11. August 2026

The Three Types of Innovation

7 min read

There are three types of innovation I work with in companies: sustaining innovation, efficiency innovation and market-creating innovation. Sustaining innovation improves existing products for customers who already buy them. Efficiency innovation does the same with less effort. Market-creating innovation takes something that used to be expensive or complicated and makes it accessible to people who could not use it before – and in doing so creates a new market.

There are plenty of opinions and definitions of innovation, and for academically minded people arguing about them is certainly a worthwhile pursuit. From a business – that is, a practical – point of view, these three types are all I need. Clayton Christensen worked with exactly these three in his last book, The Prosperity Paradox. What matters most is this: each type does something different. Only once you know the differences can you use them strategically for your company’s goals.

Sustaining innovation

Sustaining innovations are improvements to existing products and services within existing markets. They are aimed at people who already have access to the market – usually that simply means enough money – and who want better performance from something they already know.

One example is the succession of model updates in the car industry, from the Golf 1 to the Golf 8 (the latest model when the podcast was recorded), including the Jetta, GTI, Golf Country and also the ID.3 and ID.4. These are all sustaining innovations. They open up further segments of a market that already exists and, through continuous product development, keep motivating customers to buy again.

Efficiency innovation

As the name suggests, efficiency innovations enable a company to achieve more with fewer resources. The product and the market stay the same; nothing changes there. It is simply about doing what you do better, faster or more cheaply. These are often process innovations in production, but innovations in marketing and sales count too. In every industry they are a core management task, mostly for higher profitability, but also for stronger customer loyalty.

A pretty striking example is oil and gas production in the United States: in 1980 around 220,000 people worked in it, producing 8.6 million barrels a day; by 2017 it was around 146,000 people producing 9.3 million barrels a day (production: EIA, employment: US Bureau of Labor Statistics).

Market-creating innovation

Market-creating innovations do exactly what their name says: they create new markets. Either a solution emerges that did not exist before, or a previously complicated or expensive solution becomes affordable and usable for a great many people. You could also say they democratise what used to be exclusive.

Christensen’s starting point is what he calls non-consumption. People have a need but do not use any solution, because they lack one of four things: the skill, the money, the access or the time. Wherever that is the case, there is a lot of potential.

Henry Ford invented neither the car nor the assembly line. But he managed to offer a car for under 1,000 dollars, putting it within reach of more or less everyone. The result was mass adoption and a whole world of new business models around it: lenders, petrol stations, garages, road building. For me, one example we can watch unfolding right now is Bitcoin, which allows millions of people without a bank account to take part in international trade for the first time.

Exploit and explore

In the JTBD Innovation Framework, the three types sit alongside two fields of innovation: exploit and explore. Exploit means making the existing business better. Explore means looking for something new where it is not yet clear whether it will work.

All three types of innovation occur in both fields. It is tempting to assign sustaining and efficiency innovation to exploit and market-creating innovation to explore. I think that is dangerous, though, because the two fields influence each other. In some cases, market-creating innovation draws on insights from exploiting the existing business and then leads into exploring. And exploring follows its own sequence: first a problem has to be explored, then a product has to be created or found for it, and then a business model.

Alexander Osterwalder and his co-authors describe the same three types in The Invincible Company (2020), explicitly borrowed from Christensen, and place them on an axis between explore and exploit: efficiency at one end, transformative innovation at the other, sustaining in between. Yet there too, all three types are about exploring opportunities, just with different levels of risk.

What mainly sets the two fields apart is how you manage them. When exploring, uncertainty is high. You work in fast experiments, expect failure and fund it like a venture capitalist: many small bets, a few big winners. When exploiting, uncertainty is low; you plan, execute step by step and expect steady returns. Manage both by the same rules and metrics, and you will stifle exploration.

What this has to do with Jobs to be Done

For all three types it is essential to know and understand the jobs of the people involved. For sustaining and market-creating innovation, and for efficiency innovations in marketing and sales, that means you need to know your customers’ jobs out there in the market. When it comes to process innovation – how you make your products or run your marketing – you also need to understand the jobs of your employees.

The Wheel of Progress, which I developed together with Eckhart Böhme in 2019, is built for exactly this: capturing the jobs and the potential across all three types of innovation in a structured way, documenting them and making them actionable – all in a single pass.

Why you need to tell the three apart

Every company needs to be active in all three types of innovation to survive in the long run – whatever the industry and whatever the size. You do not have to do everything at once, or a lot of everything. But you do need to know where your blind spots are and where you need to act, so that you use the resources you have on the right things. Which order is right for your company cannot be answered in general terms from behind a microphone; for that, someone needs to look at your business model.

In business, innovation is never an end in itself. If you cannot tell these three types apart, then in my view innovation and success are a high-stakes gamble.

The podcast episode (in German)

In this JTBD podcast shot I explain the three types of innovation in just under eleven minutes. Listen to Innovate+Upgrade season 2, episode 045 here:

Chapter timestamps for this episode:

00:00:00 Intro
00:01:06 Gambling disclaimer!
00:02:03 Three types of innovation
00:03:01 Sustaining innovations
00:04:15 Efficiency innovations
00:05:41 Market-creating innovations
00:07:36 Where JTBD and the Wheel of Progress help
00:10:33 Get out

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Frequently asked questions

Isn’t disruptive innovation missing?

No. I find the term too ambiguous; these days it is used for almost anything new. With his theory of disruptive innovation, Christensen actually describes something quite specific: how a company with fewer resources challenges established players by offering simpler, more affordable solutions to overlooked customers. For practical business work, I therefore use the three types from The Prosperity Paradox.

What is the difference between sustaining and efficiency innovation?

Sustaining innovation makes the product better for the customer. Efficiency innovation makes producing, marketing or selling the same product cheaper or faster.

How do I recognise market-creating innovation?

By the fact that people gain access to a solution for the first time – a solution they could not use before for lack of skill, money, access or time. A better product for people who already buy is sustaining innovation, even if it looks new.