What is Innovation?
(Definition)
The word “innovation” is derived from the Latin verb innovare, which means to renew. In
essence, the word has retained its meaning up until today. Innovation means to improve
or to replace something, for example, a process, a product, or a service. In the context
of companies, however, the term needs a definition. In the complex context of business,
a definition is needed.
Innovation is a process by which a domain, a product, or a service is renewed and
brought up to date by applying new processes, introducing new techniques, or
establishing successful ideas to create new value.
The creation of value is a defining characteristic of innovation.
Why is innovation so important?
Organizations have several options to increase their competitiveness: they can strive for
price leadership or develop a strategy of differentiation. In both cases, innovation is
essential.
Companies that choose price leadership must secure their long-term
competitiveness by developing innovative, highly efficient processes. Process
optimization and continuous improvement in terms of costs are important for
them.
Companies that strive for a differentiation strategy need innovation to develop
unique distinguishing features to their competitors.
Many start-ups launch their activities by developing an innovative product or
service.
Continuous innovation is, therefore, crucial for all companies. The main difference is in
the focus of the innovation strategy, which varies considerably from company to
company.
Organizations can drive innovation using state-of-the-art innovation software.
Innolytics® Managing Director Dr. Jens-Uwe Meyer writes in his scientific paper
“Strengthening Innovation Capacity Through Different Types of Innovation Culture“:
“Although innovation has always been one of the driving forces in competition and has
always been a primary competitive dimension, the numerous studies and publications
of recent years show that the speed of change is increasing.”
This makes innovation one of the most important drivers for the long-term success of
companies. Accordingly, methods of collaboration and teamwork are increasingly being
used in numerous companies, for example,
to promote digital innovations and
overcome the challenges of digital change.
Innovation requires a higher degree of creativity than the operative business and a
clear innovation strategy, especially in the phase of the so called “fuzzy front end of
innovation“.
Concepts like lean innovation and the establishment of community-
based innovation networks become increasingly relevant.
Companies are using modern idea management software and innovation
management software to manage innovation efficiently.
The Right Mindset for Innovation
Innovation requires more creativity and more willingness to take risks than the
implementation of typical projects. To successfully realize innovation projects, a
different mindset is needed. We have created four cartoons, which you are welcome to
include in presentations or on your website with reference (backlink) to this page.
Break the rules!
With traditional approaches and conventional methods, you will often not get anywhere
in the field of innovation. Challenge the status quo consistently! And explore new paths
off the beaten track.
Collect ideas everywhere!
Innovation projects constantly need new ideas: To overcome obstacles, to change
concepts, and to optimize strategies.
Believe in the impossible!
Imagine how your innovation will look like in reality. And believe that you will be able to
overcome all obstacles on the way to realization.
Put together an innovation team of individuals with different
perspectives and thinking styles!
Innovation needs the diversity of various competencies and diverse ways of thinking.
The Different Types of Innovation
In the context of businesses, there are different types of innovation.
Process improvement and organizational innovation: The improvement of
processes through continuous improvement and the development of new
solutions.
Product development: The development of innovative products or product
features.
Service innovation: The creation and introduction of new services for customers
and partners.
Business Model Innovation: The development of innovative business models
and new revenue streams.
Digitalization and digital transformation also require companies to rethink and develop
new approaches.
Many Companies Focus on Incremental Innovation
There are different degrees of innovation. The mere improvement – for example, of
processes or products – is called incremental innovation. Major innovations that lead to
substantial changes are called disruptive innovation or radical innovation.
Incremental innovations are, for example, the optimization of existing processes
and procedures or a product line extension.
Disruptive Innovations are, for example, major innovations such as iTunes and
Google Android. These are often referred to as “digital disruption”: Innovations
that change the logic of existing markets.
The Difference Between Incremental and Disruptive Innovation
For many companies, innovation means taking existing products and changing details:
The color, the form, the functionalities, the size, etc.
This form of incremental innovation ensures the competitiveness of companies in
existing markets.
In future markets, incremental innovation is often no longer sufficient. Companies
must radically reinvent products and services.
To ensure their long-term innovation capability, companies worldwide have established
an idea management and innovation management system that provides a structured
approach: From the development of an innovation strategy to setting up an innovation
roadmap and successfully implementing innovation.
Managing Incremental and Disruptive Innovation
For companies, setting up an innovation management is important in order to keep pace
with changing customer needs.
Incremental innovation provides competitive advantages in terms of production
costs, functionalities, or equipment.
Conventional innovation management often does not go beyond incremental
innovation: products are improved, but not reinvented.
With methodologies like the Stage-Gate Model for the innovation of process and
product development, however, companies quickly reach their boundaries, –
especially in supersaturated markets.
Particularly in times of digital change, in which new customer needs emerge, companies
must be able to develop more far-reaching forms of innovation and bring them to market
successfully.
Disruptive Innovation Needs Different Approaches
Companies that want to drive disruptive innovation forward need to take a different
approach and pursue a revolutionary path in addition to traditional methods.
More and more businesses realize that different approaches are critical to long-
term growth.
Innovation has to be more radical in the future.
This requires rethinking. New management techniques are being sought. More
courage and willingness to take risks are necessary.
The result of such management approaches are new products and services for
tomorrow’s markets. Business models that are still impossible to imagine today will
emerge. Small teams that can act flexibly develop innovative concepts faster to market
maturity.
Methods for Managing Innovation
The methods of innovation management are as diverse as the types of innovation:
Innovation processes, with which developments are steered by a clearly
defined procedure through different stages and levels.
Open innovation and Customer co-creation: methods that integrate customers
directly into the development process.
Innovation labs: Business units in which employees work on the development of
innovations outside the daily business
Innovation challenges: Competitions in which employees are asked to contribute
solutions to overcome a company’s challenges.
It is essential to select the right tools for innovation projects and to build up
the innovation culture as well to increase the innovation capability of a company.
Using the Innolytics® Innovation Software, you can start right away to develop ideas for
different types of innovations. The software is free for up to 15 users.
