This is a model
that says there are two methods, or dimensions, of innovation. These consist of a horizontal dimension and a vertical dimension.
Horizontal innovation involves deconstructing old systems and recombining them to form a new system. Essentially it is what happens when you find a new use for something old, or put two things together in a novel way. Most innovation is this type of innovation. These innovations have an immediate practical purpose. One example of this type of innovation is cellular phones, which are essentially a telephone mixed with a radio. This is a "bottom up" approach, working from concretes to abstractions.
Horizontal innovation: X = Y + Z
Vertical innovation involves having a completely new idea or model, then reorganizing lower elements until they fit the model or design. It is a kind of "reverse engineering" except we're creating the groundwork as we go along. In this sense, it is a "top down" approach to innovation, and it deals more with structure than content, working from abstractions to concretes. It is this type of innovation that generally has more societal influence. The first airplanes are examples of this type of innovation.
Vertical innovation is often the result of thought experiments, new classes of generalizations and out of the ordinary thought loops.
Vertical innovation: X gives rise to Y + Z