What Is Innovation?


November 27, 2018

CEO's keep talking about innovation. There isn't any game without it, they say. But it is a term often misunderstood. People wonder--

What exactly is innovation? What does innovation mean?

As a corporate creativity blogger, my focus is not on the academic definition. Here I am explaining the idea of innovation in the business and corporate scenarios. 

Innovation Meaning:

Here are some ways in which the word innovation is used in practice:

  • 1: Innovation as improvements in technology and processes.
  • 2: New product innovations (also service innovations)
  • 3: Making technology useful and available to a larger audience.
  • 4: Business model innovation for getting the competitive advantage in the marketplace.
  • 5: Marketing innovations
  • 6: Financial innovations.
  • 7: Organisational innovations.
  • 8: Social innovation: Though not business related, it is often talked about in business circles in relation to CSR activities of organizations.

Innovation Is Change!

Innovation is always about changing 'something'. We take 'something' existing and change it to achieve better results. It is about new ideas which provide novel solutions for existing problems, or ideas that-- improve the productivity of the existing solution, remove bottlenecks in processes, or reduce the cost of production. 

These ideas could be small or big in themselves, but they change the products, services and market behavior in significant ways.  

This 'something' could be a product, a process, a social situation, or the way we do our business, run our organization.

It's important to underline here that many business leaders and managers use the term 'innovation' as a synonym for any new improvement, they throw it around like a buzzword. But an incremental change in the product, service, process, or situations 'is not innovation!'

Let there be no confusion here. Innovation is about introducing something new. Newness is an important parameter for innovations. But the 'new improved' is not innovation. There must be a significant change. Changes which are non-linear, not predictable.

What is a significant change?

A significant change is the first requirement to call something innovation. Which means dramatic improvements in productivity, lowering of cost to a level where competition becomes irrelevant, or the evaluation parameters of the industry suddenly change.

That's why innovations are disruptive. And game-changers. They shake-up the status-quo. Break business and industry assumptions. Innovation also demands new infrastructure, support system, and skill-sets. And ask for a new mindset.

These changes often involve technology breakthrough. And result in radical changes in industry benchmarks and practices.

To add clarity on the concept of innovation:

It is not just a change in technology or process or a product. It changes the way the market behaves, industry leaders re-think their evaluation parameters, customer's expectations change. 

Innovation creates new opportunities for entrepreneurs. New product categories, platforms, and business models appear.

We can say, innovations are not just an incremental stretch of a progressive straight line. It signifies a bend. And a leap up. Innovative changes are not just evolutionary, but revolutionary in nature.

Innovation Example

Nokia was a proactive company. it consistently upgraded their phones. Regularly introduced new features. These were incremental changes. Not exactly innovation. These could be called new and the improved versions in their product line.

Smartphones were an innovation. It changed the industry. It raised customer's expectations. An innovation wave was triggered resulting in new business opportunities for entrepreneurs who developed new applications to make the smartphones even more user-friendly. 

Innovation is about usefulness:

It's not possible to define innovation without factoring in-- usefulness.

We can say: 

Innovation is about significant changes to make a new idea or technology useful.

Throughout the world, many inventions happen in scientific laboratories. While the scientists appreciate these new ideas and inventions, receive awards for the efforts, the common people can't use these inventions.

Their inventions remain in the laboratories and the patent books. Until someone cracks a way to produce their invention on a large scale, at a cost affordable to people, and make it user-friendly so that people can actually use it in their lives. 

Computing technology was available for a long time. But confined in universities and big corporations. Entrepreneurs like Steve Jobs and Wozniak brought that technology to use for common people in the market. They created the user-friendly operating system, screens, icons, introduced mouse and made computers useful to a large number of people outside the academia.

3-D and Nano-technology are in focus right now. Drones and their potential uses are exciting the innovators throughout the world. They are working on innovative solutions to bring it to the market. To make it available to people. A whole new innovation wave is waiting to surge up and influence the lives of people. And the truth is, 3-D technology is not new, it was here for decades. More than 40 years!

This journey from invention to the practical solutions in the market is the innovation in its purest form. There are many inventions, patented but not serving mankind. Innovators apply their vision and skills to bring it to the masses. 

Now this journey leads to many new inventions. Creation of new machines, devices, applications. It also involves connecting the dots between available resources and solutions, developing and packaging them in such a way that these technologies become useful and add value to the life and business of the users.

Innovation adds value. Real value. Their impact is felt not just on the business and the market, but also on the healthcare, lifestyle, and the financial well-being of the society. Innovators create a better future by making the present more productive and useful. 

