We will pick up from the previous show's topic, “What is Innovation?” and talk about innovation types. There are three types that I use. These are institutional innovation, social innovation, and technological innovation.
Type of Innovation: Institutional
Institutional innovation is the type that is most commonly overlooked by organizations. Institutional innovation applies to organizations, teams, companies, industries, and governments. This type can have several applications to different industries and co-innovation opportunities within those industries.
Based on how an institution operates and covers things (like policies, procedures, structures etc.), institutional innovation tends to get overlooked because it encompasses day-to-day things that we usually take for granted.
Improving institutional innovation can have a significant impact on an organization. There are a few different ways to do it when it comes to funding institutional/organizational innovation. Firstly, you can do it through entrepreneurship, consisting of going out and finding investors or customers to provide funding. Another way is to be an intrapreneur, coming up with ideas and securing funding from your organization. These are the two funding models within institutional innovation that have the potential to make a significant impact.
Driven by social priorities, social innovation has a positive social impact. Employment, quality of life, equality, or environmental efforts like providing clean water, are only some of the many goals. It is the innovator's passion that often drives these social innovations.
Funding can come from social impact investments. These investments don't seek a return on their investments. Instead, they seek to further a cause wherein they share a similar passion. Finding those who are passionate about the same thing is an effective way to fund this type of innovation.
Another way to fund is through angel investors who want a smaller return than usual due to their passion for the cause. Grants from government agencies, philanthropists, World Bank, etc., can also be a great way to fund social innovations. When working with social innovation, you have to be creative with fundraising efforts to achieve your financial goals.
The most commonly thought of the type of innovation is technological innovation. It comes in the form of new technology such as phones, tablets, software, etc. This type can also be in the form of scientific know-how, pharmaceuticals, manufacturing processes, etc.
In many cases, technological innovation comes from a unique combination of background or expertise that creates something new. The technology doesn't have to be invented from the ground up but requires the dots to be connected.
The funding opportunities for technological innovation are many. First, there are angel investors such as friends and family that invest in you. Next, there are venture capitalists that invest in companies as a profession. These two types of investors fall into the equity category, as you sell a percentage of your company to them to receive their investment.
Another option is corporate venture capitalists, which invest in areas of interest that could impact their corporate entities. There is also customer funding, where a customer interested in buying the product invests early on in it. I made many investments like this while I was at HP and got priority access to a lot of products. Lastly, there are grants such as Small Business Innovation Research (SBIR) grants from the government.
When it comes to ideas, it can be hard to make them sound interesting to investors. There are three elements I teach to those wanting to pitch their ideas. Firstly, there is the “what,” which should be a description of the idea. The next element is the “who,” or who the innovation is for, and who the innovation impacts. There can be multiple “whos” when it comes to ideas. It could be a customer, a government, etc. The third area is “why,” or why the investor should care about your idea. I get pitched hundreds of times a month with new ideas. The one area that most innovators do not think about is the “why.” You need to think about all three of these elements to pitch ideas and gain funding.
To know more about institutional, social, and technological innovation, listen to this week's show: 3 Types of Innovation – Institutional – Social – Technological.