10 Types of Innovation

As venture capitalist Peter Thiel once put it:

competition is for losers

To avoid perfect competition, companies must strive to build an economic moat that gives them a sustainable competitive advantage over time. While these protective moats can arise from a number of different sources, in today’s information economy they most often arise from the power of innovation.

For example:

• Hyatt uses “lab hotels” to find innovative solutions to recurring problems. A select number of its 488 global hotels have between 7 and 9 experiments running at the same time. Successful experiments then get implemented
• Chicago restaurant Next makes money on customers’ tabs paid in advance. To reserve a table, customers pay for their entire meal in advance. Next makes interest on those funds and dramatically decreases no shows. Pricing also changes based on the time of the reservation rather than the quantity of food eaten, therefore maximizing margins
• Natura, a Brazilian cosmetics company, has a modest R&D team but continually launches products on the cutting edge of “skin science” to the tune of $3.4 billion annually. This was done by relying heavily on “open innovation” partners - 25 universities around the world that come up with 50% of Natura’s products
• In the 1990s, Dell hand-picked its customers to maximize revenue and profitability. It researched corporate customers to see which had the most predictable purchasing patterns and low service costs, including which were second-time computer buyers and are therefore more likely to have fewer service calls
• Gillette completely altered its profit model after customers got hooked on its products. Gillette started with selling cheap blades to train the customer to throw them away instead of sharpening them to reuse. Later on, it switched to a higher margin on the blades
• Henry Ford’s success with the Model T was due to more than just the assembly line innovation. Investing in his employees led to a decrease in turnover costs and an increase in employee satisfaction. Ford paid twice the minimum wage so his workers could afford to buy the cars they were building and reduced the workday from nine to eight hours. Ford also sold modification kits that made the vehicle a multi-use machine. Now known as the product system innovation, owners could use their Model Ts to make cider, pump water, saw wood or blow snow, among other uses
• To sell diapers in China, Procter & Gamble used network and profit model innovations. Chinese parents were not convinced that diapers were healthy for babies, so P&G partnered with Beijing Children’s Hospital to prove they were safe and helped baby sleep longer. P&G also made the diapers at three different price points to increase their affordability
• Combine innovation “tactics” to produce innovations that can be replicated across industries. Zipcar and Chegg are both examples of companies that combined metered use and switchboard innovations. Zipcar provides easy-to-use and always available car rental by the hour. Chegg lends textbooks in a similar fashion
• By asking potential customers to vote on its website, fashion company Threadless figured out which designs customers would purchase before going through the trouble to produce them. Threadless has hosted over 42,000 designers pitching their designs, with over 80 million people voting for them
• Equipment manufacturer Caterpillar optimized its own supply chain and proceeded to capitalize on that knowledge and experience by forming CAT Logistics, a successful consultancy that helps others do the same. CAT Logistics garnered a revenue of $3.1 billion in 2010 and was spun into a separate company in 2012
• Harley-Davidson innovates in service and support systems, cultivating user communities among minority motorbike groups such as women and Latinos. Harley-Davidson was the top brand for minority riders with over $4.5 billion in sales in 2011
• Hyundai radically innovated its service just after the Great Recession. In 2009, customers gravitated towards the brand because of its guarantee that anyone who lost their job within a year of buying or leasing a Hyundai could walk away from the payments and the vehicle
• Starbucks may be coming out with a new drink every season, but the average caffeine addict doesn’t realize that Starbucks’s core innovation was providing a “third place between work and home”. By cultivating this sense of space and belonging, they built a regular customer base who connected with the brand and formed a habit.
• Indian “smart basics” hotel chain Ginger operates with a room to staff ratio of 1 to 0.36, as compared to the industry average of 1:3. They do this through a combination of tactics such as outsourcing tasks such as laundry and food service, promoting a self-service mentality and eliminating under-appreciated luxuries that caused extra work and expense.
• The Mayo Clinic achieves medical breakthroughs with a five-phase process that prevents risks in potential investments and innovations. As ideas move through these checkpoints, they are improved and gain access to more funding.