Product and Process Innovations:

Product innovations are talked about the most. Because these often accompany marketing and advertising hype.

Product innovation happens through new product developments or improving old products by making them better.

Process innovations often are in the background. And many times even shielded from the outside world. Because these improved processes give the cost and productivity advantage to the organizations. Some organizations choose to talk about it. And share it with others.

To give an example of process innovation, Ford's use of assembly line was a process innovation. (Yes, it is one of the most talked about process innovation. But, then it could get a place in the world's most significant innovations ever. And deserve that kind of attention)


Business Model Innovation:

Business model innovations are often less talked about. But its role is vital in the innovation game. Innovation in the business model makes sure the radical ideas are successful in financial terms as well. Because while everyone talks about the customer value creation, business models take care of the value creation and retention for the business organisation.  

These involve major changes throughout the organization. That's why established businesses find it difficult. On the other hand the entrepreneurial businesses take advantage as they can start afresh in the new paradigm and gain a competitive advantage.

With the advent of new technology and the digital economy, new business models are emerging. The business model decides which companies will remain profitable and dominate the marketplace in the long run.

Business model innovations often involve marketing innovations and financial innovations as well. 

Example Of Business Model Innovation

New players like Uber and Ola are in the same old business of transportation. But the way they serve the customer is different. They manage resources differently. That expands their fleet and reach faster than the traditional transportation companies who own the vehicles.

Many other entrepreneurs are adopting the 'freemium' model for customer acquisition. 'Software as a service' is gaining ground fast with cloud technology innovation.

Organizational Innovations: 

Organization culture plays a big part in making the innovations possible.

The way communication flows in an organization has a major impact on the innovation output in any organization. Even appraisal and evaluation parameters must change.

Many companies talk about innovations. They even have innovation as one of the core values. But they neglect the organizational innovation part of it. And fail.

Creating some new products alone can't give a competitive advantage. Organizational innovation is a must to deliver the innovation edge.

Role Of businesses in innovation process

Business houses play a vital role in innovative solutions. Because while the inventions can happen in secluded laboratories, innovation involves a lot many resources. 

The infrastructure and financial muscles of organizations make innovation possible. They also have the manpower and the managerial competencies to bring solutions to market.
 
Inventors often lack these qualities. 

Toady's successful market leaders like Apple, Google and Amazon are very aggressive on the innovation front. It's their strategic edge. But most organisations, even though they accept the benefit of innovations, resist new ideas and innovation in their organisations.

Why Businesses Resist Innovation?

Innovations are not accepted easily. Because it obsoletes many old resources and assets. The businesses must create new competencies. They have to look for new vendors. Incur their resources in new technologies. It's hard work!

As a result of innovation, old market leaders lose their position of power. Their cash cows become a liability! So, there is every bit of effort to discredit the new developments. Also, in the beginning, the innovative solutions are in their primary stage and face teething problems. This becomes a good ground for the critics and naysayers.

That's why many times the leaders don't pursue the innovative solutions created by their own research and development teams. They keep on investing and developing the old solution. And later they suffer when competition challenges them with the new paradigm.

Innovation is no more an exception but a norm now. That's why progressive business leaders are pushing their organisations to take it seriously. It's better to create the next big development and reap the rewards than to chase the disruptors and lose the market leadership.

Innovation: Talking Is Not Enough!

As per the state of innovation report 2018, about 85% top strategy leaders talk of the importance of innovation in business. But among them 78% are 

focusing only on incremental changes. It is tough to walk the talk
on breakthrough innovations. 

A brilliant depiction of the innovation paradox by Timo Elliot

Let's Summarise...

Innovation is not an incremental change. It is about changing the status quo. Something new, which is not just an improvement but a leap. Often a sideway leap!

innovations help bring inventions to market by making large-scale production possible. Innovators also ensure the products and services are affordable and useful to the users.

The business model innovations are needed to gain the value for the organization. It also involves financial and marketing innovations. To gain the competitive advantage businesses must work on the organizational innovation. 

Share Your Innovation Story With Us!

Feel free to connect with us. Share your success stories, we will publish it.
Let's make innovations happen.

Write to us at:
creativity.training@creacos.com

About the author 

Creacos

Puneet Bhatnagar is a business innovator, creativity and innovation coach. He is a columnist and author who writes on creativity and innovation.

He has trained 1000's of people from all walks from life--From CEOs, CFOs, R&D experts, Engineers, Marketing and Advertising experts, News editors...And combat fighters too!

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