Definition of the word innovation

Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services.^[1] ISO TC 279 in the standard ISO 56000:2020 ^[2] defines innovation as «a new or changed entity realizing or redistributing value». Others have different definitions; a common element in the definitions is a focus on newness, improvement, and spread of ideas or technologies.

Innovation often takes place through the development of more-effective products, processes, services, technologies, art works^[3]
or business models that innovators make available to markets, governments and society. Innovation is related to, but not the same as, invention:^[4] innovation is more apt to involve the practical implementation of an invention (i.e. new / improved ability) to make a meaningful impact in a market or society,^[5] and not all innovations require a new invention.^[6]

Technical innovation often manifests itself via the engineering process when the problem being solved is of a technical or scientific nature. The opposite of innovation is exnovation.

DefinitionEdit

Surveys of the literature on innovation have found a variety of definitions. In 2009, Baregheh et al. found around 60 definitions in different scientific papers, while a 2014 survey found over 40.^[7] Based on their survey, Baragheh et al. attempted to define a multidisciplinary definition and arrived at the following definition:

«Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace»^[8]

In an industrial survey of how the software industry defined innovation, the following definition given by Crossan and Apaydin was considered to be the most complete, which builds on the Organisation for Economic Co-operation and Development (OECD) manual’s definition:^[7]

Innovation is production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and the establishment of new management systems. It is both a process and an outcome.

American sociologist Everett Rogers, defined it as follows:

«An idea, practice, or object that is perceived as new by an individual or other unit of adoption»^[9]

According to Alan Altshuler and Robert D. Behn, innovation includes original invention and creative use and defines innovation as a generation, admission and realization of new ideas, products, services and processes.^[10]

Two main dimensions of innovation are degree of novelty (i.e. whether an innovation is new to the firm, new to the market, new to the industry, or new to the world) and kind of innovation (i.e. whether it is process or product-service system innovation).^[7] In organizational scholarship, researchers have also distinguished innovation to be separate from creativity, by providing an updated definition of these two related constructs:

Workplace creativity concerns the cognitive and behavioral processes applied when attempting to generate novel ideas. Workplace innovation concerns the processes applied when attempting to implement new ideas. Specifically, innovation involves some combination of problem/opportunity identification, the introduction, adoption or modification of new ideas germane to organizational needs, the promotion of these ideas, and the practical implementation of these ideas.^[11]

Peter Drucker wrote:

Innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual in the family kitchen. It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.^[12]

Creativity and innovationEdit

In general, innovation is distinguished from creativity by its emphasis on the implementation of creative ideas in an economic setting. Amabile and Pratt in 2016, drawing on the literature, distinguish between creativity («the production of novel and useful ideas by an individual or small group of individuals working together») and innovation («the successful implementation of creative ideas within an organization»).^[13]

TypesEdit

Several frameworks have been proposed for defining types of innovation.^[14][15]

Sustaining vs disruptive innovationEdit

One framework proposed by Clayton Christensen draws a distinction between sustaining and disruptive innovations.^[16] Sustaining innovation is the improvement of a product or service based on the known needs of current customers (e.g. faster microprocessors, flat screen televisions). Disruptive innovation in contrast refers to a process by which a new product or service creates a new market (e.g. transistor radio, free crowdsourced encyclopedia, etc.), eventually displacing established competitors.^[17][18] According to Christensen, disruptive innovations are critical to long-term success in business.^[19]

Disruptive innovation is often enabled by disruptive technology. Marco Iansiti and Karim R. Lakhani define foundational technology as having the potential to create new foundations for global technology systems over the longer term. Foundational technology tends to transform business operating models as entirely new business models emerge over many years, with gradual and steady adoption of the innovation leading to waves of technological and institutional change that gain momentum more slowly.^{[20][additional citation(s) needed]} The advent of the packet-switched communication protocol TCP/IP—originally introduced in 1972 to support a single use case for United States Department of Defense electronic communication (email), and which gained widespread adoption only in the mid-1990s with the advent of the World Wide Web—is a foundational technology.^[20]

Four types innovation modelEdit

Another framework was suggested by Henderson and Clark. They divide innovation into four types;

• Radical innovation: «establishes a new dominant design and, hence, a new set of core design concepts embodied in components that are linked together in a new architecture.» (p. 11)^[21]
• Incremental innovation: «refines and extends an established design. Improvement occurs in individual components, but the underlying core design concepts, and the links between them, remain the same.» (p. 11)^[21]
• Architectural innovation: «innovation that changes only the relationships between them [the core design concepts]» (p. 12)^[21]
• Modular Innovation: «innovation that changes only the core design concepts of a technology» (p. 12)^[21]

While Henderson and Clark as well as Christensen talk about technical innovation there are other kinds of innovation as well, such as service innovation and organizational innovation.

Non-economic innovationEdit

The classical definition of innovation being limited to the primary goal of generating profit for a firm, has led others to define other types of innovation such as: social innovation, sustainable innovation (or green innovation), and responsible innovation.^[22][23]

HistoryEdit

The word «innovation» once had a quite different meaning. The first full-length discussion about innovation is the account^[which?] by the Greek philosopher and historian Xenophon (430–355 BCE). He viewed the concept as multifaceted and connected it to political action. The word for innovation that he uses, ‘kainotomia’, had previously occurred in two plays by Aristophanes (c. 446 – c.  386 BCE). Plato (died c.  348 BCE) discussed innovation in his Laws dialogue and was not very fond of the concept. He was skeptical to it both in culture (dancing and art) and in education (he did not believe in introducing new games and toys to the kids).^[24] Aristotle (384–322 BCE) did not like organizational innovations: he believed that all possible forms of organization had been discovered.^[25]

Before the 4th century in Rome, the words novitas and res nova / nova res were used with either negative or positive judgment on the innovator. This concept meant «renewing» and was incorporated into the new Latin verb word innovo («I renew» or «I restore») in the centuries that followed. The Vulgate version of the Bible (late 4th century CE) used the word in spiritual as well as political contexts. It also appeared in poetry, mainly with spiritual connotations, but was also connected to political, material and cultural aspects.^[24]

Machiavelli’s The Prince (1513), discusses innovation in a political setting. Machiavelli portrays it as a strategy a Prince may employ in order to cope with a constantly changing world as well as the corruption within it. Here innovation is described as introducing change in government (new laws and institutions); Machiavelli’s later book The Discourses (1528) characterises innovation as imitation, as a return to the original that has been corrupted by people and by time.^{[citation needed]} Thus for Machiavelli innovation came with positive connotations. This is however an exception in the usage of the concept of innovation from the 16th century and onward. No innovator from the renaissance until the late 19th century ever thought of applying the word innovator upon themselves, it was a word used to attack enemies.^[24]

From the 1400s^{[citation needed]} through the 1600s, the concept of innovation was pejorative – the term was an early-modern synonym for «rebellion», «revolt» and «heresy».^{[26][27][28][29][30]} In the 1800s^[timeframe?] people promoting capitalism saw socialism as an innovation and spent a lot of energy working against it. For instance, Goldwin Smith (1823-1910) saw the spread of social innovations as an attack on money and banks. These social innovations were socialism, communism, nationalization, cooperative associations.^[24]

In the 20th century the concept of innovation did not become popular until after the Second World War of 1939-1945. This is the point in time when people started to talk about technological product innovation and tie it to the idea of economic growth and competitive advantage.^[31] Joseph Schumpeter (1883–1950) is often^[quantify] credited as the one who made the term popular — he contributed greatly to the study of innovation economics,

