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    3 Types of Innovation You Should Know

    Colleagues looking at whiteboard in team meeting
    • 01 Oct 2020
    Lauren Landry Author Staff
    tag
    • Disruptive Strategy
    • Entrepreneurship & Innovation
    • Strategy

    Innovation isn’t one-size-fits-all. Depending on whether you’re an established company or a new and emerging brand, there are different ways you can create value, achieve differentiation, and outpace the competition.

    At your organization, innovation could mean anything from making gradual improvements to an existing product to creating a breakthrough technology or developing an entirely new market. In the online course Disruptive Strategy, Harvard Business School Professor Clayton Christensen outlines three types of innovation, defining them as:

    1. Sustaining innovation
    2. Low-end disruption
    3. New-market disruption

    How and when you leverage each innovation type depends on your place in the market. Here's what each category means and how you can apply it to achieve long-term business success.


    Free E-Book:
    So You Want to Be an Entrepreneur: How to Get Started

    Access your free e-book today.

    DOWNLOAD NOW

    Different Types of Innovation

    1. Sustaining Innovation

    Sustaining innovation is an improvement on an existing product. Companies that pursue sustaining innovation develop enhanced versions of their top-tier products to target their most profitable customers who are willing to pay for improved performance. Businesses benefit because they can leverage their current processes and cost structures and, in turn, maintain or improve their profit margins.

    In Disruptive Strategy, Christensen succinctly describes the characteristics of sustaining innovation as “better products that you could sell for better profits to your best customers.” Apple applies this practice whenever it launches a new version of its iPhone. While each release highlights a new, often breakthrough feature—such as a triple-camera system in the iPhone 11 Pro—Apple is still building on a pre-existing market and value network.

    Sustaining innovation is where incumbent leaders typically win because they’re listening to their existing customers and using those insights to develop superior products and services. Yet, in the process, they create opportunities for new companies to break in at the low end of the market.

    Related: Disruptive Innovation Theory: What It Is & 4 Key Concepts

    2. Low-End Disruption

    Enter low-end disruption, which is when businesses come in at the bottom of the market with a “good enough” product at a cheaper cost. Christensen describes this as “disruptive innovation,” in which a smaller company with fewer resources moves upmarket and, ultimately, captures the incumbents’ customers, who have adopted it into the mainstream.

    “If you come to the bottom of the market, you create a situation where the giant company is motivated to flee, rather than fight you,” says Christensen in Disruptive Strategy. “They won’t fight you, because there’s no profit in it, and it’s very hard for companies to pursue opportunities where there’s no profitability.”

    Learn about the differences between sustaining and disruptive innovation in the video below, and subscribe to our YouTube channel for more explainer content!

    View Video


    Low-end disruption is how new entrants typically win. For example, Airbnb got its start in 2007 when co-founders Brian Chesky and Joe Gebbia had the idea to rent out air mattresses in their apartment to people attending a design conference in San Francisco. Although not an ideal sleeping situation, it was “good enough” for the three guests who showed up, and much cheaper than staying in a hotel. Fast forward to today, and the online vacation rental marketplace is offering travelers more than seven million accommodations and 50,000 experiences from around the world. Hotels have since turned to Airbnb to generate more bookings.

    Related: 3 Examples of Disruptive Technology That Are Changing the Market

    3. New-Market Disruption

    New-market disruption is when businesses create a new segment in an existing market to reach underserved customers. Through a new measure of performance, they turn products and services that were once expensive and unattainable into something affordable and accessible to a larger population of people.

    “Low-end disruption doesn’t create new markets,” says Christensen in Disruptive Strategy, “you just gain market share against the old. New-market disruption competes against the original players by going after new customers that these [companies] aren't interested in, selling them a simple product.”

    While Apple’s iPhone is now a sustaining innovation, it previously served as a new-market disruption. The iPhone upended the laptop market by enabling customers to connect to the internet and engage with their favorite apps from a device they could hold in one hand.

