Considered a key source of competitiveness for businesses, innovation is a complex concept which can be applied to a number of different fields and take on various forms. Here’s an overview of some of the main aspects of innovation.
The definition of innovation
The definitive definition of innovation is given by the OECD in the Oslo_Manual, also known as the "The Measurement of Scientific and Technological Activities, Proposed Guidelines for Collecting and Interpreting Technological Innovation Data".
It defines innovation as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.” According to this definition, there are four main types of innovation:
- A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements to technical specifications, components and materials, user friendliness or other functional characteristics. The commonest examples of this are an MP3 player, (based on a combination of existing technologies), GPS for a car (result of the integration of innovations in other sectors), and breathable fabrics (changing materials and adapting them to new uses).
- Process innovation: the implementation of new or significantly improved production or delivery methods, e.g. product tracking via barcode or RFID.
- Marketing innovation: this is aimed at making significant changes in product design and packaging, product placement, product promotion or pricing. e.g.: e-commerce, loyalty programmes, special brand corners in a department store, etc.
- Organisational Innovation: the implementation of a new organisational method in a firm’s business practices (e. g. cross-disciplinary processes, collaboration, new production processes) or external relations. Examples include automating processes, collaboration with external experts, mergers/acquisition, etc.
How does invention differ from innovation?
While both terms reflect the idea of novelty, innovation, as opposed to invention or discovery, has an actual application or commercial use in mind. Invention, on the other hand, is a new idea that doesn’t necessarily result in a marketable idea for the end-user (for example, Leonardo da Vinci’s original sketch of a helicopter, pictured here).
Innovation: some basic concepts
Incremental or cumulative innovation: this is a small, gradual improvement to a product, service or process.
Breakthrough innovation: a drastic, radical change to a product, service or marketing system, brought about by new technologies (although not exclusively), or the emergence of new players in a traditional ecosystem, and involving new usages.
Closed and open innovation: these concepts refer to two paradigms for innovation within companies. The terms open and closed innovation were coined by Henry Chesbrough, a professor at the University of California, Berkeley (see the graph below) and defined in his 2003 book “Open Innovation: the new imperative for creating and profiting from technology’’:
- Closed innovation is based on the idea that innovation requires control and ownership of the intellectual property, and therefore all R&D must be internal.
- Open innovation, on the other hand, is based on the sharing of expertise and knowledge, collaboration between different internal and external resources (research centres and corporations, corporations and start-ups, corporations and suppliers, clients, etc).
Cross-disciplinary innovation is linked to new management methods and organisation 2.0. It refers to organisational innovation and aims to break down the barriers between R&D, IT, marketing and production and encourage cross-disciplinary exchanges and ideas by creating a community of employees who communicate via collaboration and social networks.
Learn more about innovation
The Wikipedia page on Innovation gives a detailed description of innovation.