On average, the world’s most innovative companies use 3.6 different types of innovation in a single new product or service, whereas average innovators only use 1.8 types of innovation altogether. Combining the types makes moves harder to replicate by competitors. Innovation is so much more than just inventing a new product or designing the next version of an existing offering. Innovation can be anything from re-thinking your profit model, to improving your delivery channel, to revamping your customer engagement strategies. There are ten major types of innovation. Within each type, there are also dozens of proven tactics to pull from.

The structured categorization of innovation into ten discrete types is the result of extensive, detailed research carried out by the firm Doblin, which is now a part of the global consulting network Deloitte. This group of innovation specialists dedicated years to performing an in-depth examination of more than 2,000 significant business innovations recorded throughout modern history. Their central discovery was a profound realization: most breakthrough commercial successes did not arise from extremely rare scientific discoveries or purely technical engineering inventions, as is often assumed in popular culture. Rather, the majority of game-changing advancements utilized existing technology or market conditions in novel ways, essentially applying a creative organizational and strategic lens to an old problem.

Doblin’s comprehensive study concluded that innovation can be reliably classified across ten unique facets or dimensions. This insight led to the creation of the strategic framework, which provides a clear, actionable lens for analyzing how a company creates, captures and delivers value. It offers a universal diagnostic tool that any enterprise can use to evaluate their current competitive positioning, pressure-test the durability of their product ecosystem or purposefully search for lucrative new areas to develop their services. The framework fundamentally challenges the notion that innovation is a mysterious, unpredictable event; instead, it presents it as a teachable, systematic discipline. This framework guides businesses to shift their focus away from the difficult, often temporary, gains of technical superiority toward building a stable, multifaceted advantage across their entire organizational and customer-facing structure. The ten types are thoughtfully separated into three main groups:

1. Configuration,
2. Offering, and
3. Experience

These categories provide a logical structure that spans everything from a company’s deep internal workings to its most public customer interactions.

The Framework

The Doblin framework organizes the ten types of innovation into three primary categories, helping business leaders understand where to direct their strategic focus. The three groupings:

1. Configuration
   1. Profit Model: How you make money
   2. Network: Connections with others to create value
   3. Structure: Alignment of your talent and assets
   4. Process Signature of superior methods for doing your work
2. Offering
   1. Product Performance: Distinguishing features and functionality
   2. Product System: Complementary products and services
3. Experience
   1. Service: Support and enhancements that surround your offerings
   2. Channel: How your offerings are delivered to customers and users
   3. Brand: Representation of your offerings and business
   4. Customer Engagement: Distinctive interactions you foster

These represent the internal, product and external dimensions of a successful enterprise.

Configuration Innovations

The Engine Room

The first four types of innovation focus on the company’s internal structure and how the business is fundamentally organized, which is often described as the “behind the scenes” work. Although these innovations do not directly face the customer, they have a crucial and far-reaching effect on the quality and cost of the final customer experience. A well-configured internal engine can enable significant competitive advantages in the other two categories.

Two of the most interesting examples here are Google and McDonald’s. Both companies made internal innovations that empowered their people to make important advancements further on downstream. In the case of McDonald’s, the franchisee insight that led to the introduction of the Egg McMuffin spearheaded the company’s entire breakfast offering, which now accounts for 25% of revenues. Breakfast is also now the company’s most profitable segment.

Profit Model

This dimension addresses the core strategy for capturing value, essentially asking, How do we generate revenue? Profit model breakthroughs involve designing entirely new approaches for pricing, generating revenue or establishing a superior cost structure that competitors cannot match.

