Beyond Buzzwords: What Does Innovation Mean in Business
Innovation is everywhere today, and that’s a problem.
Be it part of vision statements, leadership meetings, or pitches made to the investors, everything is labeled innovation. But, in truth, nothing actually is!
According to BCG 2024 research, 83% companies say they consider innovation a priority1. Unfortunately, only 3% believe they are actually ready to innovate.
Innovation today is reduced to novelty and trends, or in some cases, new technology. In contrast, it must be about how value is created, delivered, and sustained over time.
What does innovation mean in business? Let’s talk about it.
The Core Definition
In the past, the term innovation was used for developing new products. In reality, creating new products only resulted in the lowest return on investment and didn't offer much of a competitive advantage either.
The key idea today of innovation is to create value through new and improved solutions. It doesn't live in a single idea or product. But rather, it happens across the entire system.
So, if you ask, what does innovation mean in business today? It’s all about turning ideas into solutions that bring real and repeatable value. True innovation is multidimensional and hard to replicate for others. It reshapes the entire business process.
Ten types of innovation framework
Innovation can look different for different businesses and leaders. Many high-performing companies work with a diversified model. They spread their innovation efforts on multiple channels rather than the end products or services alone.
So we have the ten types of innovation framework. It breaks down innovation into ten distinct but connected areas. Let’s talk about it.
Profit model
This is all about how you make money. It's less to do with what you sell and more about how you do it. Consider new pricing models, bundle offers, subscriptions, and shift the focus from one-time deals to recurring revenues.
The profit model directly impacts the business growth.
Network
Network innovation is about creating partnerships and collaborations. When you form strategic alliances or outsource non-core capabilities, you can scale up quicker. You can access greater markets and speed up operations without having to invest more.
Structure
Structure innovation reshapes the way your company organizes talent, assets, and other responsibilities. Structure innovation is about decentralizing teams and coming up with new incentives for the team.
At times, it involves redesigning roles so there's better (and quicker) decision-making and accountability.
Process
Process innovation is about improving the way you get work done. Like say, you go for automation or adopt lean operational models, it can boost efficiency and bring consistency to the system.
It's about making a change in your present system that's hard to replicate for others. At times, companies opt for patented and proprietary approaches that lead to a competitive advantage that lasts for years.
As per research, process improvements can lead to cost reductions and fast improvements to speed and quality, leading to high gains2.
Product Performance
Now we come to the most visible form of innovation, i.e., performance. It means improving the features or quality of the offering.
You can employ a different technology or materials to make them better.
But keep in mind that improving product performance alone is never a sustainable strategy. It is the easiest one to replicate for others (again, which is why product performance is only one part of the ten types of innovation).
Product system
In product system innovation, we look at how individual products work together. Think complementary products or add-ons.
When your product interoperates or is integrated with another one, you form valuable connections with an otherwise distinct offering. It creates an ecosystem that, on the one hand, delights customers and, on the other, forms a stronger barrier against competition.
Service
Service innovation influences the customer experience before, during, and after the purchase.
The smoother the customer's journey from onboarding to usage, the more likely they are to stick around.
Channel
Next channel innovation is about how you connect your company's offers with the customers. It's about creating immersive experiences for the customers. You don't wait for them, but bring your own products and services to the customers.
You make it easy for them to purchase the offer whenever and however they want it.
Brand
The way you showcase your product or service is how the audience will recognize and remember it.
It's about how you stand out in their minds compared to the competition.
When you have strong brand innovation, you get better trust and long-term loyalty from your customers.
Customer engagement
Lastly, customer engagement is about how you interact with your customers over time.
There are different strategies to keep the customers coming back.
Like, you can offer personalization or loyalty programs, which strengthen the current relations. Done right, a one-time transaction turns into long-term loyalty.
Incremental vs transformational innovation
Most businesses cite that they want transformational innovation. But their budget usually points towards incremental changes only. The difference lies in risk and investment.
Incremental innovation is a continuous improvement for improving the products, services, or processes. For businesses, it means low risk and a steady performance. The strategy is to make small but continuous, say 10%, improvements to the features of the existing offering.
Yet, if we ask most companies, what does innovation mean in business for them?
They talk about ‘transformational innovation’, which is a complete breakthrough. As Clayton Christensen states: “Disruptive innovation changes the competitive landscape.”
In transformational innovation, businesses redefine their offerings or bring new models or industries into the setup. Transformational innovation carries a greater risk and often requires long timelines for implementation.
In reality, both incremental and transformational innovation are very important for a business to sustain in the market.
Business impact of innovation
The reason why innovation is important in business is that it delivers results. Those companies that continuously innovate perform much better than their counterparts.
As per research, the organizations that innovate can grow up to 3 times faster3. Then, there are other, less innovative companies. This is because they are able to adapt more quickly to the shifting customer needs and market conditions.
This gives them a competitive advantage too, where they are able to introduce new products, have smarter processes, and differentiate business models. It becomes difficult for the competitors to replicate the model the company is running on.
People are also more likely to stay in a company that is progressive. In fact, 91% of employees look for companies that value innovation4.
Conclusion: What does innovation mean in business?
Innovation today is more important than ever. The market conditions are changing and reshaping business dynamics faster than ever (thanks to AI).
Those companies that can anticipate these changes and adapt their strategies to meet the challenges can reshape themselves faster.
This is the number one reason why they are able to sustain. ‘Business as usual’ is now a huge risk. Those competitive advantages that used to last for years are now overtaken within months.
Post-pandemic, innovation for business is a non-negotiable strategy. All efforts can fail if they’re directed to solutions rather than understanding the actual problem (case in point, the 74% of first-time postsecondary students who dropped out or transferred when institutions didn’t understand their real ‘job’)5.
Work Cited
Boston Consulting Group. “83% of Companies Rank Innovation as a Top-Three Priority, Yet Just 3% Are Ready to Deliver on Those Innovation Goals.” 2024.
ResearchGate. “Measuring Process Innovation Output in Firms: Cost Reduction versus Quality Improvement.” 2023.
McKinsey. “Innovative Growers: A View from the Top.” 2023.
PCMA. “Are Creative Employees Valued? How to Encourage Innovation on the Job.” 2019.
Christensen Institute. “Jobs to Be Done.” 2025.