In business and in economics, innovation can provide a catalyst for growth in an enterprise or even in an industry. With rapid advances in transportation and communications over the past few decades, the old concepts of factor endowments and comparative advantage which focused on an area’s unique inputs are outmoded in today’s global economy.^{[citation needed]} Schumpeter argued that industries must incessantly revolutionize the economic structure from within, that is: innovate with better or more effective processes and products, as well as with market distribution (such as the transition from the craft shop to factory). He famously asserted that «creative destruction is the essential fact about capitalism».^[32] Entrepreneurs continuously search for better ways to satisfy their consumer base with improved quality, durability, service and price — searches which may come to fruition in innovation with advanced technologies and organizational strategies.^[33]

A prime example of innovation involved the boom of Silicon Valley start-ups out of the Stanford Industrial Park. In 1957, dissatisfied employees of Shockley Semiconductor, the company of Nobel laureate and co-inventor of the transistor William Shockley, left to form an independent firm, Fairchild Semiconductor. After several years, Fairchild developed into a formidable presence in the sector.^[which?] Eventually, these founders left to start their own companies based on their own unique ideas, and then leading employees started their own firms. Over the next 20 years this process resulted in the momentous startup-company explosion of information-technology firms.^{[citation needed]} Silicon Valley began as 65 new enterprises born out of Shockley’s eight former employees.^[34]

Another example involves business incubators – a phenomenon introduced in 1959 and subsequently nurtured by governments around the world. Such «incubators», located close to knowledge clusters (mostly research-based) like universities or other government excellence centres – aim primarily to channel generated knowledge to applied innovation outcomes in order to stimulate regional or national economic growth.^[35]

In the 21st century the Islamic State (IS) movement, while decrying religious innovations, has innovated in military tactics, recruitment, ideology and geopolitical activity.^[36][37]

Process of innovationEdit

An early model included only three phases of innovation. According to Utterback (1971), these phases were: 1) idea generation, 2) problem solving, and 3) implementation.^[38] By the time one completed phase 2, one had an invention, but until one got it to the point of having an economic impact, one didn’t have an innovation. Diffusion wasn’t considered a phase of innovation. Focus at this point in time was on manufacturing.

All organizations can innovate, including for example hospitals, universities, and local governments.^[39] The organization requires a proper structure in order to retain competitive advantage. Organizations can also improve profits and performance by providing work groups opportunities and resources to innovate, in addition to employee’s core job tasks.^[40] Executives and managers have been advised to break away from traditional ways of thinking and use change to their advantage.^[41] The world of work is changing with the increased use of technology and companies are becoming increasingly competitive. Companies will have to downsize or reengineer their operations to remain competitive. This will affect employment as businesses will be forced to reduce the number of people employed while accomplishing the same amount of work if not more.^[42]

For instance, former Mayor Martin O’Malley pushed the City of Baltimore to use CitiStat, a performance-measurement data and management system that allows city officials to maintain statistics on several areas from crime trends to the conditions of potholes. This system aided in better evaluation of policies and procedures with accountability and efficiency in terms of time and money. In its first year, CitiStat saved the city $13.2 million.^[43] Even mass transit systems have innovated with hybrid bus fleets to real-time tracking at bus stands. In addition, the growing use of mobile data terminals in vehicles, that serve as communication hubs between vehicles and a control center, automatically send data on location, passenger counts, engine performance, mileage and other information. This tool helps to deliver and manage transportation systems.^[44]

Still other innovative strategies include hospitals digitizing medical information in electronic medical records. For example, the U.S. Department of Housing and Urban Development’s HOPE VI initiatives turned severely distressed public housing in urban areas into revitalized, mixed-income environments; the Harlem Children’s Zone used a community-based approach to educate local area children; and the Environmental Protection Agency’s brownfield grants facilitates turning over brownfields for environmental protection, green spaces, community and commercial development.

Sources of innovationEdit

Innovation may occur due to effort from a range of different agents, by chance, or as a result of a major system failure. According to Peter F. Drucker, the general sources of innovations are changes in industry structure, in market structure, in local and global demographics, in human perception, in the amount of available scientific knowledge, etc.^[12]

Original model of three phases of the process of Technological Change

In the simplest linear model of innovation the traditionally recognized source is manufacturer innovation. This is where an agent (person or business) innovates in order to sell the innovation. Specifically, R&D measurement is the commonly used input for innovation, in particular in the business sector, named Business Expenditure on R&D (BERD) that grew over the years on the expenses of the declining R&D invested by the public sector.^[45]

Another source of innovation, only now becoming widely recognized, is end-user innovation. This is where an agent (person or company) develops an innovation for their own (personal or in-house) use because existing products do not meet their needs. MIT economist Eric von Hippel has identified end-user innovation as, by far, the most important and critical in his classic book on the subject, «The Sources of Innovation».^[46]

The robotics engineer Joseph F. Engelberger asserts that innovations require only three things:

1. a recognized need
2. competent people with relevant technology
3. financial support^[47]

The Kline chain-linked model of innovation^[48] places emphasis on potential market needs as drivers of the innovation process, and describes the complex and often iterative feedback loops between marketing, design, manufacturing, and R&D.

Facilitating innovationEdit

Innovation by businesses is achieved in many ways, with much attention now given to formal research and development (R&D) for «breakthrough innovations». R&D help spur on patents and other scientific innovations that leads to productive growth in such areas as industry, medicine, engineering, and government.^[49] Yet, innovations can be developed by less formal on-the-job modifications of practice, through exchange and combination of professional experience and by many other routes. Investigation of relationship between the concepts of innovation and technology transfer revealed overlap.^[50] The more radical and revolutionary innovations tend to emerge from R&D, while more incremental innovations may emerge from practice – but there are many exceptions to each of these trends.

Information technology and changing business processes and management style can produce a work climate favorable to innovation.^[51] For example, the software tool company Atlassian conducts quarterly «ShipIt Days» in which employees may work on anything related to the company’s products.^[52] Google employees work on self-directed projects for 20% of their time (known as Innovation Time Off). Both companies cite these bottom-up processes as major sources for new products and features.

An important innovation factor includes customers buying products or using services. As a result, organizations may incorporate users in focus groups (user centered approach), work closely with so-called lead users (lead user approach), or users might adapt their products themselves. The lead user method focuses on idea generation based on leading users to develop breakthrough innovations. U-STIR, a project to innovate Europe’s surface transportation system, employs such workshops.^[53] Regarding this user innovation, a great deal of innovation is done by those actually implementing and using technologies and products as part of their normal activities. Sometimes user-innovators may become entrepreneurs, selling their product, they may choose to trade their innovation in exchange for other innovations, or they may be adopted by their suppliers. Nowadays, they may also choose to freely reveal their innovations, using methods like open source. In such networks of innovation the users or communities of users can further develop technologies and reinvent their social meaning.^[54][55]

One technique for innovating a solution to an identified problem is to actually attempt an experiment with many possible solutions.^[56] This technique was famously used by Thomas Edison’s laboratory to find a version of the incandescent light bulb economically viable for home use, which involved searching through thousands of possible filament designs before settling on carbonized bamboo.

This technique is sometimes used in pharmaceutical drug discovery. Thousands of chemical compounds are subjected to high-throughput screening to see if they have any activity against a target molecule which has been identified as biologically significant to a disease. Promising compounds can then be studied; modified to improve efficacy and reduce side effects, evaluated for cost of manufacture; and if successful turned into treatments.

