A Glossary of Innovation Terms and Strategies

The terminology used by executives involved in corporate innovation and new ventures can be confusing to newbies — and it’s constantly evolving, often pulling in new language and concepts from the realms of entrepreneurship, academia, and consulting.

Here’s our glossary of terms commonly used by leaders of innovation, R&D, and new product development groups in large companies. We’ve linked to background articles, on Innovation Leader and elsewhere, to provide more detail about many of them.

Are there any terms you think are worthy of inclusion? Post a comment.

Innovation Methodologies and Approaches

• Agile development: A set of methodologies, most notably used in software development, where solutions evolve through iteration and the work of self-organized teams.
• Adjacent innovation: Leveraging something a company or product already does well in a new or innovative way. Less closely tied to the core business than incremental innovation, below.
• Back end: The later stages of a design or development process, when something is closer to production, deployment, or roll-out. (See front end, below.)
• Champion/catalyst network: A group of employees within a company who receive innovation training, and are tasked with promoting the innovation agenda, events, and competitions. Champions or catalysts often train others in innovation methodologies and tools, like design thinking or lean startup; work with customers or business partners to create new products and services; and scout market trends, disruptive startups, or otherwise gather market intelligence.
• Co-creation: A product development approach that brings multiple entities together to come up with solutions or new concepts — often customers, suppliers, startups, or business partners.
• Customer insights: Also known as consumer insights, this is the collection of customer feedback, trends, or observed customer behavior that may guide the design of new offerings or overall corporate strategy.
• Design thinking: Applying design methods and principles — like empathy, observation, and experimentation — to solve problems or develop new offerings.
• Ecosystem: A group of parties that work together to enhance a product, with economic or reputational benefits accruing to all parties. Some parties may build hardware, some write software, some provide services. Online marketplaces and app stores are two examples of ecosystems, as are open source projects like Linux or Drupal, which can have commercial and non-commercial elements.
• Front end: The early stages of an innovation, design, or product development process, when you are soliciting ideas, refining them, building prototypes, and testing them with customers.  (See back end, above.)
• Incremental innovation: Small and simple improvements or tweaks made to a product or strategy. Refers to innovation that is closely tied to the core business, unlike adjacent or transformational innovation.
• Innovation pipeline: A visual metaphor for the progression of ideas through a “pipeline” of development. The pipeline typically begins with many ideas that could address a problem. As ideas are prototyped, tested, and refined, some are winnowed out as others proceed further down the pipeline. Ideally, the highest-potential ideas make it to the final stage of the pipeline, when they are rolled out or implemented.
• Lean Startup: A product development approach that espouses frequent input from customers, and refinements to the product based on what they will actually pay for — not just what they say they like. The lean startup approach includes three phases: build, measure, and learn. It encourages the creation of “minimum viable products” that can be tested in the market quickly, instead of more expensive, polished products.
• MVP, or minimum viable product: The minimum viable product is the simplest form of a product that will satisfy a customer, and ideally lead to a purchase. MVPs are useful to gather input for future development or refinement of the product.
• Open innovation: An approach to seeking ideas, technology, and solutions from outside a company’s walls. May involve posting an open challenge that outsiders can respond to. Sometimes called “external innovation” or “crowdsourcing.” (We spoke with UC/Berkeley professor Henry Chesbrough, who coined the term open innovation, in 2018. A recording of that conversation is here.)
• Rapid prototyping: Strategies and tools used to create a quick model or prototype of a proposed product or concept. Sometimes these can be paper or digital mock-ups, or 3D-printed prototypes.
• R&D: Research and Development
• Scalability: The ability for a product or service to maintain its functionality in times of high-demand or high work-load situations, or after a large-scale commercial roll-out.
• Scrum: A portion the agile development process in which a self-organized, cross-functional team (scrum team) develops a potential solution for a problem. A scrum can consist of multiple “sprints,” or time-limited work sessions focused on a specific piece of a project.
• Transformational innovation: The most long-range type of innovation, which companies often find too risky to invest in. This often involves entering an entirely new market segment, using a new distribution strategy, testing a new business model, etc. Very loosely tied to the core business, unlike incremental or adjacent innovation.
• Vitality Index: A way to measure the output of innovation, product development or R&D initiatives. Originally created by 3M, the Vitality Index is a tally of the percent of total revenues generated by products that have been released in a defined timeframe, often the prior three to five years.

