3) You are producing a commodity. You should stop trying to convince yourself otherwise, and embrace whatever it is that you do better than your competitors. And then prune away all the nonsense that prevents you from improving it daily.
Yes, in the meanest sense of the definition, innovation may be part of your processes because you can claim a newness to what you're doing. Yet that is likely a dubious claim. Whatever is new in your business, is only a factor of difference from what your competitors are doing. Such a factor is likely to be a few percentage points on a scale, and certainly not a significant one.
It's not significant because you've studied your competitors, benchmarked against the leader in your category, carefully considered the industry best practices, and convinced yourself that you're creating processes for successful innovation. When you do all of these things, you assure yourself of creating a commodity. Just as you do when you spend precious resources on studying your clients/customers/buyers via focus groups.
If you are truly innovative, however, congratulations on creating something truly unique. Now, prepare yourself for your competitors to catch you.