In today’s business world, ‘innovation’ has become a buzzword — every new company, service or product proclaims itself to be innovative, while, many a time, offering nothing new or different from existing competitors.

The term innovation means ‘the creation of a viable new offering’ — hence, by definition, an innovation should not only be something new, but should also make economic sense for the manufacturer.

In their book, Ten Types of Innovation, Larry Keeley, Helen Walters, Ryan Pikkel and Brian Quinn describe the various forms of innovation and suggest truly innovative products combine 5 or more of these forms. They have classified the 10 types of innovations into three broad groups.

‘Innovation in offer’ refers to a change in core product features. This could be in terms of:

* Product performance — A new and better way of performing a particular task/function. For instance, the iPhone, one of the most innovative products of recent times, completely changed consumer-device interface, thus ushering in the touch revolution.

* Product system — Developing high quality, complementary products or services that are based on modularity and integration. For example, IKEA revolutionised the furniture industry by coming up with flat-pack designs that reduced storage, inventory and assembly costs, the benefit of which was then passed on to consumers.

* Service — Innovative companies set new standards of customer service. Emirates airline and Singapore Airlines pride themselves on providing a memorable and consistent level of service, which leads to a high degree of customer loyalty.

Innovation in configuration — This refers to a change in processes involved in delivering the offer to customers. This could be in terms of:

* Structure — Relates to how a business manages all its assets, including capital, machinery and people, to deliver a higher degree of efficiency. For example, Southwest Airlines used to operate only one type of aircraft (Boeing 737s) to achieve standardised service, low costs and quick turnaround.

* Process — Looking at the ‘core processes’ within a business and making them more efficient. A very good example of this is Toyota’s ‘Just in Time’ manufacturing process, which made every step of the manufacturing process more efficient.

* Network — This refers to how a business collaborates with external partners to create more value collectively. For example, The Body Shop sources raw ingredients for its products directly from communities of artisan farmers — this has cut out the need for middlemen, delivering better value to the farmers and relatively lower cost to the retailer.

* Business Model — Innovative ones break from industry standards in terms of offer, pricing and collection procedures. Airbnb has dramatically revolutionised the hospitality industry by allowing homeowners to use spare bed space for tourists — this has benefited both the homeowners as well as travellers, while also being a viable business model for Airbnb.

Innovation in Experience — This pertains to the experience that the consumer has during their interaction with the product or service. This could be in terms of:

* Channel — Innovative products disrupt the normally accepted delivery practices. For example, the Kindle reader allowed consumers to directly download a newly purchased book onto their machine, rather than waiting for it to be delivered via mail.

* Customer engagement — How a company engages with its customers can make a huge difference. For example, Apple launches its products at its World Wide Developers Conference, which makes the developers feel special as well as enables the company to get valuable feedback.

Similarly, Ford in the UAE has been running a promotion giving some customers a chance to test drive their new models for an entire week.

* Brand — Innovative brands are able to build a sense of community among their customers, which creates and aura of exclusivity. Royal Enfield, the Indian motorcycle brand, has reinvented itself by launching a new product range and creating groups of diehard fans, and in the process, has grown into a cult brand.

While innovation is important for any business, it needs to go beyond just product improvement, as that can easily be copied by competitors. For innovation to really work, it needs to incorporate multiple facets that work in tandem to create a truly differentiated product or service.

— The writer is CEO of AMRB, a research consultancy.