The word innovation has been used as a single block idea. There is a lot under this category. In his book Dealing with Darwin, Geoffrey Moore highlighted that when people call to mind “innovation,” they usually think of disruptive innovation. Disruptive innovation is an important type, but it has many brothers than sisters that will be useful and relevant for value creation throughout the category lifecycle. It sits on the far left, and has not “crossed the chasm”.

There are four zones which involve different innovation types: product leadership, customer intimacy, operational excellence and category renewal.

Value disciplines
A strategy development model championed by Michael Treacy and Fred Wiersema in The Value Disciplines of Market Leaders that focuses value creation on one of three areas: product leadership, customer intimacy, or operational excellence. The message of this book was that no company will succeed in today’s environment by attempting to be all things to all people. Instead companies must find the unique value that they alone can deliver to their market. They can choose from the suite of innovation vectors below to find how they will deliver this unique value.

Product Leadership (Growth markets)
One of three value disciplines, it invests heavily in R&D to differentiate offerings by more desirable features, better performance, or lower market price.

Customer intimacy (Mature markets)
One of three value disciplines, it invests heavily in customer information gathering in order to differentiate offerings by aligning them more precisely with target customers’ needs and values.

Operational excellence (Mature markets)
One of three value disciplines, it invests heavily in processes and systems to differentiate offerings by lower cost, higher quality, or faster time to market.

Category renewal (Declining markets)
Here companies reinvent themselves through organic and structural innovation.

The diagram below shows when in the lifecycle each innovation type can be applied, different types get traction at different points. As different types are suited to different points in the category maturity life cycle, innovation strategy must adapt to life-cycle dynamics. This model helps managers make innovation vector choices and focus investment in that choice.

Author of Dealing with Darwin, Geoffrey Moore, “Each innovation type is a compass point, a vector along which companies can proceed, and which if they pursue with enough consistency and commitment will lead them to the competitive separation they require.”

Each of the four zones and their types are covered in more detail below.

Innovation types in the Product leadership zone focus on acquiring new customers, but customer intimacy and operational excellence focus on deepening relationships, more cost effective to maintain margins, while reducing customer costs. The value renewal zone is relevant when a market enters into a decline. This is a period in the maturity of a market when, setting aside cyclical fluctuations, growth rates are negative. Strategically, this is a time to either reinvigorate the category or harvest and exit.

Innovation strategy must be situational in selecting its preferred innovation types. In growth markets there is still room for functional improvements customer intimacy is less important as customers are using price/performance as their primary evaluation criteria. When people say we can’t innovate anymore it is almost always not the case. Companies should pick a single vector of innovation and march so far down it that your competition either cannot or will not follow.

This innovation type model lets you choose a vector for differentiation to gain differentiation from competitors. The innovation vector you choose determines where sustainable competitive advantage is developed.