Innovation matrix

One way to categorise different types of innovation is by using the innovation matrix, which describes the impact of innovation along two dimensions: market and technology (Kylliäinen, 2019). Table 1 shows the basic innovation matrix including the four different types of innovations.

Table 1: Innovation matrix (adapted from: Kylliäinen, 2019).

 Technological innovationTechnological innovation
Low Market impactIncremental: A series of small-scale, gradual improvements to existing products or services to add value or increase efficiency.Radical: The creation of completely new technologies or ideas that can transform industries, change behaviours and create new markets.
High Market impactSustaining: A substantial improvement that enables a product or service to maintain or grow its position in an existing market.Disruptive: Novel business models or technologies that disrupt an existing market or capture a new market.

While incremental innovation can help businesses retain their competitive edge in the short term, radical innovation has a more significant impact in the long term (Hopp et al., 2018). In the context of the net zero transition, incremental or sustaining innovations can enable businesses to boost operational or energy efficiencies and improve existing products and services in existing markets (Scope 1 & 2). However, to accelerate the transition and remain prosperous in the longer term, businesses need to invest in developing new technologies, concepts and business models that drive a fundamental shift in business practices and supply chain structures (Scope 3).

While radical or disruptive innovations typically involve higher levels of risk and upfront costs, they offer businesses the potential of securing new markets, creating superior, low carbon products and developing new value propositions aligned with the net zero economy (Voinea et al., 2021; Campbellsville University, 2017).

Explore further:

Learn more about disruptive innovation and how it dominates incumbents and creates new markets from Harvard Business Review.

Disruptive, Sustaining, and Efficiency innovations