PDF Summary:Ten Types of Innovation, by Larry Keeley, Helen Walters, Ryan Pikkel, and Brian Quinn

Why do the overwhelming majority of innovation projects fail? And more importantly, what can you do to innovate successfully? In Ten Types of Innovation, Larry Keeley and his co-authors argue that the key to success often lies in knowing which types of innovation would most help a given project succeed, as well as how many types you need to apply to your project. He explains that there are ten fundamental types of innovation. Understanding these ten types and the importance of combining them correctly can help you understand why most innovation projects fail and how to make your projects succeed.

In this guide, we’ll also compare the authors’ perspective to insights from Geoffrey Moore’s Crossing the Chasm, Chan Kim and Renée Mauborgne’s Blue Ocean Strategy, and Vijay Kumar’s 101 Design Methods, among others.

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Standard Distribution Channels as a Starting Point for Innovation

In Crossing the Chasm, Geoffrey Moore discusses several different distribution channels that are useful for reaching different types of customers. Although these are standard distribution channels, not novel ones, understanding them can provide you with a starting point to consider novel variations or combinations of them.

One approach, of course, is to distribute your product yourself. Moore breaks this up into several “channels” depending on which part of your company interacts with the customer: For high-value business-to-business sales, he recommends that your executives meet directly with the customer’s executives to arrange the transaction. For larger-volume, lower-value sales, it may be appropriate to sell your product directly through an online store or to use a hybrid model that combines some of the automation of an online store with a live sales team that helps customers determine exactly what they need.

Another approach is to market your product through “value-added resellers,” or VARs. A VAR is usually a local company that provides repair, tech support, training, consulting, or other supporting services and expertise in addition to acting as a vendor for products. Moore notes that VARs are particularly useful for marketing high-tech products to users who are less tech-savvy because these users need more support and feel more comfortable having someone they can turn to locally if they have problems.

Support Innovations

This type of innovation means supporting your customers in their use of your product in exceptional ways. For example, if your product can only be repaired by a small number of certified technicians, you could instead design it with easy-to-obtain spare parts so that any technician can fix it when needed. Or you could guarantee zero downtime and offer to reimburse business customers for any revenue they lose if your product does go down.

(Shortform note: In Raving Fans, management experts Ken Blanchard and Sheldon Bowls essentially argue that this is the most important type of innovation. Although they don’t explicitly discuss managing innovation projects, they say that impressing your customers through superior service and support is the most important part of business management. And they assert that to impress your customers, you have to do things for them that they don’t expect. Elements of customer service that provide novel or unexpected value to your customers are, by the authors’ definition, innovations.)

Branding Innovations

Through branding innovation, you find a way to make customers ascribe additional value to your products based on your brand identity. Maybe they’re willing to pay more for your products because they trust you to stand behind your products more than they trust other companies. Maybe something about how your company does business resonates with their values. Or maybe your brand conveys social status in a way that others don’t.

(Shortform note: Another term for branding innovation is “positioning strategy.” In marketing parlance, “positioning” refers to how customers think about your product or brand—where they place you on the market landscape. “Positioning” can also refer to actions you take to influence how customers think about your product or brand.)

Gratification Innovations

This type of innovation revolves around understanding your customers’ values and aspirations and designing your product so they get more gratification from using it. For example, you might let users customize the appearance of your product when they buy it so that your product becomes a form of self-expression for them.

(Shortform note: In Blue Ocean Strategy, Kim and Mauborgne describe a closely related form of innovation as “adding function or emotion.” People tend to view some products objectively and others emotionally. But if you can find a way to make people see your product in a different light than they view other products in the same category, they may find a different form of gratification in it, creating a new market. For example, most people view house paint relatively objectively and cosmetics more emotionally, and most companies that make these products cater to these expectations. But if you introduce a cosmetic product and show users how it is objectively better in some way, or if you introduce a line of house paints that customers can get more emotional about, your product would stand out.)

Why Innovation Projects Fail and How to Succeed

The authors identify a number of reasons that innovation projects fail, most of which they explain in terms of the ten types of innovation that we’ve just covered: A project can fail because it doesn’t incorporate enough types of innovation, tries to incorporate too many types at once, or focuses on the wrong types.

