Technological Innovation: Definitions, Classifications, and Impact

Posted on Mar 5, 2025 in Business Administration and Innovation Management

Technological Innovation

Introduction

Pressure for Innovation: A company that does not innovate faces strong pressure from competitors that do.

Innovation and Protection of Markets: An innovating company can only survive in protected markets in the medium term. In open markets, innovation is a competitive resource.

Approach to Innovation:

  • From engineering: An analysis of the process that can transform scientific knowledge into successful innovation.
  • Economist: Focuses on the acceptance and success of innovation by consumers.

Complexity of the Innovation Process: Features:

  • Multi-disciplinary nature: Uncertainty associated with the novelty of results.
  • The need for continuous adaptation of the company’s structure to change through innovation.
  • The need for criteria other than financial ones to determine the interests of technological innovation projects in advance.

Definitions

Innovation (Schumpeter): A new combination that arises in the sphere of production, being the key process of economic change, breaking the steady state, energized with the discontinuous and qualitative changes in the economic system.

Classification of Innovation

Innovation rankings according to Schumpeter:

  1. Introduction of a new asset, one that is not familiar to consumers, or a new quality of a good (e.g., the mountain bike).
  2. a) Introducing a new method of production (e.g., when a chemical industry adopts a productive method from another industry).
  3. Opening of a new market (e.g., when Banco Santander expands to Latin America).
  4. Conquest of a new source of procurement of raw materials or semi-finished goods (e.g., using oil instead of natural gas to create electricity).
  5. Creation of a new large organization in any industry.

Classification of Innovation by its Nature or Object

  1. Product Innovations: The product supports a wide range of innovations (external innovation).
  2. Process Innovations: A new method of manufacturing a product (internal innovation).
  3. Manufacturing Innovations: When product innovation and process innovation go together.
  4. Trade Innovations: Changes in any of several marketing variables (new means of sales promotion, new distribution systems…).
  5. Management Innovations: Change occurs in the direction and organization under which the production and trade of the company develop.

For the Degree of Novelty

  1. Radical Innovation: High originality, a new application of technology (e.g., transistor). Highly risky.
  2. Incremental Innovation: Small changes designed to increase functionality and performance of the company. When they happen on a cumulative basis, they can be a permanent base for progress. Learning is the most common form of incremental innovation, and is threefold:
    • Learning through practice (trial and error).
    • Learning by using.

Reverse Engineering: Taking a product already developed and redesigning it, achieving a modified product.

For the Degree of Uncertainty on their Degree of Technological Intensity

  1. Innovation Rupture: As the technology life cycle progresses, when a technology reaches a saturation phase, it is reversed to create a break and placed on a new technology (e.g., laser, fiber optics, photovoltaic, electronic technological breakthrough in the field of information processing).
  2. Innovation of Adaptation: Trying to prolong the life cycle curve of technology, augmenting or regenerating a traditional technology.
  3. Innovation Resurgence: Enabling an obsolete technology to be viable again, thanks to knowledge gained from the new technological system.

For the Degree of Relationship with the Competition

  1. Architectural Innovation: When a new technological concept breaks down and reconstructs the architecture consisting of the production system and relations with the market and users (e.g., Ford – chain manufacturing system).
  2. Market Niche Innovation: Obtaining a new form by combining existing technological elements (e.g., Walkman – a light helmet attached to a tape deck).
  3. Power Innovation: Simply adjusting the product – can be an incremental innovation.
  4. Revolutionary Innovation: Affects product technical data – changes its structure or its parts and even how to make it, but does not change its central feature – no impact on the market or consumers.