Understanding the three types of innovation—and why not all “new ideas” deliver real value

Hopefully your copy of ASHRAE Journal will reach you before you arrive in Las Vegas for ASHRAE’s Winter Conference. If so, I have a challenge for you. I want you to play a game called “C, B or A?”

Innovation can be divided into three distinct types of activity, which are labeled C, B and A. The definition of “innovation” used here is the combination of new ideas with action or implementation that results in an improvement, gain or profit. It is not enough to be creative; the idea must be applied and deliver a measurable benefit.

Type C innovation is sometimes called “line extension.” An example from the refrigeration world would be taking an existing product, such as a four-cylinder compressor, and developing a larger six-cylinder version using many of the same components. This approach builds on what already exists to meet customer demand for increased capacity.

A similar concept can be seen in the automotive industry, where engineers might take the body of a smaller car and integrate components from a larger model—such as a bigger engine, brakes and suspension—to create a high-performance “hot hatch.” This demonstrates how existing designs can be adapted to create something new without starting from scratch.

Type B innovation is known as “changing the basis.” This involves more significant development in response to customer needs. For example, instead of selling just a compressor, customers may want a complete package including a motor, oil separator and control panel, all integrated into a single unit. Delivering this requires new design approaches, manufacturing capabilities and often leads to increased value for both supplier and customer.

Type A innovation represents entirely new business opportunities. These ideas are not always driven by direct customer demand, as the market may not yet exist. Instead, they arise from insight or inspiration. A well-known example often attributed to Henry Ford is the idea that customers might have asked for “faster horses” rather than imagining the car. In refrigeration, this could involve rethinking a compressor as an expander to open up entirely new applications.

If you explore industry exhibitions such as the AHR Expo, many new products can be assessed through this lens—are they Type C, B or A? It may even be necessary to introduce a fourth category for ideas that fail to deliver meaningful improvement, gain or profit, and therefore do not qualify as true innovation.