Known for its ever-evolving line of razors and razor blades, Gillette is the quintessential example of a profit model that takes advantage of an installed base, charging high margins on a consumable product. Back in the 1920s, Gillette enjoyed healthy profits from its patent on disposable razor blades. Gillette sold blades quite inexpensively and used a savvy profit model that trained its customers to throw away dulled blades and purchase more. Customers became hooked on Gillette’s cheap disposable blades and their convenience. Once Gillette’s patent ran out, however, it was time for a change. Gillette took advantage of its customers’ user habits and strategically began to charge more and more for the once inexpensive blades. Without thinking twice, customers began to pay a lot for a razor that would soon dull and be tossed aside. Gillette enjoyed substantial profit boosts as a result of its timely shift in profit model.

Profit model innovation examples include:

• Ad-Supported: Charge companies to place advertisements on your product
• Flexible Pricing: Pricing changes based on market demand
• Membership: Offer additional benefits in exchange for a membership fee
• Metered Use: Users pay by the quantity of use instead of a flat fee
• Switchboard: Create a new marketplace by connecting multiple sellers to multiple buyers

Creating a subscription model for a historically one-time purchase, like the Amazon Prime membership for shipping and media access. Implementing flexible pricing where cost dynamically changes based on current demand, a common strategy in the airline or hotel (hospitality) sectors. A classic example is the “razor and blade” approach, which involves selling a product at a low margin—or even a loss—to establish a user base and then earning high-margin, recurring revenue on the essential, consumable components. This strategy successfully shifted the market perception of consumables.

Network

Connections with Others to Create Value

Network innovation focuses on strategically leveraging partnerships, alliances and external resources to enhance a company’s offering, reduce risk or improve efficiency. It’s about recognizing that not all valuable assets or capabilities must be owned internally.

Amid the clutter of the big box stores and the looming threat of Amazon, Target succeeds by leveraging its unique partnerships with high-end designers to elevate its brand from just inexpensive wares. When Target launched its first of many major design partnerships, this innovation distinguished them from competitors. To date, Target has worked with over 75 major designers, from clothing to houseware. Standouts include renowned architect Michael Graves’s line of kitchen appliances, Liberty of London pop-up shops and a five-year collaboration with Isaac Mizrahi that created $300 million in annual profits. By looking outside the ordinary and stretching its network in product design and development, Target has achieved a network innovation.

Network innovation examples include:

• Alliances: Share the risks and benefits of a partnership with a common goal, such as greater purchasing power
• Open Innovation: Outsource research and development by making R&D needs known widely
• Supply Chain Integration: Acquire or create a relationship with a supplier to lower costs
• Secondary Markets: Find customers for “by-products” not initially seen as products

Pursuing open innovation by crowdsourcing research and development needs to a broader scientific community, as seen in the pharmaceutical (biotech) industry. Forming a strategic alliance to share purchasing power or distribution channels, like what Target does with high-end fashion designers to elevate its brand perception and product quality beyond its typical inexpensive offerings. Supply chain integration is another key tactic, where a firm closely collaborates with or acquires a supplier to guarantee quality and drive down input costs.

Structure

Alignment of Your Talent and Assets

This type involves organizing a company’s physical, human and intangible assets in novel ways to create value that rivals find incredibly difficult to duplicate. These structural changes often require deep commitment from senior leadership and can result in superior efficiency and employee satisfaction.

Decentralization and transparency are at the core of Whole Food’s management philosophy. These conscious structural decisions by founder John Mackey led to a culture of healthy competition and growth. Rather than making decisions at the corporate level and issuing edicts to individual stores, each department within a given store has a wide berth for decision making. For example, management gives individual departments the responsibility to determine which products to stock and who to hire. This structural innovation has created a culture wherein departments compete for profitability and employees strive to outperform one another. The success of decentralization was made possible by an equal commitment to transparency. Whole Foods reveals data such as sales, profitability and performance to employees. Overall, decentralization and transparency improved profitability of both individual departments and stores.