Problem: Insufficient Scope of Innovation

According to the authors, the most common problem with innovation projects is that they aren’t bold enough: They don’t change anything enough to make a difference for your customers because they focus on minor improvements that include only one or two of the 10 types of innovation. Thus, even if they succeed in developing an improved product, they fail to generate new value for your company.

Solution: Implement at Least Five Types of Innovation

The authors' solution to this problem is to think big: Tackle the difficult problems that nobody else is addressing and employ several types of innovation to build a solution that’s unique and difficult to copy. They assert that most historically significant innovation projects involved at least five of the 10 types of innovation.

Contrasting Perspectives on Why Innovations Fail

Other experts have different ideas about why innovation projects most often fail. For example, in Crossing the Chasm, Geoffrey Moore argues that innovation projects tend to fail because not enough mainstream customers buy them. This, in turn, is because mainstream customers prefer to buy products that other mainstream customers have already bought and found useful. This makes it difficult to sell innovative products to mainstream customers unless you already have mainstream customers, creating a catch-22.

Moore’s solution to this problem involves tailoring your initial offering so exquisitely to the needs of a niche that you can use that niche to break into the mainstream market. Then, once you have enough customers to vouch for your product to raise other mainstream customers’ interest, you can expand into adjacent market sectors.

Moore’s solution is arguably a special case of the authors’ solution: If you have an innovative product that mainstream customers consider unproven, you’ll need to add at least one type of innovation that overcomes your customers’ hesitance to buy it. This might be a perception-related innovation that makes your product especially appealing to a certain niche, as Moore suggests. Or it might be a revenue stream innovation that allows you to offer your product for free, inducing enough customers to try it that you can build a rapport with them.

Thus, Moore’s discussion of customers’ behavior illustrates why you need several different types of innovation and how combining the authors’ ideas with insights from other experts can further boost your product’s chances of success.

Problem: Lack of Clear Direction

The authors also observe that innovation projects often fail because they don’t have a well-defined scope or clear objectives. What market should your innovative new product disrupt? What problems or pain points does it need to solve in order to be valuable to buyers in that market? Perhaps most importantly, which of the 10 types of innovation do you most need on this project? In the authors’ experience, assigning a team to brainstorm ideas for new innovations without giving them clear goals along these lines seldom generates beneficial innovations for your company.

Solution: Visualize Your Industry to Identify Opportunities

Before you dive into an innovation project, you need an objective. You may not know how to achieve your goal yet—figuring that out is the purpose of the project—but you should know what you want to achieve and how it will benefit your company.

How do you come up with this initial vision? The authors say you need to analyze your industry to determine where the real opportunities are. Usually, there are industry trends that lead most firms to focus on a few specific types of innovation at any given time. But the greatest opportunities usually lie in innovating where nobody else is.

So ask yourself—or experts in your industry, for that matter—what the current trends are. What are the driving factors behind those trends? Who are the industry leaders that are currently exploiting them?

Once you’ve answered these questions, then ask yourself what you could do to change the driving factors in a way that gives you control. Are there types of innovation that nobody is applying? Are there problems or pain points that the industry currently ignores? Have there been transformations in other industries that nobody has implemented in your industry yet?

As you do your research, the authors recommend constructing a 3D graph showing the amount of each of the ten types of innovation that’s taken place in your industry over time. Such graphs can help you visualize industry trends in innovation and see at a glance what types of innovation are absent.

Shortform Commentary: Choosing Your Direction With Blue Ocean Strategy

Blue Ocean Strategy prescribes a similar approach that provides additional perspective and tools you can use to implement Keeley’s advice as you formulate your goals and overall strategy for an innovation project. Much like Keeley, the authors of Blue Ocean Strategy recommend focusing on the areas where there are opportunities to create value for the user that no one else is taking advantage of. This creates a greater opportunity for profitable growth than competing head-to-head with other companies in areas where they’re already active.

