What Is the Innovation Matrix? (Plus Types of Innovation)

By Indeed Editorial Team

Published July 22, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Innovation is important to the success of many businesses. It allows companies to adapt to industry changes and remain relevant and competitive, which may help them achieve their long-term goals. Understanding this concept may help you apply it more effectively to benefit an organization. In this article, we answer the question, “What is the innovation matrix?”, discuss its composition and how to use it, and explore the types of innovation that companies undertake.

What is the innovation matrix?

To answer the question, “What is the innovation matrix?”, it's important to first define innovation in business. Innovation is the process of creating new products, services, processes, and technologies that provide value to a target market. It typically involves developing and implementing new ideas to drive business growth. Innovation allows businesses to find new ways to solve problems and create new opportunities, often to increase revenue. It's a broad term that refers to a wide range of activities and strategies that organizations use to keep pace with the changing business environment and improve their performance.

An innovation matrix is a strategic tool that can help business leaders identify and prioritize opportunities for innovation in their organizations. It provides a framework for analyzing and evaluating potential opportunities, which can help them focus on the most promising approach for growth. Companies also use it to develop a shared understanding of the direction and goals of a business and the strategies they plan to employ to achieve them. This helps executives and managers ensure that their decisions align with the organization's strategic priorities and goals.

Related: 15 Innovation Interview Questions (With Sample Answers)

Composition of an innovation matrix

The most common structure for an innovation matrix is a two-by-two grid with four quadrants or sections and two axes. The quadrants often represent various types of innovations. The axes are parameters that measure a particular innovation's position on the grid, which determines its value proposition. These guide an organization's decision makers in choosing which type of innovation is best for a specific situation or to achieve a goal.

Common structure of an innovation matrix

In the usual innovation matrix that companies use, the vertical axis describes the problem an innovation solves, and it may be defined or not well defined. The horizontal axis establishes the domain in the same way. A defined domain typically means that the organization knows who or what can address the problem. This may be an existing technology that they can use, their research and development (R&D) department, or another company with the capabilities to meet their needs. The four sections are:

  • Breakthrough innovation: While the innovations in this section address a specific or well-defined problem, the domain isn't well-defined, which usually means a company is finding it difficult to develop solutions. This may happen when an organization uses the same approach and strategies and is also often the reason that breakthroughs come from startups who are still willing to try new and different methods to achieve their goals.

  • Sustaining innovation: This is similar to a breakthrough innovation because the problem it addresses is well-defined. Its difference is in the fact that the domain is also well-defined, which means the organization knows the right approach to arrive at its desired outcome.

  • Basic research: While many people don't consider this an innovation, it's still key to pursuing growth in business because it may result in new technological discoveries that may be useful to a company. Strategies in this quadrant are for instances wherein the problem and the domain aren't well-defined.

  • Disruptive innovation: Innovations with a well-defined domain and a problem that isn't well-defined are in this quadrant. These often result in revolutionary products or services.

Another example of an innovation matrix

Another version of the innovation matrix uses parameters that allow companies to categorize innovations depending on the market in which they operate and the technology they use. These are the four quadrants in this matrix:

  • Architectural innovation: This refers to innovations that use existing technology and which aim to reach a new market. These often involve adapting a product that already exists to meet the requirements of a group of consumers that's different from their usual customers.

  • Radical innovation: While this also aims to expand the company's customer base by breaking into a new market, implementing it requires the use of new or revolutionary technology.

  • Incremental innovation: Innovations in this quadrant typically consist of small improvements that culminate in a major change for the company. These target the business' existing market and make use of existing technologies in their implementation.

  • Disruptive innovation: This type of innovation often describes introducing a product or service that uses new technology in an existing market.

Related: A Guide to the Product Development Process (With Examples)

How to use an innovation matrix

An innovation matrix enables companies to define their innovation strategies. This is important because it helps them direct their resources to the type of innovation that fits them best and can make the most impact on their performance. While this tool is beneficial, its effectiveness relies on its proper use. Here's a guide on how you can use an innovation matrix to determine the appropriate approach to innovation for an organization:

1. Decide on the composition of the matrix

Innovation matrices differ in terms of the perspective they offer and the elements they use to categorize innovations. While you can create your own, you can save time and effort by utilizing a common innovation matrix that many organizations use. If your focus is on developing solutions for consumers, it may be a good idea to use the matrix with market and technology as parameters.

2. Brainstorm and categorize innovation strategies

The next step is to facilitate a group discussion among team members with the aim of developing a list of strategies the company can use to innovate. You can do this in person or through an online collaboration tool. After creating a list, the next step is to classify them into matrix categories.

3. Choose the best strategy

To do this, use the matrix as a reference while considering the organization's goals and innovation maturity. For example, if the organization is a startup, it may be a good idea to focus on developing a solution to address a specific market need that other companies aren't meeting. If the organization is an established company, it may want to innovate its processes to improve efficiency.

3 main types of innovation

The importance of innovation in the growth of a company means that organizations are often always working towards it. There are many ways to achieve this, and it's common for a business to employ various innovative strategies in its lifetime. These are the three main types of innovation:

Product innovation

This type of innovation involves developing new products, services, or technologies. This often means coming up with novel ideas and then figuring out how to make them into a profitable business. While this innovation brings the potential for large profits, it may also be difficult to achieve because it requires risk and experimentation.

While this innovation usually means introducing a new offering, it may also mean improving an existing product or service. To do this, companies may add a new feature or modify an existing one. Product innovation can help a company keep up with the demands of its customers. It can also provide a new revenue stream or an opportunity for the business to reach a new group of consumers.

Process innovation

In this type, the focus is on improving internal operations. This often means improving existing processes to make them more efficient and less costly. An example is automating a manual process by adopting the use of new software. Process innovation can also involve creating new processes to address problems in the current structure. These strategies often focus on long-term goals, which means that the company may not feel the impact of this type of innovation immediately.

Process innovation often occurs when it's necessary for a business to respond to a change in the industry. It also happens when a company is trying to keep up with the competition or customer expectations. For example, a fast-food restaurant may use process innovation to reduce the time it takes to prepare food, which can improve customer satisfaction, expand their customer base, and increase their sales.

Related: What Is Business Innovation (With Skills and Tips)

Business model innovation

This is the process of changing the fundamental ways in which a company operates to better serve their markets and stakeholders. It often involves developing a new business model, which is the way in which a business generates revenue. Innovating in this area often means discontinuing or replacing the core product or service a company offers or changing the way they deliver their offerings to customers. It may also signal organizational changes, such as shifting to another business structure or redefining the roles and responsibilities of employees.

The goal of business model innovation is to determine a way to provide value to customers while maintaining or increasing business profitability. Because it necessitates a shift in the company's operations, it can be challenging and may require a lot of time and resources to implement. It's crucial for an organization that's working towards innovating its business model to be flexible to adapt to the changes that may result from it.

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