The related technique of A/B testing is often used to help optimize the design of web sites and mobile apps. This is used by major sites such as amazon.com, Facebook, Google, and Netflix.^[57] Procter & Gamble uses computer-simulated products and online user panels to conduct larger numbers of experiments to guide the design, packaging, and shelf placement of consumer products.^[58] Capital One uses this technique to drive credit card marketing offers.^[57]

Goals and failuresEdit

Programs of organizational innovation are typically tightly linked to organizational goals and growth objectives, to the business plan, and to market competitive positioning. Davila et al. (2006) note, «Companies cannot grow through cost reduction and reengineering alone… Innovation is the key element in providing aggressive top-line growth, and for increasing bottom-line results».^[59]

One survey across a large number of manufacturing and services organizations found that systematic programs of organizational innovation are most frequently driven by: improved quality, creation of new markets, extension of the product range, reduced labor costs, improved production processes, reduced materials cost, reduced environmental damage, replacement of products/services, reduced energy consumption, and conformance to regulations.^[59]

Different goals are appropriate for different products, processes, and services. According to Andrea Vaona and Mario Pianta, some example goals of innovation could stem from two different types of technological strategies: technological competitiveness and active price competitiveness. Technological competitiveness may have a tendency to be pursued by smaller firms and can be characterized as «efforts for market-oriented innovation, such as a strategy of market expansion and patenting activity.»^[60] On the other hand, active price competitiveness is geared toward process innovations that lead to efficiency and flexibility, which tend to be pursued by large, established firms as they seek to expand their market foothold.^[60] Whether innovation goals are successfully achieved or otherwise depends greatly on the environment prevailing in the organization.^[61]

Failure of organizational innovation programs has been widely researched and the causes vary considerably. Some causes are external to the organization and outside its influence of control. Others are internal and ultimately within the control of the organization. Internal causes of failure can be divided into causes associated with the cultural infrastructure and causes associated with the innovation process itself. David O’Sullivan wrote that causes of failure within the innovation process in most organizations can be distilled into five types: poor goal definition, poor alignment of actions to goals, poor participation in teams, poor monitoring of results, and poor communication and access to information.^[62]

DiffusionEdit

Diffusion of innovation research was first started in 1903 by seminal researcher Gabriel Tarde, who first plotted the S-shaped diffusion curve. Tarde defined the innovation-decision process as a series of steps that include:^[63]

1. knowledge
2. forming an attitude
3. a decision to adopt or reject
4. implementation and use
5. confirmation of the decision

Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. This process has been proposed that the lifecycle of innovations can be described using the ‘s-curve’ or diffusion curve. The s-curve maps growth of revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point, customers begin to demand and the product growth increases more rapidly. New incremental innovations or changes to the product allow growth to continue. Towards the end of its lifecycle, growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.

The s-curve derives from an assumption that new products are likely to have «product life» – i.e., a start-up phase, a rapid increase in revenue and eventual decline. In fact, the great majority of innovations never get off the bottom of the curve, and never produce normal returns.

Innovative companies will typically be working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an emerging technology that currently yields lower growth but will eventually overtake current technology and lead to even greater levels of growth. The length of life will depend on many factors.^[64]

MeasuresEdit

Measuring innovation is inherently difficult as it implies commensurability so that comparisons can be made in quantitative terms. Innovation, however, is by definition novelty. Comparisons are thus often meaningless across products or service.^[65] Nevertheless, Edison et al.^[66] in their review of literature on innovation management found 232 innovation metrics. They categorized these measures along five dimensions; i.e. inputs to the innovation process, output from the innovation process, effect of the innovation output, measures to access the activities in an innovation process and availability of factors that facilitate such a process.^[66]

There are two different types of measures for innovation: the organizational level and the political level.

Organizational-levelEdit

The measure of innovation at the organizational level relates to individuals, team-level assessments, and private companies from the smallest to the largest company. Measure of innovation for organizations can be conducted by surveys, workshops, consultants, or internal benchmarking. There is today no established general way to measure organizational innovation. Corporate measurements are generally structured around balanced scorecards which cover several aspects of innovation such as business measures related to finances, innovation process efficiency, employees’ contribution and motivation, as well benefits for customers. Measured values will vary widely between businesses, covering for example new product revenue, spending in R&D, time to market, customer and employee perception & satisfaction, number of patents, additional sales resulting from past innovations.^[67]

Political-levelEdit

For the political level, measures of innovation are more focused on a country or region competitive advantage through innovation. In this context, organizational capabilities can be evaluated through various evaluation frameworks, such as those of the European Foundation for Quality Management. The OECD Oslo Manual (1992) suggests standard guidelines on measuring technological product and process innovation. Some people consider the Oslo Manual complementary to the Frascati Manual from 1963. The new Oslo Manual from 2018 takes a wider perspective to innovation, and includes marketing and organizational innovation. These standards are used for example in the European Community Innovation Surveys.^[68]

Other ways of measuring innovation have traditionally been expenditure, for example, investment in R&D (Research and Development) as percentage of GNP (Gross National Product). Whether this is a good measurement of innovation has been widely discussed and the Oslo Manual has incorporated some of the critique against earlier methods of measuring. The traditional methods of measuring still inform many policy decisions. The EU Lisbon Strategy has set as a goal that their average expenditure on R&D should be 3% of GDP.^[69]

IndicatorsEdit

Many scholars claim that there is a great bias towards the «science and technology mode» (S&T-mode or STI-mode), while the «learning by doing, using and interacting mode» (DUI-mode) is ignored and measurements and research about it rarely done. For example, an institution may be high tech with the latest equipment, but lacks crucial doing, using and interacting tasks important for innovation.^[70]

A common industry view (unsupported by empirical evidence) is that comparative cost-effectiveness research is a form of price control which reduces returns to industry, and thus limits R&D expenditure, stifles future innovation and compromises new products access to markets.^[71]
Some academics claim cost-effectiveness research is a valuable value-based measure of innovation which accords «truly significant» therapeutic advances (i.e. providing «health gain») higher prices than free market mechanisms.^[72] Such value-based pricing has been viewed as a means of indicating to industry the type of innovation that should be rewarded from the public purse.^[73]

An Australian academic developed the case that national comparative cost-effectiveness analysis systems should be viewed as measuring «health innovation» as an evidence-based policy concept for valuing innovation distinct from valuing through competitive markets, a method which requires strong anti-trust laws to be effective, on the basis that both methods of assessing pharmaceutical innovations are mentioned in annex 2C.1 of the Australia-United States Free Trade Agreement.^[74][75][76]

IndicesEdit

Several indices attempt to measure innovation and rank entities based on these measures, such as:

• Bloomberg Innovation Index
• «Bogota Manual»^[77] similar to the Oslo Manual, is focused on Latin America and the Caribbean countries.^{[citation needed]}
• «Creative Class» developed by Richard Florida^{[citation needed]}
• EIU Innovation Ranking^[78]
• Global Competitiveness Report
• Global Innovation Index (GII), by INSEAD^[79]
• Information Technology and Innovation Foundation (ITIF) Index
• Innovation 360 – From the World Bank. Aggregates innovation indicators (and more) from a number of different public sources
• Innovation Capacity Index (ICI) published by a large number of international professors working in a collaborative fashion. The top scorers of ICI 2009–2010 were: 1. Sweden 82.2; 2. Finland 77.8; and 3. United States 77.5^[80]
• Innovation Index, developed by the Indiana Business Research Center, to measure innovation capacity at the county or regional level in the United States^[81]
• Innovation Union Scoreboard, developed by the European Union
• innovationsindikator for Germany, developed by the Federation of German Industries (Bundesverband der Deutschen Industrie) in 2005^[82]
• INSEAD Innovation Efficacy Index^[83]
• International Innovation Index, produced jointly by The Boston Consulting Group, the National Association of Manufacturers (NAM) and its nonpartisan research affiliate The Manufacturing Institute, is a worldwide index measuring the level of innovation in a country; NAM describes it as the «largest and most comprehensive global index of its kind»^{[citation needed][84]}
• Management Innovation Index – Model for Managing Intangibility of Organizational Creativity: Management Innovation Index^[85]
• NYCEDC Innovation Index, by the New York City Economic Development Corporation, tracks New York City’s «transformation into a center for high-tech innovation. It measures innovation in the City’s growing science and technology industries and is designed to capture the effect of innovation on the City’s economy»^[86]
• OECD Oslo Manual is focused on North America, Europe, and other rich economies
• State Technology and Science Index, developed by the Milken Institute, is a U.S.-wide benchmark to measure the science and technology capabilities that furnish high paying jobs based around key components^[87]
• World Competitiveness Scoreboard^[88]