Structure innovation examples

• Competency Center: Create hubs of people and resources that specialize in a given skill and support an entire organization in that particular area
• Corporate University: Invest in large-scale training for employees with a dedicated space and methodology
• Knowledge Management: Codify information and insights for internal dissemination so multiple business units can all benefit
• Outsourcing: Use external firms rather than internal staff to handle discrete tasks and projects

Establishing internal competency centers - dedicated hubs of specialized expertise that service the entire organization. Adopting a culture of decentralization and radical transparency, as demonstrated by Whole Foods, where individual departments within each store have significant autonomy over product selection and hiring, fostering internal entrepreneurial spirit and competition, which ultimately drives higher store profitability. Investing in large-scale corporate universities to standardize and improve employee skills across the board.

Process

Signature of Superior Methods for Doing Your Work

Process innovation centers on developing unique and proprietary methods for producing and delivering a company’s primary offerings. When done successfully, these methods lead to significant advantages in cost, speed or quality that competitors simply cannot replicate without a complete overhaul.

Long lines, high rates and high employee oversight indicated a car rental industry that was in dire need of innovation. Zipcar’s answered with cars that could be rented for short periods of time and were hassle-free. Rather than building a complex infrastructure, Zipcar focused on cars and parking spots. This streamlined design lead to an exceedingly smooth rental experience for customers. Customers simply walked up to the car and unlocked it with their pre-approved “Zipcard”. No long longs, unnecessary paperwork or add-on fees. Since the process was automated, management could easily focus on statistics such as which cars were rented the most, which might be having issues or ways to fill inventory gaps.

Process innovation examples include:

• Crowdsourcing: Outsource given tasks and cast a wide call for others to complete them
• Flexible Manufacturing: Set up a manufacturing process that can be easily changed, customized or redirected
• Lean Production: Dramatically eliminate the waste and associated costs through everyday processes
• On-Demand Production: Set up purchasing and fulfillment systems such that products are only produced when ordered

Implementing lean production to systematically eliminate all forms of waste and non-value-add activity from everyday operations, a principle originating in the automotive (manufacturing) sector. Utilizing crowdsourcing to complete tasks or generate content by making a widespread call to an external group, often seen in creative fields. Zipcar offers a prime example; their proprietary, highly streamlined rental process—allowing customers to walk up and unlock a car with a dedicated access card, eliminating counter interactions and paperwork—was the core of their hassle-free, short-term rental service.

Offering Innovations

The Visible Core

This is the category most people associate with the term “innovation.” It involves making significant improvements to the product or service itself. Doblin stresses that relying solely on these two types of innovation creates a temporary advantage, suggesting that they are most powerful when combined with innovations from the other two categories.

Apple has a reputation for innovation, but the product ecosystem highlighted above is an underappreciated piece of the company’s strategy. By putting thought into the ecosystem of products—and ensuring they work together flawlessly—additional utility is created, while also making it harder for customers to switch away from Apple products.

Product Performance

Distinguishing Features and Functionality

Product performance innovation involves enhancing the value, features and overall quality of the goods or services offered. While immediately visible to the customer, purely performance-based advantages can often be quickly matched by capable competitors.

OXO Good Grips Founder Sam Farber saw an opportunity to dramatically increase the ease of use of everyday tools and has built a behemoth brand from it as a result. OXO Good Grips was initially focused on enabling those with relatively minor motor disabilities (e.g., trouble gripping or bending over) to maintain their independence while cooking. From observing his arthritic wife, Farber saw someone whose life could be significantly improved by cooking tools that were easier to grasp and maneuver and more ergonomically designed. Farber priced his Good Grips tools at roughly three times the cost of the existing kitchen devices. This price point was made possible because his tools did take away the pain and discomfort that many experienced. Today, OXO Good Grips has over 850 products available and the brand is synonymous to smart and functional design.