One particularly useful graphical tool that the authors of Blue Ocean Strategy introduce for identifying areas of opportunity is the “strategy chart” or “strategy canvas.” This tool helps you see what areas other products or companies are focusing on and what areas they’re neglecting. It’s similar to Keeley’s recommended 3D graph but arguably clearer. Here’s an example of a strategy chart:

To create a strategy chart, list the defining characteristics of products in your industry at regular intervals on the horizontal axis and record how well each one is currently addressed in each competing option by marking a dot on the graph. Then connect all the dots that represent the same option, creating a profile curve for that option. The shape of the curves shows you at a glance how similar or differentiated different products are. For example, on the strategy canvas, Product X and Product Y are clearly very similar offerings.

If you're analyzing products against the ten types of innovation, you could make a strategy chart using the ten types of innovation as the factors listed on the graph. Or you could just determine what types of innovation influence each of the factors and group factors affected by the same type next to each other. Either way, the shape of the curves would then show which types of innovation each product focuses on.

Problem: Incorrect Direction

Of course, there’s always a possibility that your initial vision for an innovation project was wrong. As the authors observe, innovation projects also fail when they focus on solving problems that customers don’t care about or implement solutions that work well on paper but not in practice.

Solution: Iterate on Prototypes

To make sure you’re working on the right problem and developing a truly practical solution, the authors advise you to build and test prototypes—not just of your core product, but of every type of innovation that you hope to implement. For example, if you’ve come up with a novel revenue stream and a relational innovation, try building a “prototype” of these by diagramming how they would work or testing them on a small scale.

Prototypes mitigate risk in an innovation project by allowing you to test your assumptions about how things will work and what customers will like. The authors say your first prototypes should be extremely low-cost models that you can put together with minimal effort. He recommends starting with “paper prototypes.” A paper prototype might be a sketch illustrating the flow of information, value, and material between different parties, or a written story describing day-to-day operations with your proposed solution in place.

Refine your solution as much as you can based on what you learn from your first prototypes. Then build a set of slightly more refined prototypes and repeat the process. For the second round, you might use simple mathematical models or video animations instead of sketches and stories. Continue to iterate until you get close to a final solution that you can roll out with confidence.

Experiment on Users With Minimum Viable Products

In The Lean Startup, Eric Ries elaborates on how you can validate the direction of your innovation project by observing users and building prototypes. Based on what you know (or think you know) about customers’ needs, demographics, market data, and so forth, come up with a testable hypothesis, like “20% of women over 50 would be interested in [my new product] at a price of $75,” or “A product with [this feature] would reduce the time it takes a mechanic to repair [this automotive problem] by an average of 3 hours.”

Then test your hypothesis by launching a “Minimum Viable Product”, or MVP, and observing how users interact with it. Your MVP is a prototype that provides everything you’ll need to test your hypothesis without any additional features that add time or expense.

For example, one type of MVP Ries describes is a video showing off your product and how it works. If you don’t have a working prototype to record video of, use artwork or computer-generated graphics to show how the product will work.

Even if you need a fully functional prototype to test your hypothesis, Ries says your MVP could implement it on a very small scale: Instead of rolling out a service to thousands or millions of users right away, start with just one customer and make sure your service meets her needs before you determine how to scale up.

You can also build MVPs that appear to be fully functional from the user’s perspective, even though behind the scenes you’re performing functions manually that the final product would have to perform automatically. Using this kind of MVP helps you understand what the product actually needs to do to provide value to customers before you invest in developing technology or infrastructure to meet those needs.

By using MVPs to test your hypotheses about how users will react to a product and how it will solve their problems, you can validate early on that your innovation project is headed in the right direction.

Problem: Inadequate Execution

While the authors see insufficient ambition and misdirected focus as more common and more fundamental problems, they acknowledge that the opposite problem is also possible: Sometimes companies can’t execute their innovation projects successfully because its scope or complexity exceeds their capabilities and resources. The more types of innovation you incorporate into a project, the more complex it becomes. So innovating across more types does carry some risk.

Solution: Keep Your Expectations Realistic

To mitigate the risk of failing at execution, the authors say you need to approach innovation projects with the right level of ambition. Assess what kinds of innovation you actually need to make your product successful and only work on those types. As we discussed earlier, you’ll probably need several types of innovation to disrupt the market. But maybe you don’t want to disrupt the market. The authors concede that if you’re already the market leader, periodically making minor improvements in one or two areas may be sufficient to stay in the lead.

Innovation and Essentialism

The authors’ solution to the problem of innovation projects failing at execution could be considered a special application of the more general philosophy of Essentialism.

