PRODUCT INNOVATION VERSUS ORGANIZATIONAL INNOVATION
A product innovation that addresses a specific market or customer segment usually needs a different approach to innovation opportunity discovery than an organizational innovation. On the surface, it seems to be similar, but on the product side, we have product experts when it comes to building and using. In contrast, on organizational innovation, we have processes and operational challenges. Besides, there are often underestimated leadership, skills-related and adoption-related challenges to overcome. Innovation ROI is relatively easy to calculate on the product side and more complex on the organizational side. Moreover, disruptive innovation brings publicity, while organizational innovation brings un-noticed competitive advantages. Product innovations need to get more attention on the Intellectual property side, while organizational innovation requires more attention on the human relationship and talent side. A product innovation usually replaces older products or creates new behavior. Organizational innovation is to be implemented within the organization at “run-time,” knowing that other processes’ interwoven network needs to be well understood.
Structural Innovation or leadership transformation is again similar yet a very different beast. The decision-makers to initiate a structural innovation are the same as the audience the innovation is made for. When the need for being more innovative arises in a large enterprise, it isn’t about having an innovation department that players around with some random ideas. There is a leadership decision to be made if the enterprise is even willing to allow groundbreaking innovations. On a global scale rare, but in several developed nations, the board, which has the last word in the strategy of an enterprise, is composed of up to 50% board members from unions and employee representatives who have very different interests and much shorter-term visions than investors or the C-Level. A decision to disrupt markets and risk thousands of jobs in competing businesses is not an easy decision to support unions. Industry associations and ever deeper political influences make such decisions and their execution very different compared to a startup shaking up a market. Such structural innovation has a different audience and different players, and a very different problem to solve.
BUSINESS MODEL INNOVATION
Unlike organizational innovation or product innovation, a business model innovation is partially hybrid of those two, yet very different in its nature. A business model innovation can be part of product innovation, but that co-existence is definitely not necessary. Likewise, a business model innovation can go hand in hand with organizational innovation, but also, there is no necessity to be part of each other. Business model changes can be made for existing products and/or existing organizational structures. When the first razor company decided to give the razor away for free and only sell the matching blades, it disrupted a global market. Competitors had been forced to either follow the model (making them a follower) or make substantial investments in significantly better razors. The disruptor just changed their pricing structure. In the past 20 years, that mechanism became part of startup disruptors. Whether it was the media industry, vacation rentals, taxies, electric vehicles, coffee, and hundreds of others – the business model innovation changed entire industries. The big challenge for the competition is that successful business model innovation is mostly a complex structure, made super easy for customers but virtually invisible for others. Even today, roughly 10 years later, the completion in the hotel industry, media industry, the automotive industry has not understood at all what and how those disruptors do their business.
Experience innovation is more geared towards customer experiences and general experiences such as theme parks, new entertainment, travel experiences, and more. Unlike product innovation, where things disrupt a market, or business model innovations where the way industry segments conduct their business gets disrupted, experiences are more complex. Experiences need to be mapped to the audience’s psychographics and its dreams, requiring far more creativity. Since experiences are the base ‘material’ for all innovative ideas, experience innovation needs the most advanced ability to compose new ideas from not yet realized ideas to be truly disruptive.