Innovation theory: what is innovation?

Innovation is a broad term with many different definitions. There are several misconceptions about what innovation is. Some believe innovation is about entirely new technology, that only inventors do innovation, that innovation only concerns products, and that innovation only matters when it results in a groundbreaking change. The reality of innovation is quite different. Read on to learn more about innovation theory.

Innovation is something that happens every day, in both large and small forms. The word innovation comes from the Latin innovare, meaning to renew or make something new. In 1934 the Austrian economist Joseph Schumpeter tried to define innovation, emphasising that innovations are new combinations of new or existing knowledge and resources. This can happen in existing companies or through the creation of new ones. For an idea or an invention to be characterised as an innovation it has to come into practical use, meaning it is sold in the market or put to use by the organisation itself.

It is also worth bringing out that many ideas remain just ideas because of gaps in technology, resources, materials, production competence or market. Schumpeter also placed great weight on innovation as the most important driver of economic development. It can also be argued that innovations do not only bring positive change for everyone in society. The market is disturbed by new waves of innovation, which means old markets can disappear and new ones are created. A classic example is Kodak, where the introduction of digital cameras contributed to the bankruptcy of the company through a failure to adapt.

There are different types and degrees of innovation worth noting. Among the types are product innovations, which are new or significantly improved goods or services; process innovations, which are new or significantly improved production technologies, distribution methods or support activities; organisational innovations, which are new or improved ways of organising a company; and market innovations, which are the introduction of a new or improved marketing approach or strategy, such as social media marketing.

Among the degrees of innovation are incremental innovations, small changes to existing products. These are adaptations and modifications to improve the product. We can point to the iPhone, which with each generation has updated the phone with new features, such as face recognition in the iPhone X. Then there are radical innovations, the introduction of entirely new products that can often be disruptive in the market. That means the innovations can damage many companies in competing and adjacent markets. Here we can use Airbnb and Uber as examples that were disruptive in the rental and taxi markets. And then there is technological shift.

Technological shift is something we in the modern world have been through in recent years. This is a set of innovations that contribute to substantial societal change. Earlier we can look at the introduction of electricity and computers, but now we can look at how apps and social media connect the world and challenge older ways of communicating.

The demand for new thinking and innovation is higher today than ever. Competition in the market, along with the costs and risks of R&D, keeps growing, and change seems to be the only constant. In everyday speech innovation is associated with new and exciting products, since those often get a lot of attention, but innovation can be much more than new inventions.

Innovation Norway and the Norwegian government define innovation as a new product, production process, service, application or form of organisation that is launched in the market or put to use in production in order to create economic value (Ministry of Trade, 2017). This is a definition where added value for society is an important factor, since it creates business results and socioeconomic benefits.

With that definition you can think of a new idea or invention as not being an innovation until it is in practical use and creating value. Which is in line with the thinking of Schumpeter.

We at Link have experience with innovation processes and business development. Get in touch to hear how we can help you and your company within this area.

Sources:

Trott, 2017.

Written by

Hana Colakovic