RankingsEdit

Common areas of focus include: high-tech companies, manufacturing, patents, post secondary education, research and development, and research personnel. The left ranking of the top 10 countries below is based on the 2020 Bloomberg Innovation Index.^[89] However, studies may vary widely; for example the Global Innovation Index 2016 ranks Switzerland as number one wherein countries like South Korea, Japan, and China do not even make the top ten.^[90]

Rate of innovationEdit

In 2005 Jonathan Huebner, a physicist working at the Pentagon’s Naval Air Warfare Center, argued on the basis of both U.S. patents and world technological breakthroughs, per capita, that the rate of human technological innovation peaked in 1873 and has been slowing ever since.^[94][95] In his article, he asked «Will the level of technology reach a maximum and then decline as in the Dark Ages?»^[94] In later comments to New Scientist magazine, Huebner clarified that while he believed that we will reach a rate of innovation in 2024 equivalent to that of the Dark Ages, he was not predicting the reoccurrence of the Dark Ages themselves.^[96]

John Smart criticized the claim and asserted that technological singularity researcher Ray Kurzweil and others showed a «clear trend of acceleration, not deceleration» when it came to innovations.^[97] The foundation replied to Huebner the journal his article was published in, citing Second Life and eHarmony as proof of accelerating innovation; to which Huebner replied.^[98]
However, Huebner’s findings were confirmed in 2010 with U.S. Patent Office data.^[99] and in a 2012 paper.^[100]

Innovation and developmentEdit

The theme of innovation as a tool to disrupting patterns of poverty has gained momentum since the mid-2000s among major international development actors such as DFID,^[101] Gates Foundation’s use of the Grand Challenge funding model,^[102] and USAID’s Global Development Lab.^[103] Networks have been established to support innovation in development, such as D-Lab at MIT.^[104] Investment funds have been established to identify and catalyze innovations in developing countries, such as DFID’s Global Innovation Fund,^[105] Human Development Innovation Fund,^[106] and (in partnership with USAID) the Global Development Innovation Ventures.^[107]

The United States has to continue to play on the same level of playing field as its competitors in federal research. This can be achieved being strategically innovative through investment in basic research and science».^[108]

Government policiesEdit

Given its effects on efficiency, quality of life, and productive growth, innovation is a key driver in improving society and economy. Consequently, policymakers have worked to develop environments that will foster innovation, from funding research and development to establishing regulations that do not inhibit innovation, funding the development of innovation clusters, and using public purchasing and standardisation to ‘pull’ innovation through.

For instance, experts are advocating that the U.S. federal government launch a National Infrastructure Foundation, a nimble, collaborative strategic intervention organization that will house innovations programs from fragmented silos under one entity, inform federal officials on innovation performance metrics, strengthen industry-university partnerships, and support innovation economic development initiatives, especially to strengthen regional clusters. Because clusters are the geographic incubators of innovative products and processes, a cluster development grant program would also be targeted for implementation. By focusing on innovating in such areas as precision manufacturing, information technology, and clean energy, other areas of national concern would be tackled including government debt, carbon footprint, and oil dependence.^[49] The U.S. Economic Development Administration understand this reality in their continued Regional Innovation Clusters initiative.^[109] The United States also has to integrate her supply-chain and improve her applies research capability and downstream process innovation.^[110]

Many countries recognize the importance of innovation including Japan’s Ministry of Education, Culture, Sports, Science and Technology (MEXT);^[111] Germany’s Federal Ministry of Education and Research;^[112] and the Ministry of Science and Technology in the People’s Republic of China. Russia’s innovation programme is the Medvedev modernisation programme which aims to create a diversified economy based on high technology and innovation. The Government of Western Australia has established a number of innovation incentives for government departments. Landgate was the first Western Australian government agency to establish its Innovation Program.^[113]

Some regions have taken a proactive role in supporting innovation. Many regional governments are setting up innovation agencies to strengthen regional capabilities.^[114] In 2009, the municipality of Medellin, Colombia created Ruta N to transform the city into a knowledge city.^[115]

See alsoEdit

Look up innovation in Wiktionary, the free dictionary.

• Communities of innovation
• Creative problem solving
• Diffusion (anthropology)
• Ecoinnovation
• Hype cycle
• Induced innovation
• Information revolution
• Innovation leadership
• Innovation system
• International Association of Innovation Professionals
• ISO 56000
• Knowledge economy
• Obsolescence
• Open Innovation
• Open Innovations (Forum and Technology Show)
• Outcome-Driven Innovation
• Participatory design
• Product innovation
• Pro-innovation bias
• Sustainable Development Goals (Agenda 9)
• Technology Life Cycle
• Technological innovation system
• Theories of technology
• Timeline of historic inventions
• Toolkits for User Innovation
• UNDP Innovation Facility
• User Innovation
• Virtual product development

ReferencesEdit

Further readingEdit

• Bloom, Nicholas, Charles I. Jones, John Van Reenen, and Michael Webb. 2020. «Are Ideas Getting Harder to Find?», American Economic Review, 110 (4): 1104–44.
• Steven Johnson (2011). Where Good Ideas Come From. Riverhead Books. ISBN 9781594485381.
• Sonenshein, Scott (2017). Stretch: Unlock the Power of Less and Achieve More Than You Ever Imagined. Harper Business. ISBN 978-0062457226.

Last Updated:
13 Apr 2023
— Updated example sentences

While many of our regular readers are very familiar with the nuances of innovation, it’s such a difficult concept that we still come across a lot of confusion and misinformation surrounding the term in most companies – and of course the population at large.

Especially in light of recent events, innovation is seemingly on everyone’s lips, so we thought it would be important to clarify what it really means.

There’s naturally a good reason for this popularity: innovation is what essentially drives humanity forward, both in terms of well-being, but also economic growth.

According to OECD research, 85% of all economic growth in the US economy between 1870 and 1950 actually is a result of innovation.

So, even if some of the latest technologies and companies using them are often overhyped, in the long run, innovation is what both companies and investors should really be investing in.

Definition and true meaning of innovation

Let’s start by first defining what the term actually means.

There are literally hundreds, if not thousands, of different definitions for the word “innovation” out there, so just getting to the root of what the term actually means, can be challenging. There just isn’t a clear consensus in the industry on what the correct definition is.

We have gone through the vast majority of these definitions, and for the most part, the differences are actually relatively minor and academic in nature.

In general, everyone agrees that innovations are “novel”. Many argue that it’s not an innovation, but an invention, unless it “creates value”.

The challenge is that these are both naturally very subjective terms.

• Does something have to be “new” or “novel” to the entire world for it to count as an innovation? What about your industry or market? Or just for your company?
• For whom should it “create value”? For customers? For the company and its shareholders? What about the society at large?
• And how do you even define value? Is it just monetary value, or do softer measures count as well? What if it creates tremendous value for some individuals, but is harmful at large?

Thus, it’s virtually impossible to come up with a truly objective way to tell if something is an innovation – or not. Thus, it’s probably best to keep the definition of the word quite accommodating.

The introduction of something new.
– Merriam-Webster online dictionary

In other words, innovation is simply anything new that you do.

It can be new products or services, a new manufacturing process that saves a lot of resources, or even just a minor improvement in an existing product or process.

Using the term “innovation” in practice

Knowing how often people interpret the term “innovation” in so wildly different ways, those of us who are in the business of trying to make it happen should obviously be mindful of the challenges that careless use of the term may lead to.