Product performance innovation examples include:

• Added Functionality: Upgrade an existing product with new features or uses
• Conservation: Highlight how a given product conserves environmental resources
• Feature Aggregation: Combine the functions of multiple products into one
• Performance Simplification: Dumb down a product to only its core and most useful function

Added functionality involves simply upgrading an existing product with new features, such as adding a camera or fitness tracker to a phone. Feature aggregation combines the utility of multiple older products into a single, cohesive unit. The development of OXO Good Grips kitchen tools is a classic example of focusing on performance simplification—making everyday utensils dramatically easier to grip and use, particularly for individuals with motor difficulties, thereby commanding a significant price premium based on superior ergonomics.

Product System

Complementary Products and Services

This dimension focuses on how individual products and services connect, bundle or integrate to form a robust, cohesive and scalable system. It creates value by establishing valuable, hard-to-break connections between distinct and disparate offerings, making it difficult for customers to switch to a competitor who offers only a single component.

Scion ingeniously leveraged the concepts of a product system in each of its car sales. As a brand of Toyota, Scion was an effort to capture sales from younger generations that preferred customization and choice in their purchases. Whereas competitors sold new pre-designed vehicles, Scion took the approach of allowing buyers to customize each detail of their new car. Each add-on was part of the greater product system and offered the potential for higher margins. After selecting their “base” type of car from one of five options, drivers could choose from multiple options for everything from the type of lights, special engines, audio, to apps.

Product system innovation examples include:

• Complements: Put forth new products that are related to older products
• Extensions/Plugins: Offer products, often from other manufacturers, that “go with” or “plug in” to a product you sell
• Modular Systems: Design products that are functional separately but increase in functionality when used together
• Product/Service Platforms: Sell products and services that work in conjunction with one another

Designing modular systems where products are functional alone but achieve superior utility when used together. Offering extensions or plugins that enhance the base product’s capabilities. Apple’s famed ecosystem exemplifies this: the seamless interaction between the iPhone, Mac, Apple Watch and AirPods creates additional utility and convenience, effectively locking the customer into the entire platform and making a transition to a different brand costly and inconvenient. The Scion (automotive) brand’s early strategy of extreme customization, offering a vast array of add-on parts and accessories, treated the car as a customizable platform rather than a fixed product.

Experience Innovations

The Customer Interface

These final four types of innovation are the most customer-facing, dealing with how the company interacts with its market. Because these innovations are rolled out and judged directly in the hands of the end-user, their implementation requires intense care and a deep understanding of customer psychology.

In the early days of the internet, online shipping was precarious at best—but Amazon’s introduction of Amazon Prime and free expedited shipping for all members has been a game-changer for e-commerce. Executing on such a promise was no small task, but today there are 150 million users of Prime worldwide, including some in metro areas who can get items in as little as two hours.

Service

Support and Enhancements That Surround Your Offerings

Service innovation centers on making a product easier, more delightful and more reliable to try, use and enjoy. They reveal features and functionality customers might otherwise overlook and they fix problems and smooth rough patches in the customer journey.Innovative service transforms a simple transaction into a memorable, positive experience, fostering deep customer loyalty and positive brand association. Service innovations can be powerful because when a company provides innovative service, it transforms its products from a mere product to an experience. Innovative service makes customers feel a certain way and associate these positive experiences with a given product.

Zappos, acquired in 2009 by Amazon, pioneered innovation in service as an e-commerce company. Zappos had ten core values, the first of which is “Deliver WOW through service”. Key to this value is the fact that management empowered customer service representatives to take extraordinary actions on behalf of customers. These representatives have been known to send shoppers flowers, troubleshoot with customers on the phone for hours to find just the right pair of shoes and actually buy from competitors and put the overnight shipping on Zappos’s tab if a certain product was out of stock. These features not only made Zappos an attractive acquisition for Amazon, but they also enabled Zappos to spin off a consultancy, Zappos Insights, that helps other companies transform their approach to service.

