Innovation definitions?

This short article analyzes what innovation is. Like many things, it has a different meaning to different people, companies, and markets. In fact, the following example definitions demonstrate how difficult it is to describe innovation. So what is innovation?

Innovation was defined by Joseph Schumpeter, the Austrian economist as:

1. The introduction of a good (product), which is new to consumers, or one of higher quality than was available in the past;

2. Production methods, which are new to a particular branch of industry. These are not necessarily based on new scientific discoveries and may, for example, already have been used in other industrial sectors;

3. The opening of new markets;

4. The use of new sources of supply;

5. New forms of competition, which lead to the restructuring of an industry.

(Schumpeter (1934) ‘The Theory of Economic Development’ Harvard University Press, Boston)

There are other definitions, the UK Department of Innovation (part of the then Department of Trade and Industry) defines it as the ‘successful exploitation of new ideas’, Richard Branson at a DTI conference in 1998 defined ‘an innovative business is one that lives and breathe ‘outside the box’. It’s not just good ideas, it’s a combination of good ideas, motivated staff and an instinctive understanding of what the customer wants.”

Moving away from theory, from a business perspective, innovation has to do with the commercial exploitation of new ideas. These new ideas could be a new and revised product or service or an extension to an existing range (think of the changes to Apple’s iPod as a good example of this). Successful innovation could be about the production process of the good or service itself. Examples of this include improved operations or an optimized supply chain. Innovation could have to do with positioning. An example of this is the low-cost airline industry or online customization of products (once again, Apple and its online store have the ability to customize your new Apple iMac or MacBook Pro!). More difficult to define, and indeed develop, innovation could be through a new paradigm. This is defined as ‘how we frame what we do’. Examples include new platforms, like IBM reinventing itself as a consulting business, or iTunes.

Innovation can be further divided into incremental, radical and discontinuous. By far the most common is incremental innovation, which is simply doing something better. Radical innovation, which is a bit more elusive, is doing something different. The most difficult and potentially threatening is discontinuous innovation. This tends to result in significant change, often through the emergence of entirely new and unpredictable markets or as a result of a new technological advance. The introduction of a new business model, such as Amazon, is an example of discontinuous innovation. An example of radical innovation could be the introduction of digital cameras.

Innovation is essential for the growth of an organization. Innovation is all around us, and it doesn’t have to be the headline-grabbing innovation breakthrough of dreams. Most innovation is small and incremental in nature. Are you or your organization innovative? Do you or your organization understand what innovation is?