So, whenever you’re talking about “innovation” with a new audience, it’s often helpful to start by ensuring that you’re on the same page when it comes to the terminology, or your conversation might turn out to not be as productive as you hoped it would be.A nice and very practical way to achieve this goal is to actually not use the term “innovation” in the first place. Even though you’d still be going after innovation, it can often be easier to get your message through if you talk about ideas, improvements, changes or new businesses instead, especially if you’re working in a conservative organization.

What can we learn from the experts – our favorite quotes on innovation

Since innovation is a topic that some of the smartest minds on our planet have put a lot of thought into, we thought it would also make sense to provide you with a few of our favorite quotes on innovation. They really do a great job of capturing the essence of innovation.

1

“Innovation is taking two things that exist and putting them together in a new way.“

Tom Freston (born 1945), Co-founder of MTV

2

“What is the calculus of innovation? The calculus of innovation is really quite simple: Knowledge drives innovation, innovation drives productivity, productivity drives economic growth.“

William Brody (born 1944), Scientist

3

“Creativity is thinking up new things. Innovation is doing new things.“

Theodore Levitt (1925 – 2006), Renown economist

4

“You can’t wait for inspiration, you have to go after it with a club.“

Albert Einstein (1879 – 1955), Mathematician

5

“I have not failed. I’ve just found 10,000 ways that won’t work.“

Thomas Edison (1847 – 1931), Inventor

6

“There’s a way to do it better. Find it.“

Thomas Edison (1847 — 1931), Inventor

7

“The riskiest thing we can do is just maintain the status quo.“

Bob Iger (born 1951), Media executive & businessman

8

“When the winds of change blow, some people build walls and others build windmills.“

An ancient Chinese proverb

9

“Innovation- any new idea- by definition will not be accepted at first. It takes repeated attempts, endless demonstrations, monotonous rehearsals before innovation can be accepted and internalized by an organization. This requires courageous patience.“

Warren Bennis (1925 – 2014), Scholar and organizational consultant

Lessons learned

When we put all of those thoughts together, what can we learn?

• Innovation is ultimately about putting the figurative 1 + 1 of existing knowledge together to create something novel.
• Innovation takes a lot of hard work, it’s not just about being creative or coming up with a great idea.
• Innovation always feel risky and new ideas will usually be resisted, that’s just a part of the process.
• Still, the riskiest thing you can do is to try to stick with the past and not embrace the change.

Common misconceptions about innovation

Now that we’ve understand the big picture, let’s clear a few of the most common misconceptions about innovation.

“Innovation is something startups do”

This is probably one of the most common misconceptions out there.

Sure, many startups are tremendously innovative, and drive a significant portion of the innovation in our society, but that

1. 1. doesn’t mean that all startups would be innovative
   2. doesn’t mean that large organizations wouldn’t innovate

First of all, not every startup is innovative. If you decide to open up a lemonade stand and set up a company for it, it is a startup, but there probably isn’t anything new or innovative there.Second, large organizations (companies, universities, and research institutes included) actually create a big portion of innovations out there.

Just think of the device you’re using to read this article. It’s without a doubt a product created and sold by a large company, with most of the meaningful hardware and software components on it also being developed by other large organizations.

It’s actually the medium-sized organizations that are usually worst positioned to innovate: they don’t have the resources of the big companies, and unlike startups, they usually have existing processes in place, as well as something to lose, which makes them less likely to want to embrace change and innovation.

This is something we very much empathize with, and it’s a big part of our mission to help them change this.

“Build and they will come”

This is the traditional way people approached innovation. You simply created a pretty good product, and usually people came and found you.

Well, these days, most of us in the developed world have most of our basic needs met, and there’s so much information and so many different products and services out there, that it doesn’t usually work like that anymore.

These days, you have to start by truly, deeply, understanding your customer, and the specific problems they’re trying to solve, or you’re very likely to fail at innovation.

“Innovation has to be a groundbreaking technological invention”

Many still think that innovations have to be these big, groundbreaking inventions.

Well, as we covered earlier, that simply isn’t true.Usually even the groundbreaking discoveries and inventions need many additional, smaller improvements and innovations to actually become commercially feasible. Just think of something like electric cars: it was first invented more than 100 years ago and is just now on the verge of becoming mainstream.

In addition, innovations can be any kind of novel, even seemingly minor things, that just make a difference in the grand scheme of things. They don’t even have to be technological at all.

As a matter of fact, marketing and business model innovations are incredibly powerful forms of innovation, that don’t require you to necessarily invest in cutting edge research.

Even a few relatively simple improvements in some of your internal processes can be the difference between being profitable or not, so incremental innovations are usually very important, especially for large companies.

Examples of successful innovations

So, what do successful innovations then look like?

Well, everyone is familiar with those big new technological breakthroughs that changed the world, like the lightbulb, and the Internet, so we’ll next show a few more subtle examples of successful innovations from throughout history.

The subscription business model

Business model innovation is one of the most powerful, yet simultaneously underappreciated forms of innovation.

While the business model itself is obviously pretty old, it’s been successfully used for ages in things like newspapers and season tickets, it’s really gained incredible popularity in the last couple of decades.

After Salesforce pioneered the Software as a Service business model in the early 2000s, we’ve literally seen an explosion in subscription businesses, and for good reason.

A subscription business model makes it easier for customers to buy as they aren’t forced to make an upfront investment and have the flexibility to end their subscription whenever they want. For the business, it aligns their interests with the customer, provides a more predictable source of revenue, and ultimately allows them to increase profitability down the road.

It’s a great example of a seemingly simple change that can make all the difference between success and failure.

Seasonal crop rotation

Way back in the day when humans first started cultivating crops, a similar pattern emerged in many diverse geographical areas.

Thanks to the agricultural revolution, population quickly began to grow. As the population grew, more and more land was needed to grow food for everyone. Farmland thus expanded until there was no more arable land in the vicinity to expand to.

At that point, people often started cultivating the land more aggressively and only chose to plant the most productive crops to cope with the increased demand.Unfortunately, that only made things worse.

When you plant the same crop in the same place year after year, the soil will gradually lose more and more of its nutrients. This will in turn lower crop yields and eventually lead to the land becoming unusable for farming for extended periods of time.

The solution to this problem is incredibly simple: you essentially just rotate the placing of the crops every season and perhaps give the soil a season to rest every now and then.

The Ritz-Carlton $2,000 rule

The $2,000 rule is an example of a very different kind of a process innovation, one that focuses on the customer experience.

As a luxury hotel chain, Ritz-Carlton is one of the embodiments of great customer service, and for them to stay in business, they do need to live up to their reputation.

To ensure that is the case, they’ve long had the so called $2,000 rule, which as the name would suggest, indicates that any frontline employee can spend up to $2,000 right away without asking their manager for permission to address any and all problems customers might face.

And that is not $2,000 per year, but $2,000 per incident. This might raise a few eyebrows at first, but when you consider that their customers spend an average of $250,000 during their lifetime, it suddenly makes a lot of sense.By having such a rule in place, employees tangibly know how highly the management not only values the customer experience, but also trusts their judgment. As a result, they behave accordingly, which in turn leads to a far superior experience than your average run of the mill hotel.

The same exact rule might not make sense for your business, but it’s still a great example of a really simple change that can make a huge difference in making customers lives’ much easier.

How does innovation happen in practice?

So, now that you have a pretty good of what innovations really is, the question remains, how do you actually create one?

Well, it’s a whole art and a science of its own, there isn’t necessarily just one “right way to innovate”.

What’s more, the answer also depends highly on whether you’re looking to create smaller, incremental innovations, or perhaps the bigger, more outside the box, breakthrough innovations.

Also, if you’re looking to innovate as a startup, the challenges you face will be somewhat different than if you were to innovate within a large incumbent organization.