Service innovation examples include:

• Concierge: Offer indirectly related and unexpected services at customer’s request
• Guarantee: Assure that products or services will be refunded if they fail to meet expectations
• Loyalty Programs: Establish a system wherein customers are incentivized to buy even more due to special perks, rewards and points
• Personalized Service: Harness an individual’s specific preferences to provide tailored service

Offering personalized service by using customer preferences to provide tailored support. Implementing strong, risk-reversing guarantees that build immediate trust. Zappos pioneered e-commerce service by giving customer service agents the authority to take extraordinary actions, such as sending flowers or buying a competitor’s product for a customer if their item was out of stock. This extreme focus on “delivering wow” cultivated a fiercely loyal customer base and built their reputation as a service-first retail brand. Hyundai innovated its service during the Great Recession by offering a guarantee that customers who lost their jobs within a year could walk away from their car payments, providing crucial psychological security during a period of economic uncertainty.

Channel

How Your Offerings Are Delivered to Customers and Users

A channel is the method by which customers access and purchase products or services. Channel innovation focuses on developing new and more effective routes to market that boost sales, enhance margins or improve brand visibility and customer convenience. Channel innovations ensure that users can buy what they want, when and how they want it, with minimal friction and cost and maximum delight. A channel innovation can also alleviate wasted time or effort via outsourcing sales through methods such as indirect distribution.

Nespresso’s channel innovations ensured that customers never have to search hard to find the capsules for their pint-sized espresso machines. While Nespresso’s multitude of channels did add some complexity to the business, it allowed customers a variety of buying preferences that ultimately made it more attractive to customers. It has over 270 unique retails stores and coffee shops of its own worldwide, but also runs kiosks within dozens of department stores frequented by older buyers. To appeal to younger, tech-savvy generations who prefers to buy online, Nespresso has an online Nespresso Club that sends automatic email reminders when it’s time to re-order. Lastly, Nespresso finds even more channels via B2B sales to hotels and airlines.

Channel innovation examples include:

• Flagship Store: Invest in heavily branded, experience-rich retail stores where customers can experience your brand fully
• Go Direct: Sell to customers directly online
• Multi-Level Marketing: Utilize a third-party, unaffiliated sales force to sell the products they buy from you in bulk
• Pop-Up Presence: Create temporary, low budget but high impact experiences for customers via these pop-up “shops” with more than a kiosk feel

Investing in high-impact, brand-immersive flagship stores that allow customers to fully experience the brand. Implementing a “go direct” strategy by selling directly to consumers online, bypassing traditional retail intermediaries. Nespresso is a master of channel innovation, creating a multi-pronged approach: they operate their own branded retail boutiques, sell through kiosks in department stores (to reach older buyers) and run an exclusive online Nespresso Club with automatic re-order reminders (to appeal to tech-savvy younger customers), ensuring that customers can purchase their coffee capsules wherever, whenever they prefer.

Brand

Representation of Your Offerings and Business

Brand innovation involves creating a strong strategic differentiator that confers meaning, intent and value to your offerings and the entire enterprise. It can effectively transform a generic commodity into a highly sought-after, prized product i.e, a strategic differentiator.

Traditional groceries rely on the power of individual product brands to drive sales within their stores. Trader Joe’s, however, has famously taken the opposite approach. With its private label Trader Joe’s brand, the store seeks out unique, seasonal and quality products. Customers are more likely to pop in to see what is new or make an out-of-ordinary purchase to try a seasonal item. By sourcing directly from individual suppliers, it locates lesser-known products and often appeals to customers’ fancies for buying local.

Brand innovation examples include:

• Certification: Create a unique designation named after your brand that can be applied to products or services made by others
• Component Branding: Elevate the overall value of new products by using branded components
• Private Label: Establish your brand for goods manufactured by others
• Value Alignment: State and bring into line company values and brand identity

Employing a private label strategy, where the store establishes its own brand for goods manufactured by others. Trader Joe’s famously uses this tactic, curating a selection of unique, high-quality, seasonal products sold under their private label. This approach encourages customers to make exploratory “pop-in” visits, as they can only find these specific, appealing items at Trader Joe’s, cultivating a strong sense of novelty and exclusivity. Value alignment involves openly stating and consistently implementing company values to connect with customers who share those principles, such as the cleaning brand Method’s rigorous avoidance of any ingredient that could pose a safety risk.

