Innovation can be defined as the process of implementing new ideas to create value for an organization. This may mean creating a new service, system, or process, or enhancing existing ones. Innovation can also take the form of discontinuing an inefficient or out-of-date service, system, or process.[1]

Innovation Explained[2]

The late Marshall McLuhan, a University of Toronto professor and cultural guru suggested a functional definition for innovation that is easily recognizable by anyone of any type of organization. An innovation...

  • Enhances something: Think about how Google was a late entrant into the search biz but lapped the field with its simple approach
  • Eliminates something: Think about how Charles Schwab eliminated the need for stock brokers by connecting the back office of the trading house directly to the customer
  • Returns Us to Something in Our Past: Think about how the desire to have home-cooked family meals has led to the proliferation of underground dining and slow-food restaurants
  • Over Time Reverses into Its Opposite: Think about how e-mail was going to set us all free but instead enslaved us with its ubiquitous and overwhelming demands

It is assumed that the more potent the innovation the more it embodies the four attributes and vice versa. McLuhan understood that innovation was specific to the situation that gave rise to it or destroyed it. So he focused on its effects and not its causes. He warned that a one size fits all approach with its simple checklist would do more harm than good and lead to a form of intellectual and creative myopia. Innovation has a transformative power for a brief period of time when it produces the ability to create or destroy value. After that, it becomes the standard, the norm, and the ordinary. Like milk, it has a shelf life and goes sour over time.

Sources of Innovation[3]

There are several sources of innovation. It can occur as a result of a focused effort by 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 different changes in industry structure, market structure, local and global demographics, human perception, mood and meaning, the amount of already available scientific knowledge, etc.

  • 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.
  • 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.
  • The robotics engineer Joseph F. Engelberger asserts that innovations require only three things:
    • A recognized need,
    • Competent people with relevant technology, and
    • Financial support.

However, innovation processes usually involve identifying customer needs, macro, and meso trends, developing competencies, and finding financial support.

  • The Kline chain-linked model of innovation 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.
  • 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 spurs patents and other scientific innovations that lead to productive growth in such areas as industry, medicine, engineering, and government. 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 the relationship between the concepts of innovation and technology transfer revealed overlap. 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 styles can produce a work climate favorable to innovation. For example, the software tool company Atlassian conducts quarterly "ShipIt Days" in which employees may work on anything related to the company's products. 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, firms 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. 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.

Types of Innovation[4]
There are different classification models used for discussing innovation types Alternative frameworks for innovation lead to different types of innovation based on the objectives and approach inherent in the framework. Here are some well-known examples that can be helpful in managing innovation.

  • In Geoffrey A. Moore's book, "Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution", innovation is considered in the context of the category life cycle, with the category being the product or service term used by customers that distinguish what it is they are buying. In this context, Moore defines innovation types consisting of:
    • Disruptive
    • Application
    • Platform
    • Line-extension
    • Enhancement
    • Marketing
    • Experiential
    • Value-engineering
    • Integration
    • Process
    • Value-migration
    • Organic; and
    • Acquisition.
  • Doblin (a member of the Monitor Group) suggests types from industry patterns. These include innovation in:
    • Business model
    • Networking
    • Enabling process
    • Core process
    • Product performance
    • Product system
    • Service
    • Channel
    • Brand; and
    • Customer experience.
  • In an approach that considers change impact or scope, common types are:
    • Incremental innovation
    • Radical (or breakthrough) innovation; and
    • Transformational or Disruptive innovation.
  • In a similar manner, an alternative approach considers the impact on current business, leading to the categorization of innovation into:
    • Cannibalization
    • Market creation; and
    • Competitor disruption.
  • Types of innovation can be determined by innovation source. Familiar examples are:
    • Manufacturer innovation; and
    • End-user (or open-market) innovation.

Where to focus leads to internal versus external innovation. This can sometimes be helpful in managing the level of investment needed.

  • The Oslo Manual, developed jointly by Eurostat and the Organization for Economic Co-operation and Development (OECD) provides a framework to enable innovation measurement. The manual proposes innovation types:
    • Product (good or service)
    • Process
    • Marketing methods; and
    • New organizational method in business practices, workplace organization or external relations.

See Also


Further Reading