However, there are also many similarities. Here’s the high-level overview of the way we like to approach this:

1. 1. Identify a meaningful problem, if it’s a big one, break it down into smaller chunks
   2. Find the best solution with first principles thinking
   3. Solve the problem(s) and create real value
   4. Keep an open mind and continuously look for things to improve upon

That’s of course easier said than done. Still, it’s important to keep the big picture in mind  and not get lost in the weeds.

In essence, you should usually start by identifying a meaningful problem you’d like to solve for your customers. Alternatively, this could also be a bigger, more far flung but ambitious and concrete objective.

Almost never can you solve these meaningful problems with just a single innovation, so what you then need to do is to break the problem or objective into smaller chunks.

Then, you can simply start solving the problem or problems, one by one. Just make sure to do it in a way that creates real, tangible value.

The above two steps are essentially what all agile methods and movements like the lean startup are all about.

Finally, to get to the best possible solution, you should keep an open mind and continuously look for better ways to solve the problem and achieve your objectives, and the way you do that is by embracing first principles thinking.

Here’s Elon Musk explaining the concept:

Conclusion

If innovation is an art and a science of its own, so is the act of making it happen in organizations. This is what’s referred to as innovation management, or the ability to systematically introduce new things and manage the whole process in a way that helps you make innovation more predictable and scalable.

It’s such a big topic, and one that we’ve written about quite extensively, that we won’t cover it in more detail here. However, if you are looking to make more innovation happen in your organization, a great place to start from is our Innovation System Online Coaching Program.

It is an online program that will walk you through the process of making more innovation happen in your organization, step-by-step. We guarantee it will help deliver real business results for you.

1	0   0 Innovation, whether it relates to the development of new products, processes or organisational techniques, can help give economic operators a competitive edge. The European Union is acutely aware of t [..]

2	0   0 Innovation The introduction of new ideas, goods, etc., or new methods of production. A new way of doing something.

3	0   0 Innovation Definition An innovation is the implementation of a new or significantly improved product (good or service), or process, or a new marketing method, or a new organizational method. The minimum requirem [..]

4	0   0 Innovation An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace or [..]

5	0   0 Innovation 1[uncountable] innovation (in something) the introduction of new things, ideas, or ways of doing something an age of technological innovation The company is very interested in product design and innov [..]

6	0   0 Innovation mid-15c., «restoration, renewal,» from Late Latin innovationem (nominative innovatio), noun of action from past participle stem of innovare «to change; to renew» (see innovate). Me [..]

7	0   0 Innovation noun change, novelty

8

0   0 Innovation In the marketing literature, innovation implies the introduction of a new product, idea, or service into the market place. According to Robertson, it involves a new product that is very different from the established products or at least perceived to be different by consumers in the relevant market segment. New products can be referred to as contin [..]

9	0   0 Innovation A new invention or idea. Related: Hippolyte Blancard. Untitled (construction of the Eiffel Tower). April 1889 Landscapes: Real and Imagined Surrealist Landscapes Modern Landscapes Popular Culture Rise [..]

10	0   0 Innovation something new.

11	0   0 Innovation The creation or introduction of something new, especially a new product or a new way of producing something.

12	0   0 Innovation The introduction of something new. A new idea, method, or device, a novelty. [D02859]

13	0   0 Innovation Innovation refers to the creation of new products, technologies, processes and/or ideas that are thought to be better or more effective by the innovator.  Most organisations value their suppliers as [..]

14	0   0 Innovation The introduction and dissemination of a new idea, product, or technological process throughout society and the economy. The innovation process should be contrasted with the act of invention, which is [..]

15	0   0 Innovation invention: a creation (a new device or process) resulting from study and experimentation invention: the creation of something in the mind initiation: the act of starting something for the first time; [..]

16	0   0 Innovation introduction of new ideas and techniques. Make changes in methods.

17	0   0 Innovation Involves the creation of value out of new ideas, products, arts experiences, services, or ways of doing things. An ‘innovative’ arts practitioner will understand the skills and techniques required [..]

18

0   0 Innovation One of Merton’s adaptations in Anomie Theory (or Stress Theory). It is characterized by individuals who have accepted the culturally approved goal, but have not fully internalized the culturally approved means to attain this goal. The individual thereby adopts a different (and often deviant) method for attaining the goal.

19	0   0 Innovation Definition The creation of new products and/or services.

20	0   0 Innovation khidesh or khidish

21	0   0 Innovation A change to a preexisting feature.

22	0   0 Innovation Something new or improved, including research for (1) development of new technologies, (2) refinement of existing technologies, or (3) development of new applications for existing technologies. For th [..]

23	0   0 Innovation A new idea or method.

24	0   0 Innovation Innovation is the basic driving force behind entrepreneurship and the creation of small businesses. When an individual comes up with an idea that has not previously been explored, or a niche that larg [..]

25

0   0 Innovation Innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations (OECD, Oslo Manual, 2005: Guidelines for collecting and interpreting innovation data).

26	0   0 Innovation The discovery or invention of new ideas, things, or methods; a source of cultural change.

27	0   0 Innovation The invention or discovery of a new cultural concept, idea, behavior, or object.

28	0   0 Innovation (n) a creation (a new device or process) resulting from study and experimentation(n) the creation of something in the mind(n) the act of starting something for the first time; introducing something [..]

29	0   0 Innovation An innovation occurs when a product or service is introduced in the market that previously did not exist and that the market deem valuable, i.e. innovation = new customer value.

30	0   0 Innovation the process of producing something new or different.

31	0   0 Innovation    Things I hope will work

32	0   0 Innovation Introduction of changes which are new to the Organization and are created by management.

33	0   0 Innovation Novel Technology.

34	0   0 Innovation In a business context, the term innovation refers to ideas that are realised in new products or processes that can be launched onto the market. Innovations can be differentiated according to how new t [..]

35	0   0 Innovation Implementation of something new or different in the preparation of educators that leads to the improvement of teaching and support of student learning.

36	0   0 Innovation A new process or product.

37	0   0 Innovation Economists of all descriptions have accepted that new products and new processes are the main source of dynamism in capitalist development. But relatively …

38	0   0 Innovation

39	0   0 Innovation A novel move or idea in an established line of play.

40	0   0 Innovation Is the process of generating ideas and developing them into new (or improved) products, services, or business processes. Learn More

41	0   0 Innovation Products

42

0   0 Innovation Innovation is about creation of new products, new processes, new technologies, new organisation systems… Thus, innovation can be technological and non-technological with the objective to improve the functioning of institutions, the efficiency of strategies implemented or the competitiveness of economic operators.

43	0   0 Innovation According to Merton’s structural strain theory, the innovator accepts the goals of social success but rejects the means (and thus innovates new means).

44	0   0 Innovation The act of innovating; the introduction of something new, in customs, rites, etc. *cmn|??|sc=Hani,frm|innovation, fromfro|innovacion, fromla|innovatio

45	0   0 Innovation

46	0   0 Innovation Third stage of the Hughes model. Introducing the new technology into the world of ordinary use.

Dictionary.university is a dictionary written by people like you and me.
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Add meaning

The term innovation means “the introduction of something new,” or “a new idea, method or device.” Innovation characteristically involves creativity, but the terms are not synonymous. Innovation is distinct from invention and involves the actual implementation of a new idea or process in society. Innovation is an important topic in the study of economics, history, business, technology, sociology, policy making and engineering. Historians, sociologists and anthropologists study the events and circumstances leading up to innovations and the changes they bring about in human society. Social and economic innovations often occur spontaneously, as human beings respond in a natural way to new circumstances. Since innovation is believed to drive economic growth, knowledge of the factors that lead to innovation is critical to policy makers.