Customer Engagement

Distinctive Interactions You Foster

Customer Engagement innovations are all about understanding the deep-seated aspirations of customers and users and using those insights to develop meaningful connections between them and your company. Customer Engagement innovations are occurring more and more digitally, especially via social media. These innovations enhance the overall customer experience and often make a complex task simple, a mundane experience magical or an everyday obligation fulfilling.

Few would claim to enjoy personal financial management and budgeting. Mint.com understood this deeply and transformed the experience of managing one’s own money. For many, checking up on one’s spending, savings or investments is no longer a begrudged responsibility but instead a calming exercise. By making it possible to see the full picture of one’s financial status in one place, Mint.com substantially simplified the challenge of keeping tabs on personal finances. Examples of how Mint.com engages users in new ways with their finances include automatically update information based on recent transactions, automatically tag and categorize purchases and suggestions for ways to save or budget.

Customer engagement innovation examples include:

• Community and Belonging: Create opportunities where your customers can foster connections with one another
• Experience Automation: Remove a repetitive task from a customer’s plate, freeing up their time for more enjoyable activities
• Experience Simplification: Transform a complex experience into something simple, delighting customers
• Mastery: Help customers deepen their skills or knowledge in a given subject through experiences or products you enable

Fostering a community and belonging around the product, exemplified by Harley-Davidson’s cultivation of user communities among diverse motorbike groups. Experience simplification transforms an overly complex experience into something easy and intuitive. Mint.com is a perfect illustration, transforming the generally tedious obligation of personal financial management into a simple, calming exercise by providing a complete, automatically updated and categorized overview of a user’s financial status in a single, easy-to-digest dashboard. This dramatically reduces the friction and complexity inherent in tracking money.

Case Study: General Electric (GE)

General Electric (GE) faced a unique, constant strategic challenge: with revenues exceeding $140 billion, the company had to consistently generate roughly $7 billion in new, high-growth revenue each year just to achieve a modest 5% annual growth target. In essence, GE needed to create a new Fortune 500 scale company every twelve months. Former CEO Jeff Immelt addressed this immense challenge not with a simple product mandate, but with a deliberate, high-level Process Innovation known as the “Imagination Breakthroughs” program.

This program was a systematic, top-down mechanism designed to embed breakthrough thinking into GE’s vast and diverse business units, making innovation a repeatable, structured corporate function rather than a sporadic event. Each of GE’s business units was required to annually present its single best, high-potential new idea—one that promised exponential revenue growth rather than incremental improvement. The program ensured that the very core activity—the process of identifying and funding disruptive ideas—was standardized. Winning ideas received essential, large-scale support and dedicated funding directly from the corporate center, shielding them from the risk-averse internal budgeting pressures of their respective units. This deliberate process innovation effectively forced the organization to think big, dedicating executive attention and capital to projects that otherwise might have been killed due to short-term cost concerns. By making the pursuit of high-risk, high-reward innovations a mandatory and deeply integrated internal process, GE created a powerful, scalable framework for continuous, large-scale corporate renewal.

Case Study: Chipotle

Chipotle has already carved out a significant niche through its commitment to “Food with Integrity”, but competition in the fast-casual space is fierce. By leveraging the structured framework of the Ten Types of Innovation, the company can move beyond its current strong Product Performance (fresh, quality ingredients) and introduce new forms of value that are harder for competitors to replicate.