In Essentialism, Greg McKeown argues that the key to finding happiness in life is to refocus on what actually matters to you: Eliminate the unimportant tasks and commitments in your life so you can devote more of your time, energy, and resources to working on the important ones. This way you’ll feel less pressed for time, more collected, and thus be more successful because you’ll make more progress on the things you consider important.

The same philosophy applies equally to both personal and business undertakings. As the authors point out in the context of innovation projects, clarifying your focus and eliminating needless complexity mitigates the risk of failure: The better you understand what really matters to your stakeholders and the more you focus on it, the more likely your project will have a meaningful impact. And the fewer unimportant elements that you include, the lower your risk of failure because the complexity of the project is reduced.

Problem: Undisciplined Approach to Innovation

The authors assert that many companies don’t know how to practice innovation as a formal discipline. They treat it as something almost magical that can’t be predicted, much less planned or implemented by employees on a regular basis. This undermines their ability to execute innovation projects successfully or, more commonly, prevents them from undertaking innovation initiatives in the first place.

Solution: Develop Your Capacity for Innovation

If you suffer from this problem, the authors say you need to get past the idea that innovation is somehow special and simply develop a capacity for it, just like you have a capacity for record-keeping, internal communications, and other business activities.

The authors recommend developing a standard set of generalized innovation strategies. For example, turning a product into a service through a combination of organizational, relational, revenue stream, distribution, and support innovations might be a standard innovation strategy. Base your standard strategies on successful innovations of the past and refine them with lessons learned from your own projects—both successes and failures.

Then you can use these strategies like a sports team uses a playbook: You practice thinking through how you would apply them until they become rote. Then, in a given situation, you can quickly run through them in your mind and pick out which ones might be most effective.

(Shortform note: In The 33 Strategies of War, Robert Greene notes that successful strategists—both in war and in business—have prepared for the unexpected by creating detailed plans for many different possible scenarios. The authors’ suggestion to create a “playbook” of generalized strategies for innovation projects is basically an application of this general strategic principle to the practice of innovation. As Greene explains, the main advantage of this strategy is that it enables you to respond quickly and thoroughly to situations since you already have detailed plans in place to deal with them. In the case of innovation, the ability to work quickly but thoroughly might help to ensure you use enough types of innovation.)

The authors observe that sometimes managing an innovation project is more a matter of managing emotions than anything else. People are naturally risk averse and afraid of the unknown. Innovation projects tend to make them nervous because they have to do new things or explore unproven options. Some of them will object to the project just because it pushes them out of their comfort zone. So if your employees raise objections, listen to their concerns empathetically, then reiterate your vision and encourage them to move forward. And make sure your company’s reward system and metrics align with your emphasis on innovation so that everyone has an incentive to practice innovation.

Managing Innovation Projects

Vijay Kumar agrees with the authors that innovation projects sometimes fail because they don’t take a sufficiently disciplined approach to project management. In fact, he argues that this is the primary reason innovation projects fail. In 101 Design Methods, he describes his solution to the problem, which consists of breaking down innovation into seven general tasks you can plan and manage. Breaking down innovation projects into these manageable tasks helps you develop your company’s capacity for innovation as the authors suggest.

Especially in conjunction with a system tracking and rewarding innovation like the authors suggest, Kumar’s approach to managing innovation projects can also help you manage emotions because transforming a potentially intimidating innovation project into a series of familiar tasks can help quell your employees’ fear of the unknown and make the project less daunting.

Kumar’s seven tasks of innovation are:

• Get a clear view of the big picture. Establish the general direction and goals of the project.

• Research your operating environment. Identify your unknowns and plan out how to get the information you need.

• Research your stakeholders. Make sure you understand their motivations and pain points.

• Distill the information you gathered in tasks 2 and 3 into broadly-applicable principles that can guide your decision making.

• Brainstorm ideas that could make up parts of the solution. Relating this to the authors’ ten types of innovation, each idea would probably be a way to implement one of the ten types.

• Determine the combination of ideas from task 5 that gives you the best complete solution. This is where you would combine several types of innovation as the authors recommend.

• Create a detailed plan for implementing the final solution, including things like budgets, timelines, and marketing tactics.