What is innovation?
Innovation is a broad term with many different definitions. There are many misconceptions about what innovation is. Some have the opinion that innovation is about completely new technologies, that only inventors innovate, that innovation applies only to products, and that innovation is only important when it results in a groundbreaking change. The reality around innovation is quite different. Read on to learn more about innovation theory.
Schumpeter's definition
Innovation is something that happens every day in both large and small forms. The word innovation derives from the Latin word “innovare” which means to renew or create something new. In 1934, the Austrian economist Joseph Schumpeter tried to define innovation, and he emphasized that innovations are new combinations of new or existing knowledge and resources. This can happen in existing companies or through the creation of new companies. In order for an idea or invention to be characterized as an innovation, it must be applied in practice — that is, know that it is being sold in the market or put to its own use.
It is also important to point out that many ideas remain ideas precisely because there are deficiencies in technology, resources, materials, production skills and markets, among others. Schumpeter also placed great emphasis on the fact that innovations are the main driver of economic development. It can also be argued that innovations do not only bring about positive change for everyone in society. The market is disrupted by new waves of innovations, as a result of which old markets can disappear and new ones are created. A classic example is the company KODAK, where the introduction of digital cameras contributed to the bankruptcy of the company due to lack of restructuring.
Several types of innovation
There are different types and degrees of innovation that may be worth noting. Among the types of innovation we have include: product innovations that are new or significantly improved goods or services, process innovations that are new or significantly improved production technologies, distribution methods, or support activity, organizational innovations that are new or improved organization of a company, and market innovations that are the introduction of new or improved marketing method/strategy (social media marketing).
Of various degrees of innovation, we have, among other things: incremental innovations that are small changes of existing products. This is, adaptations and modifications to improve the product. We can refer, for example, to the iPhone that during each generation has updated the mobile with new features, such as the Iphone X's facial recognition. Furthermore, we have radical innovations such as the introduction of completely new products that can often be disruptive in the market. That is, the innovations can destroy too many companies in competing and the same market. Here we can use AirBnB and Uber as examples that were disruptive in the rental and taxi market. We also have technological change.
Technological shift is something we in the modern world have been going through in recent years. This is a set of innovations that contribute to significant societal change. In the past, we could look at the introduction of electricity and computers, but now we can look at how applications and social media connect the world and challenge older methods of communicating.
Innovation in today's market
The demands for innovation and innovation are now higher than ever. Competition in the market, as well as the costs and risks of R&D, are constantly growing and change seems to be the only constant. In everyday speech, an innovation associates with new and exciting products, as these often receive a lot of attention, but innovation can be much more than just new inventions.
Innovation Norway and the Government define innovation as a new commodity, production process, service, application or organizational form that is launched on the market or adopted in production to create economic value (Ministry of Commerce, 2017). This is a definition where added value for society is an important factor as this creates business economic results and socio-economic benefits.
With this definition, one can imagine that a new idea or invention is not an innovation until it is in practical application and creates value. Which is in line with Schumpter's mindset.
We at Link have experience in innovative processes and business development. Get in touch with us to hear how we can assist you and your company within the topic.
Sources:
Trott, 2017.
Posted by
Hana Kolaković
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