelty” through the generation and successful implementation of ideas transformed into products and services that are more or less “tangible,” namely technological and non-technological inventions. Despite the differences between IS communities, especially those between entrepreneurship and mainstream innovation scholars, innovation embraces the notion of change in individuals (“mindsets”), organizations, and broader systems. Innovation is an approach organizations use to introduce changes to survive and thrive during uncertain and turbulent conditions. The word “organizations” connotes a variety of for-profit and non-profit oriented, private-, public-, third-sector, and hybrid firms (e.g., social enterprises).
From an epistemological perspective, change is perceived as essential to innovation, being part of the dynamics of human evolution and central to how humans produce knowledge, and change and “institutionalize” their social practices over time. To innovate is to introduce “something new” that produces change, but innovation also refers to “the process” (the method) by which a change occurs and sustains with time. Innovation includes both revolutionary changes (the Internet) and small incremental changes (the latest version of an app) (Dodgson, 2018).
Intrinsic to the nature of innovation is the purpose or intent; change can be planned, provoked, or unintentional. Change may originate in the need to solve a problem or a “societal need.” In this respect, as Martin (2016, p. 435) pointed out, “under different policies, innovation can take different directions, or assume different forms, or involve different processes, or bring in different actors and bodies of knowledge.” Thus, a crucial aspect to understand the nature of innovation is identifying the agent that produces the change: “who” are innovators? Those who develop innovations? For decades, innovation scholars considered firms as the principal actors, being instruments of innovation (firm “ability” or “capability”) for gaining competitive advantage in the immediate complex and uncertain environments. However, it is necessary that IS acknowledge the contribution of the so-called “dark” or “hidden” innovations, significant innovations coming from the third sector, public institutions, multi-stakeholders and, lately, cross-sectoral collaborations that result in a new “form” of product, service, user and design-driven disruptive innovations and other innovation types. Indeed, the nature of innovation currently stresses the immense impact of non-technological and both pure and hybrid social innovations (Edwards-Schachter et al., 2012; Roth, 2009).
Other issues that claim IS research include many of the novel disruptive innovations introduced by new economic sectors such as the social economy, green and blue economies, silver economy, and gig economy. Examples of the gig economy include the Airbnb or Uber business platform models, called “marketplaces,” that enable and support transactions between independent supply- and demand-side participants; these models are challenging not only production systems, but also regulations and macroeconomic and social policies (Burtch, Carnahan, & Greenwood, 2018).
A remarkable feature of the nature of innovation is its astonishing diversity, fueled by the growth of cross-sector cooperation. On the one hand, there is a growing trend of “mixed modes of innovation” (OECD, 2017, p. 154) and hybrid innovation that reconfigure markets and blur boundaries between technology, society, and culture. On the other hand, fast-changing digital technology landscapes and innovations are emerging from the fourth industrial revolution and the changes forming the scientific and technological basis of knowledge and innovation systems. Nevertheless, much of the world is technologically backward or excluded, and is neither able to innovate nor adopt and adapt to new technologies. It is in this regard that initiatives such as the Global Social Innovation Index (GII)5 enable to capture the nature of SI and illustrate the innovation performance of developing economies. In this respect, to distinguish the types of innovation, it is necessary to understand organizations' innovative behavior and attend to their different characteristics and modes of operation as a pre-requisite to innovation measurement.
Overall, innovation is a complex socio-cultural process involving diverse actors and sources of knowledge. It is not only about improving and sustaining the competitive advantage of firms and organizations but also about addressing the major social challenges of the 21st century. In doing so, the nature of innovation is evolving from innovation for economic productivity to innovation for sustainability, from risky innovation to socially responsible innovation, from narrow conceptualizations to broadening the socio-techno-cultural perspectives of innovations. The field of innovation faces the key challenge of capturing the complete picture of innovation with a comprehensive definition and suitable metrics, overcoming the terminological ‘Babel'ization and fragmentation of the field of innovation research.