Innovation Models & Approaches

• Disruptive innovation: A term popularized by author and Harvard Business School professor Clayton Christensen, it describes a process by which a product or service starts off by doing simple things, inexpensively, for less sophisticated customers. At this stage, it is ignored by incumbents, who are extracting profits from more demanding, sophisticated, and price-insensitive users. But the new product or service relentlessly moves up-market, eventually “disrupting” established competitors.
• Innovation Life Cycle: Also referred to as the Technology Adoption Life Cycle or the Diffusion of Innovations, this theory attempts to explain how an innovation or product is adopted into society. The cycle was first published in the 1962 book, “Diffusion of Innovations” by Everett Rogers. Groups adopting a product are often referred to as Innovators, Early Adopters, Early/Late Majority, and Laggards. Here is a simplified description of each cycle phase:
  • Innovators: The first to know about, or be involved with developing, an innovation.
  • Early adopters: The people who are always in search of new and innovative products. They are also seen as those who will recommend purchasing a new innovation.
  • Early majority: The next group of people are drawn to an innovation in part because of hype and marketing, and in part because of its usefulness.
  • Late majority: Those who pick up on technology and innovation at the average speed. Usefulness is often a key requirement of tools they are using.
  • Laggards: The last group of people, who only reluctantly begin using an innovation or product.
  • Crossing the Chasm: When a product moves from early adopter suoppport to early majority support.
• Lead user: Developed by MIT professor Eric von Hippel, this term refers to customers who experience a need months or years before others in the market do. (Sometimes, these users develop their own product to fill that need — what von Hippel calls “lead user innovation” — because nothing else exists.) Understanding how lead users behave through observation and interviews can be a fertile source for new product ideas. (See our 2016 interview with von Hippel here.)
• McKinsey’s Three Horizons of Growth: Describes the different time horizons of innovation activity and investment. Companies may mark horizons by years, goals achieved, or other milestones.
  • Horizon 1: The present, when the core business provides plentiful profits and cash flow. The company’s focus is on improving performance and eking out additional market share.
  • Horizon 2: The near future, when emerging opportunities and technologies may start to pose a threat. Preparing for this horizon may require investments that won’t produce an immediate return.
  • Horizon 3: The far future, when today’s small ventures, research projects, pilot programs, or minority stakes in new businesses could create significant new revenue streams.
• Venture studio: Firms that recruit startup CEOs and help them build external new ventures for corporate partners. Sometimes, these firms also invest in the new ventures from their own fund. (See our overview of venture studios and venture builders.)
• Venture builder: Firms that assemble consulting teams to help corporate teams build new internal ventures inside the existing corporation. (See our overview of venture studios and venture builders.)

Types of Labs and Office Environments

• Innovation lab: A place designed to foster brainstorming, collaborative work, prototyping, or interaction with partners and customers. Innovation labs often feature open workspace and office design that is more conducive to collaboration than more traditional environments. (For more on different kinds of innovation labs, see our run-down of the six kinds we see most often.)
• Incubator: Intended to create new products or services, or test new business ideas. Often involves a core group of “intrapreneurs” with marketing, tech, and product development experience. Many of these labs also bring in customers, business partners, or startups to “co-create” or otherwise participate in the process.
• Makerspace: A space set up with prototyping technologies, from 3D printers to drill presses to sewing machines, to be used by employees working on projects related to the business — or simply learning an array of new tools and techniques.
• Showcase lab: A nicely-designed showcase for “cool new stuff” the company has been prototyping or testing, or a place to hold brainstorming meetings or training sessions where “out of the box” thinking is desired and encouraged.
• Skunkworks: Usually away from corporate headquarters, given lots of freedom to experiment, and charged with focusing on long-term (a/k/a Horizon 3) initiatives. Sometimes staffed with talent new to your industry, to bring in fresh perspectives.
• Venture/Ecosystem lab: Intended primarily to source and oversee venture capital investments, or create new connections with the startup ecosystem. This kind of lab can sometimes be called a “corporate accelerator.”

