Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 on innovation management proposes in the standards, ISO 56000:2020 to define innovation as “a new or changed entity creating or redistributing value”. However, many scholars and governmental organizations have given their own definition of the concept. Some common element in the different definitions is a focus on newness, improvement and spread. It is also often viewed as taking place through the provision of more-effective products, processes, services, technologies, art works or business models that innovators make available to markets, governments and society. Innovation is related to, but not the same as, invention: innovation is more apt to involve the practical implementation of an invention to make a meaningful impact in a market or society, and not all innovations require a new invention.
Definition of Innovation
Surveys of the literature on innovation have found a large variety of definitions. In 2009, Baregheh et al. found around 60 definitions in different scientific papers, while a 2014 survey found over 40. 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”
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:
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.
Types of Innovation
- Sustaining innovation: 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: 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.According to Christensen, disruptive innovations are critical to long-term success in business.
- 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.”
4. 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.”
5. Architectural innovation: “innovation that changes only the relationships between them
6. Modular Innovation: “innovation that changes only the core design concepts of a technology”
7. Non-economic innovation: 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 or green innovation, and responsible innovation.
Examples of Innovation
1. Product innovation
It involves creating new products or improved versions of existing products that increase and improve its use. When an organization embraces product innovation, products can be differentiated from others in the market, thereby making them more attractive to customers. Companies that implement product innovation are bound to experience growth, expansion, and gain a competitive advantage over industry competitors. Some product innovation examples include:
The success of the iPhone series is undeniable. What some organizations fail to recognize, however, is that its success is largely due to its existence as a series itself. Instead of developing and independent products, Apple Inc. regularly improves upon the existing model of the iPhone and releases its improvements in a stylized manner, generating excitement and increasing sales with every new model to be announced.
LG introduced a new type of screen flexible enough to roll like a newspaper. By solving the problem of portability, their brand immediately becomes more attractive to customers in the market for mobile devices.
2. Radical innovation
While Amazon’s success is largely due to its massive product selection, ease of use and convenience, the introduction of their Dash Button feature was an extremely successful service innovation. The Dash Button is a small Wi-Fi connected device that allows customers to reorder household essentials with ease, which worked to improve the efficiency and ease of their purchasing process.
Salesforce’s introduction of their CRM system, a platform that gives every organization’s department a shared view of every customer, is both a radical innovation example and an extremely strong marketing innovation example. By harnessing new technology, its platform in the form of cloud computing supports today’s modern business model.
3. Process Innovation
Many organizations have achieved success in their operations by embracing innovation in the process of producing their goods and services. Process innovation improves a company’s efficiency, reducing the cost of production, increasing the quality of the product, and overall boosting profitability. One of the strongest process innovation examples is:
Zara’s decision to not spend any of their budget on advertising may seem abnormal, but ultimately, their reliance upon word of mouth and labeling has allowed for a reallocation of funding towards efficient production patterns. They have developed a process that enables them to respond quickly to market demands, establishing an innovative manufacturing process that optimizes their response time to market demands. Only 15–25% of their clothes are produced before the season, and 50–60% during the beginning of the season. The remainder is produced during the season, responding to customer wishes directly and staying ahead of the curve on the market. This process innovation allows Zara to be market-responsive, solidifying its top position among fashion brands.
4. Open Innovation
Open innovation refers to the alternative to conventional innovation, which tends to limit itself to information that stays within pre-set confines. It is a more distributed, more participatory, more decentralized approach to innovation, based on the observed fact that useful knowledge today is widely distributed, and no company, no matter how capable or how big, could innovate effectively on its own. Some open innovation examples include:
Samsung is a leader in innovation in today’s market, advocating for open innovation and partaking in innovation collaboration with start-ups. Their innovation process divides itself into 4 categories: partnerships, ventures, accelerators, and acquisitions.Partnerships are collaborations between companies, often start-ups. These usually aim for new features or integrations with Samsung’s existing products. Ventures are investments into early-stage start-ups. These bring Samsung revenue in case of exits and provide the company with access to new technologies that they can learn and benefit from. Accelerators provide start-ups with an innovative environment to create new products, offering an initial investment, facilities to work in, and some resources to help along the way. The goal of this effort is that internal start-ups end up becoming a part of Samsung’s product portfolio, serving as learning experiences for the company.
While Samsung demonstrates success in open innovation by systematically collaborating with start-ups, Lego exhibits how engaging with customers directly can also increase productivity. By activating users through its Create and Share site, it allows community members to share their own product designs and Leo pictures. It also offers customers access to the Lego Ideas site, where new product ideas can be generated.
A specific example of the ways in which this open innovation method has benefited Lego is its mini-Big Bang Theory Lego set, which was a community-based product that originated in Lego ideas. When the number of supporters for an Idea reaches 10,000, Lego evaluates the design, and if it is approved, the design can be released into stores under the Lego Ideas product label. When a product idea is approved, the original community member(s) that ideated the product are provided monetary compensation.
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