    Related: 3 Disruptive Strategy Skills For Entrepreneurs and Business Leaders

    Disruptive Strategy | Create winning strategies for your organization | Learn More

    Pursuing Innovation Opportunities

    There are multiple ways to pursue innovation. If you’re an incumbent business, thinking strategically through how you might improve your current products can help you maintain a competitive advantage, while industry entrants will want to create new products or markets to achieve success.

    If you’re interested in learning more about disruptive innovation, explore Disruptive Strategy—one of our online entrepreneurship and innovation courses—and download our free e-book on how to start your entrepreneurial journey.

    About the Author

    Lauren Landry is the director of marketing and communications for Harvard Business School Online. Prior to joining HBS Online, she worked at Northeastern University and BostInno, where she wrote nearly 3,500 articles covering early-stage tech and education—including the very launch of HBS Online. When she's not at HBS Online, you might find her teaching a course on digital media at Emerson College, chugging coffee, or telling anyone who's willing to listen terribly corny jokes.
     
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    How are HBS Online courses delivered?

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    We offer self-paced programs (with weekly deadlines) on the HBS Online course platform.

    Our platform features short, highly produced videos of HBS faculty and guest business experts, interactive graphs and exercises, cold calls to keep you engaged, and opportunities to contribute to a vibrant online community.

    Are HBS Online programs available in languages other than English?

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    We expect to offer our courses in additional languages in the future but, at this time, HBS Online can only be provided in English.

    All course content is delivered in written English. Closed captioning in English is available for all videos. There are no live interactions during the course that requires the learner to speak English. Coursework must be completed in English.

    Do I need to come to campus to participate in HBS Online programs?

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    No, all of our programs are 100 percent online, and available to participants regardless of their location.

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    Certificate Programs

    HBS Online welcomes committed learners wherever they are—in the world and their careers—irrespective of their professional experience or academic background. To extend the reach of HBS Online, we no longer require an application for our certificate programs. (Applications are still required for our credential programs: CORe and CLIMB.) You can now immediately enroll and start taking the next step in your career.

    All programs require the completion of a brief online enrollment form before payment. If you are new to HBS Online, you will be required to set up an account before enrolling in the program of your choice.

    Our easy online enrollment form is free, and no special documentation is required. All participants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program.

    Updates to your enrollment status will be shown on your account page. HBS Online does not use race, gender, ethnicity, or any protected class as criteria for enrollment for any HBS Online program.

    Credential Programs

    HBS Online's CORe and CLIMB programs require the completion of a brief application. The applications vary slightly, but all ask for some personal background information. You can apply for and enroll in programs here. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice.

    Our easy online application is free, and no special documentation is required. All participants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program.

    Updates to your application and enrollment status will be shown on your account page. We confirm enrollment eligibility within one week of your application for CORe and three weeks for CLIMB. HBS Online does not use race, gender, ethnicity, or any protected class as criteria for admissions for any HBS Online program.

    Does Harvard Business School Online offer an online MBA?

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    No, Harvard Business School Online offers business certificate programs.

    What are my payment options?

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    HBS Online offers a variety of payment methods to provide flexibility, including:

    • Credit and debit cards (Visa, MasterCard, Discover, and AMEX)
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    You may split your payment across two credit card transactions or send a payment link to another individual to complete payment on your behalf. A minimum payment of $350 is required for the first transaction.

    Some learners may also qualify for scholarships or financial aid, which will be credited against the program fee once eligibility is determined. Please refer to the Payment & Financial Aid page for more information.

    What are the policies for refunds and deferrals?

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    After enrolling in a program, you may request a withdrawal with refund (minus a $100 nonrefundable enrollment fee) up until 24 hours after the start of your program. Please review the Program Policies page for more details on refunds and deferrals. If your employer has contracted with HBS Online for participation in a program, or if you elect to enroll in the undergraduate credit option of the Credential of Readiness (CORe) program, note that policies for these options may differ.

     

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