In organizations and businesses, innovation is linked to performance and growth through improvements in efficiency, productivity, quality, and competitive positioning. Businesses actively seek to innovate in order to increase their market share and ensure their growth. A successful innovation does not always bring about the desired results and may have negative consequences. A number of economic theories, mathematical formulas, management strategies and computerized business models are used to forecast the outcome of an innovation. Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy. Various indices, such as expenditure on research, and factors such as availability of capital, human capacity, infrastructure, and technological sophistication are used to measure how conducive a nation is to fostering innovation.

The concept of innovation

The term “innovation” dates from the fifteenth century and means “the introduction of something new,” or “a new idea, method or device.”^[1] In its modern usage, a distinction is typically made between an idea, an invention (an idea made manifest), and innovation (ideas applied successfully).^[2] Innovation is an important topic in the study of economics, business, technology, sociology, policy making and engineering. In each of these fields “innovation” connotes something slightly different.

Innovation has been studied in a variety of contexts, and scholars have developed a wide range of approaches to defining and measuring innovation. A consistent theme in discussions of innovation is the understanding that it is the successful introduction of something new and useful, for example introducing new methods, techniques, or practices or new or altered products and services.^[3] Though innovation is frequently associated with improvement and thought of as being positive and beneficial, the successful introduction of a “new” and “useful” method, practice or product may have negative consequences for an organization or society, such as the disruption of traditional social relationships or the obsolescence of certain labor skills. A “useful” new product may have a negative impact on the environment, or may bring about the depletion of natural resources.

Innovation, creativity and invention

Invention, the creation of new forms, compositions of matter, or processes, is often confused with innovation. An invention is the first occurrence of an idea for a new product or process, while innovation involves implementing its use in society.^[3]The electric light bulb did not become an innovation until Thomas Edison established power plants to furnish electricity to streetlamps and houses so that the light bulbs could be used. In an organization, an idea, a change or an improvement is only an innovation when it is implemented and effectively causes a social or commercial reorganization.

Innovation characteristically involves creativity, but is not synonymous with it. A creative idea or insight is only the beginning of innovation; innovation involves acting on the creative idea to bring about some specific and tangible difference. For example, in a business or organization, innovation does not occur until a creative insight or idea results in new or altered business processes within the organization, or changes in the products and services provided.

Sociology, history, behavioral sciences

Historians, sociologists and anthropologists study the events and circumstances leading up to innovations and the changes they bring about in human society. One of the greatest innovations in human history was the Industrial Revolution, which ended feudalism, led to the establishment of huge urban centers, and put power in the hands of businessmen. The concentration of large numbers of people in cities and towns and the rise of a middle class resulted in innovations in housing, public health, education, and the arts and entertainment. The Industrial Revolution itself was the result of myriads of innovations in technology, social organization, and banking and finance. The establishment of a democratic government in the United States in 1776 was an innovation that had far-reaching consequences for European countries and eventually for the rest of the world.

The development of modern forms of transportation, the train, automobile, and airplane, also altered the way in which people live and conduct business. Innovations in weaponry, such as the cannon and musket, and more recently, guided missiles and nuclear bombs, gave the nations who implemented them dominance over other nations.

During the last decade of the twentieth century and the first decade of the twenty-first century, technological innovations like the cell phone, internet and wireless technology transformed the way in which people communicate with each other and gain access to information. Cell phones have made it possible for people in developing countries, who previously did not have access to an efficient telephone system, to communicate freely and easily, facilitating business transactions and social relationships. The internet allows people in countries where governmental control or inadequate economic resources limit access to information, to circumvent those restrictions and disseminate knowledge internationally. Individuals now have immediate access to information about the stock market, their bank accounts, current events, the weather, and consumer products.

Policy making

Social and economic innovations often occur spontaneously, as human beings respond in a natural way to new circumstances. Governments, legislators, urban planners and administrators are concerned with bringing about deliberate innovation through creating and implementing effective public policies to achieve certain goals. The cost of enforcing a new public policy must be weighed against the expected benefits. A policy change may have unforeseen, and sometimes unwanted, consequences.

Examples of public policies that have brought about positive social innovations are the granting of property rights to women, universal suffrage, welfare and unemployment compensation and mandatory education for children.

Examples of public policy that resulted in harmful innovation are the Cultural Revolution initiated in 1966 by Mao Zedong, which closed universities and suppressed education for several years in China; the collectivization of agriculture in the U.S.S.R. by Joseph Stalin^[4] which caused millions to die of starvation during 1931 and 1932; and the efforts of Pol Pot (Saloth Sar) in the 1970s to evacuate all urban dwellers to the countryside and return to an agricultural barter economy, which cost the lives of approximately 26 percent of Cambodia’s population.^[5]

Organizations

In the context of an organization such as a corporation, local government, hospital, university, or non-profit organization, innovation is linked to performance and growth through improvements in efficiency, productivity, quality, and competitive positioning. A new management procedure, organizational structure, method of operation, communications device or product may be introduced in an effort to make the organization more efficient and productive. Successful innovation requires the definition of goals, knowledge of the materials and processes involved, financial and human resources, and effective management. A certain amount of experimentation is also necessary to adjust the new processes so that they produce the desired result.

Deliberate innovation involves risk. Organizations that do not innovate effectively may be destroyed by those that do. While innovation typically adds value, it may also have a negative or destructive effect as new developments clear away or change old organizational forms and practices. If the changes undermine employee morale, the new system may be less efficient than the old. Innovation can also be costly. The expense of purchasing and installing new equipment, computers and software, or of re-organizing, hiring and training staff is substantial, and may leave an organization without sufficient resources to continue its operations effectively. Organizations attempt to minimize risk by studying and analyzing innovations carried out by other organizations, by employing experts and consultants to carry out the innovation, and by utilizng a number of formulas and management strategies.

The introduction of computers during the second half of the twentieth century necessitated innovation in almost every type of organization. The productivity of individual workers was increased, and many clerical jobs were eliminated. Organizations made large investments in technology and created entire departments to maintain and manage computers and information, giving rise to a number of new professions. Paper documents were translated into electronic data. The workforce acquired new skills, and those who could not adapt dropped behind younger workers who were more familiar with technology and changed the dynamics of the workplace. Networks and internet connections allowed frequent and rapid communication within an organization. The centralization of information such as inventory data, financial accounts and medical records made new types of analysis and measurement possible. While organizations benefited in many ways from the new technology, the expense and risk of innovating also increased.

Economics and business

The study and understanding of innovation is particularly important in the fields of business and economics because it is believed that innovation directly drives economic growth. The ability to innovate translates into new goods and services and entry into new markets, and results in increased sales. An increase in sales contributes to the prosperity of the workforce and increases its purchasing power, leading to a steady expansion of the economy.

In 1934, the European economist Joseph Schumpeter (1883 – 1955) defined economic innovation as:

1. The introduction of a new good—that is one with which consumers are not yet familiar—or of a new quality of a good.
2. The introduction of a new method of production, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially.
3. The opening of a new market, that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before.
4. The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created.
5. The carrying out of the new organization of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position.^[6]

Businesses recognize that innovation is essential for their survival, and seek to create a business model that fosters innovation while controlling costs.^[7] Managers use mathematical formulas, behavioral studies and forecasting models to create strategies for implementing innovation. Business organizations spend between ½ of a percent (for organizations with a low rate of change) to more than 20 percent of their annual revenue on making changes to their established products, processes and services. The average investment across all types of organizations is four percent, spread across functions including marketing, product design, information systems, manufacturing systems and quality assurance.

Much of the innovation carried out by business organizations is not directed towards development of new products, but towards other goals such as reduction of materials and labor costs, improvement of quality, expansion of existing product lines, creation of new markets, reduction of energy consumption and lessening of environmental impact.

Many «breakthrough innovations» are the result of formal research and development, but innovations may be developed by less formal on-the-job modifications of practice, or through the exchange and combination of professional experience.