Funding, Events and Contests

• Crowdfunding: When a startup or company seeks pre-orders or donations from customers to test market interest and support the production of an item. The entity running the crowdfunding “campaign” often offers different incentives for different levels of financial support, like discounted pricing, early delivery, or special packages. Two popular crowdfunding platforms are:
  • Kickstarter: Founded in 2009, Kickstarter has collected pre-orders and financial support for products like the Pebble smartwatch, the Formlabs 3-D printer, and board games like Zombicide.
  • Indiegogo: Founded in 2007, initially to support independent filmmakers, Indiegogo works with startups, independent creators, and increasingly large companies like Bose, GE, and Hasbro. (Here are some recent examples of how large companies have used Indiegogo.)

• Hackathon: A time-limited work session often focused on solving a specific problem or addressing an issue, held over the course of a day, weekend, or month. Teams form with members that have different skill-sets. Often, there is a pitch-off or presentation at the end of the hackathon, and prizes are awarded to the best projects that emerge.
• Idea challenge: A company-wide initiative inviting employees from across the company to contribute ideas or concepts, often focused on a particular problem area or issue.

Startups and Corporate Venture Capital

• Angel investor: An individual investor who offers funding, mentoring, introductions, and other help with the eventual goal of a return on investment. Angels usually invest at the earliest, or seed stage, before venture capitalists get involved with a company.
• Corporate venture capital: A group inside a large company that invests money into startups, in exchange for a piece of equity and often a seat on the startup’s board. The hope is that these investments will help the large company understand newly-developing markets and technologies better, and will also deliver a financial return. Some corporate VCs are more focused on financial returns, but most are interested in the strategic benefits, like potentially integrating or distributing a technology from the startup.
• IPO: Initial Public Offering. When a company “goes public” and offers its shares to the public for purchase. Companies must register with the SEC (Securities and Exchange Commission) prior to the event.
• “Killing the Butterfly:” When a startup is acquired by a larger company that squashes the startup’s culture, often resulting in mass employee departures. This can also happen when startups and large companies collaborate on projects.
• ROI: Return on investment
• Seed stage, A round, B round, etc.: Terms used to describe the maturity of a startup based on how much funding it has received. Seed stage is the earliest stage of funding, when money often comes from angel investors, friends and family, or venture capital funds that invest in the seed stage. As the company progresses, it will eventually raise an “A round” of venture capital, then a “B round,” etc.
• Shared workspace / Co-working space: A collaborative office space with common areas and facilities, like a kitchen, conference room, or mailroom, allowing businesses to work and grow without worrying about office management tasks. These are often rented by budget-conscious startups. But increasingly, large companies are situating teams working on new business creation or innovation projects in these shared workspaces, so that they can have distance from the traditional corporate environment, be surrounded by entrepreneurs, or both.
• Startup accelerator: Fixed-term programs that allow a startup to receive mentorship, education, and other services needed to get it to its next stage. The best-known of the accelerator programs are Y Combinator, Techstars, and MassChallenge. Most accelerator programs conclude with an investor pitch event. Some, like the Disney Accelerator or Target Accelerator, are sponsored by a corporation that is interested in attracting startups with a particular industry focus.
• Startup incubator: Physical spaces often run by non-profit organizations, which aim to help entrepreneurs develop a new business. There is often an application process which can be just as selective as an accelerator program.

Innovation Methodologies