The proposed combination focuses on:

1. Configuration: Process (Internal Efficiency)
2. Offering: Product System (Ecosystem Expansion)
3. Experience: Customer Engagement (Digital Connection)

Innovation Type	Category	Strategy	Disruption & Outcome
Process	Configuration	Hyper-Efficient Prep Automation	Drastically lower labor costs and ensure ingredient consistency, creating a cost advantage (Profit Model enablement).
Product System	Offering	Home Meal Kits & Branded Ingredients	Extend the brand ecosystem into the customer’s kitchen, driving higher-margin sales and increasing customer lock-in.
Customer Engagement	Experience	Gamified Loyalty & Digital Mastery	Transform the ordering and loyalty experience into an engaging, skill-building activity, deepening emotional connection and purchase frequency.

Configuration Innovation

Hyper-Efficient Process

To win the long game in the Quick Service Restaurant (QSR) sector, cost control and speed are paramount. Chipotle should focus on a Process Innovation centered on Hyper-Efficient Prep Automation to dramatically reduce non-customer-facing labor time and ensure absolute consistency.

• The Strategy (Process): Implement specialized, proprietary automated machinery for repetitive, high-volume tasks that occur before the food is placed on the line (e.g., dicing vegetables, portioning meats, mixing rice). This is not customer-facing automation but rather a sophisticated, back-of-house system that acts as a “signature superior method for doing your work”.
• The Disruption: This innovation directly impacts the Profit Model by lowering labor costs, which are the highest expense in the restaurant industry. It also ensures every store delivers perfectly diced onions and precisely measured chicken, mitigating “stacking variability” and enhancing the quality perception of the final product. This process advantage is inherently difficult for a rival to copy without significant capital investment and organizational change, providing a sustained competitive advantage.

Offering Innovation

Product System Extension

Chipotle’s current offering is the single bowl or burrito. A powerful Product System innovation would move the offering out of the restaurant and into the customer’s home, making the brand a part of the home cooking ritual.

• The Strategy (Product System): Introduce a line of branded Home Meal Kits and Complementary Branded Ingredients that extend the brand’s utility outside of the store. For example, a “Barbacoa for Two” kit with pre-portioned, raw meat, proprietary spice mix and instructions or selling bottles of their signature vinaigrette, as seen in the broader restaurant (retail) space. This creates valuable connections between otherwise distinct offerings.
• The Disruption: This extends the brand’s ecosystem, positioning Chipotle as a food platform rather than just a restaurant. Customers who use the branded ingredients at home become more deeply embedded in the “Chipotle life”, which increases their overall spend and makes them less likely to switch to a competitor for either a quick meal or a home meal solution. The meal kits, being higher-margin than prepared food, boost profitability, while the complementary products further lock in the customer base.

Experience Innovation

Gamified Customer Engagement

To sustain growth, Chipotle must increase the frequency of transactions and deepen customer loyalty beyond simple point accumulation. A sophisticated Customer Engagement innovation can transform the interaction into a rewarding “Mastery” experience.

• The Strategy (Customer Engagement): Revamp the existing loyalty program into a Gamified Digital Mastery system, moving beyond basic points. This could involve helping customers “deepen their skills or knowledge” in burrito building.
  • Tiered Mastery: Customers earn unique badges and status (e.g., “Prep Master”, “Sauce Savant”) by achieving specific ordering behaviors (e.g., ordering an unpopular item like sofritas or correctly timing orders during non-peak hours).
  • Recipe Exchange: Introduce a feature where users can name, save and share their custom orders, fostering a Community and Belonging among users.
• The Disruption: This makes the act of ordering and interacting with Chipotle a unique, fulfilling activity rather than a simple transaction. By creating a community and allowing users to achieve Mastery, Chipotle taps into the “deep-seated aspirations” of customers—in this case, the aspiration to be a savvy, skilled eater or a member of an exclusive club. This enhances the overall experience and leads to higher purchase frequency and stronger emotional loyalty than a typical, easily replicable points program.

Simultaneously executing on Process automation, launching a Product System of meal kits and introducing Gamified Customer Engagement, Chipotle created a complex moat that would be prohibitively expensive and slow for competitors to imitate.