The traditionally recognized source of innovation is manufacturer innovation, where a person or business innovates in order to sell the innovation. Another important source of innovation is end-user innovation, in which a person or company develops an innovation for their own use because existing products do not meet their needs.^[8] User innovators may become entrepreneurs selling their product, or more commonly, trade their innovation in exchange for other innovations or services. In the case of computer software, they may choose to freely share their innovations, using methods like open source. In such networks of innovation the creativity of the users or communities of users can further develop technologies and their use.

Analysts debate whether innovation is mainly supply-pushed (based on new technological possibilities) or demand-led (based on social needs and market requirements). They also continue to discuss what exactly drives innovation in organizations and economies. Recent studies have revealed that innovation does not just happen within the industrial supply-side, or as a result of the articulation of user demand, but through a complex set of processes that links input from not only developers and users, but a wide variety of intermediary organizations such as consultancies and standards associations. Examination of social networks suggests that much successful innovation occurs at the boundaries of organizations and industries where the problems and needs of users, and the potential of technologies are together in a creative process.

Diffusion of innovations

Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. In 1962, Everett Rogers proposed that the life cycle of innovations can be described using the ‘s-curve’ or diffusion curve. The s-curve maps growth of revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point consumer demand increases and product sales expand more rapidly. New incremental innovations or changes to the product allow growth to continue. Towards the end of its life cycle growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.

Innovative companies will typically be constantly working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an emerging technology that currently yields lower growth but will eventually overtake the current technology and lead to even greater levels of growth. The length of life will depend on many factors.^[9]

The Bass diffusion model developed by Frank Bass in 1969 illustrates the process by which a new innovative product is adopted by new users, then is overtaken by products imitating the innovation. The model is widely used in forecasting, especially product forecasting and technology forecasting.

In the 1980s, Veneris (1984, 1990) developed a systems dynamics computer simulation model which takes into account business cycles and innovations. Innovation diffusion is studied by economists in a variety of contexts, for example in theories of entrepreneurship or in Paul Romer’s New Growth Theory.

Failure of innovation

Success in implementing an innovation does not guarantee a beneficial outcome. Research shows that from 50 to 90 percent of innovation projects are judged to have made little or no contribution to the goals of the innovating organization. Innovations that fail are often potentially ‘good’ ideas but do not achieve desired results because of budgetary constraints, lack of skills, poor leadership, lack of knowledge, lack of motivation, or poor fit with current goals. The impact of failure goes beyond the simple loss of investment. Failure can also lead to loss of morale among employees, an increase in cynicism and even higher resistance to change in the future. Most companies allow for the possibility of failure when planning an innovation, and include processes for detecting problems before they consume too many resources and threaten the organization’s future.

Early detection of problems and adjustment of the innovation process contribute to the success of the final outcome. The lessons learned from failure often reside longer in the organizational consciousness than lessons learned from success.

Measures of innovation

Attempts to measure innovation take place on two levels: the organizational level and the political level. Within an organization, innovation can be evaluated by conducting surveys and workshops, consulting outside experts, or using internal benchmarks. There is no measure of organizational innovation. Corporate measurements generally utilize scorecards which cover several aspects of innovation such as financial data, innovation process efficiency, employees’ contribution and motivation, and benefits for customers. The elements selected for these evaluations vary widely from company to company and may include new product revenue, amount spent on research and development, time to market, customer and employee perception and satisfaction, number of patents, and additional sales resulting from past innovations.

On a political level, measures of innovation are used to compare one country or region with another. The OECD (Organisation for Economic Co-operation and Development) Oslo Manual of 1995 suggested standard guidelines for measuring technological product and process innovation. The new Oslo Manual of 2005, 3rd edition, added marketing and organizational innovation. The Bogota Manual was created in 2001 for Latin America and the Caribbean countries. A traditional indicator used to measure innovation is expenditure, for example, investment in R&D (Research and Development) as a percentage of GNP (Gross National Product).

Economists Christopher Freeman and Bengt-Åke Lundvall developed the National Innovation System (NIS) to explain the flow of technology and information which is key to the innovative process on the national level. According to innovation system theory, innovation and technology development are results of a complex set of relationships among people, enterprises, universities and government research institutes.

See also

• Patent
• Public domain
• Research

Notes

References

ISBN links support NWE through referral fees

• Barras, R. «Towards a theory of innovation in services.» Research Policy 15: 161–73. (1984).
• Bullock, Alan. Hitler and Stalin: Parallel Lives. (1991) New York: Vintage Books, 1993. ISBN 0679729941
• Cabral, Regis. «Development, Science and.» in J. Heilbron. The Oxford Companion to The History of Modern Science. New York: Oxford University Press, 2003.
• Chakravorti, Bhaskar. The Slow Pace of Fast Change: Bringing Innovations to Market in a Connected World. Boston, MA: Harvard Business School Press. 2003. ISBN 978-1578517800
• Byrd, Jacqueline. The Innovation Equation — Building Creativity & Risk Taking in your Organization. San Francisco, CA: Jossey-Bass/Pfeiffer — Aprint. 2003. ISBN 0787962503
• Chesbrough, Henry William. Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston, MA: Harvard Business School Press. 2003. ISBN 1578518377
• Christensen, Clayton M. The Innovator’s Dilemma. Boston, MA: Harvard Business School Press. 1997. ISBN 0060521996
• Davila, Tony, Marc J. Epstein and Robert Shelton. Making Innovation Work: How to Manage It, Measure It, and Profit from It. Upper Saddle River, NJ: Wharton School Publishing, 2006. ISBN 0131497863
• Ettlie, John. Managing Innovation, Second Edition. Butterworth-Heineman, an imprint of Elsevier. 2006. ISBN 075067895X
• Fagerberg, Jan. «Innovation: A Guide to the Literature.» in Jan Fagerberg, David C. Mowery and Richard R. Nelson. The Oxford Handbook of Innovations. Oxford University Press, 2004. ISBN 0199264554
• Freeman, Chris. The Economics of Industrial Innovation. Routledge, 2012. ISBN 978-0415516105
• Hesselbein, Frances, Marshall Goldsmith, and Iain Sommerville, ed. Leading for Innovation: And organizing for results. Jossey-Bass, 2002. ISBN 0787953598
• Hitcher, Waldo. Innovation Paradigm Replaced. Wiley, 2006.
• Luecke, Richard, Ralph Katz. Managing Creativity and Innovation. Boston, MA: Harvard Business School Press. 2003. ISBN 1591391121
• Mckeown, Max. The Truth About Innovation. Pearson / Financial Times. 2008. ISBN 0273719122
• Miles, Ian. «Innovation in Services.» 433–458. in Jan Fagerberg, David C. Mowery and Richard R. Nelson. The Oxford Handbook of Innovations. Oxford University Press, 2004. ISBN 0199264554
• OECD The Measurement of Scientific and Technological Activities. Proposed Guidelines for Collecting and Interpreting Technological Innovation Data. Paris: Oslo Manual, 2nd ed. DSTI, OECD / European Commission Eurostat, 1995.
• Rogers, Everett M. Diffusion of Innovations. New York, NY: Free Press, 2003. ISBN 978-0743222099
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• Schumpeter, Joseph. The Theory of Economic Development. Transaction Publishers, 1982. ISBN 978-0878556984
• Scotchmer, Suzanne. Innovation and Incentives. Cambridge, MA: MIT Press. 2006. ISBN 978-0262693431
• Stein, Morris. Stimulating Creativity. New York: Academic Press. 1974. ISBN 978-0126642025
• von Hippel, Eric. Democratizing Innovation. Cambridge, MA: MIT Press, 2005. ISBN 0262220741
• von Hippel, Eric. The Sources of Innovation. Oxford University Press, 1994. ISBN 978-0195094220

External links

All links retrieved March 3, 2018.

• Being a Systems Innovator on SSRN