Innovation: definitions

To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination and initiative in deriving greater or different values from resources, and includes all processes by which new ideas are generated and converted into useful products or services. Innovation has to further satisfy the needs and expectations of the users. Innovation is also synonymous of risk-taking initiatives.

Innovations may be divided into two broad categories:

• Evolutionary innovations (continuous or dynamic evolutionary innovation) that are brought about by many incremental advances in technology or processes
• Revolutionary innovations (also called discontinuous innovations) which are often disruptive and new.

Based on “Oslo Manual”[1], 3rd edition, 2005, we can consider the following explanation: "An innovation is the implementation of a new or significantly improved product (good or service), or process, a new methodology, a policy, or a new organizational method in business practices, workplace organization or external relations."

The minimum requirement for an innovation is that the product, process, methodology or organizational method must be new (or significantly improved) to the organisation. Innovation activities are all scientific, technological, organizational, financial steps which actually, or are intended to, lead to the implementation of innovations. Innovation activities also include R&D that is not directly related to the development of a specific innovation.

When it comes to the definition of innovation, one should consider that a particular definition exists for every specific environment. Dictionaries give generic definitions while organisations tend to produce one focused on their field of expertise. 

Looking into dictionaries, we got the following definitions:

- Definition from Merriam-Webster dictionary:

The introduction of something new; the act or process of introducing new ideas, devices, or methods; a new idea, method, or device: novelty

- Definition from Larousse dictionary:

Ensemble du processus qui se déroule depuis la naissance d'une idée jusqu'à sa matérialisation (lancement d'un produit), en passant par l'étude du marché, le développement du prototype et les premières étapes de la production.

- Definition from UK Department for Business Innovation and Skills:

Innovation is the application of knowledge to the production of goods and services. It means improved product and service quality and enhanced process effectiveness.

- Definition from the EU Innovation Union Initiative:

Innovation is the ability of individuals, companies and entire nations to continuously create their desired future.[2] Innovation refers to the creation of new or significantly improved: products, processes, marketing and organisation that add value to markets, governments and society.

The process used to develop a definition of innovation here relies on the common research process. It started with the collection of information and data for the purpose of making the right selection in wording. Then publication research, interviews, surveys and other documents were analysed and checked against the environment to capture the most appropriate significant elements. Finally, the concepts expressed were concentrated in the simplest but precise definition allowing an organisation to innovate for customers on a broad field of actions.

From the application of the above mentioned methodology, the following definition of innovation popped up:

"Innovation is the process of translating an idea or invention into a deliverable or service that creates value for which users will pay".

Main types of innovation

1) A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics. Product innovations can utilize new knowledge or technologies, or can be based on new uses or combinations of existing knowledge or technologies.

2) A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. Process innovations can be intended to decrease unit costs of production or delivery, to increase quality, or to produce or deliver new or significantly improved products.

3) A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing. Marketing innovations are aimed at better addressing customer needs, opening up new markets, or newly positioning a firm’s product on the market, with the objective of increasing the firm’s sales.

4) An organizational innovation is the implementation of a new organizational method in the firm’s business practices, workplace organization or external relations. Organizational innovations can be intended to increase a firm’s performance by reducing administrative costs or transaction costs, improving workplace satisfaction (and thus labour productivity), gaining access to non-tradable assets (such as non-codified external knowledge) or reducing costs of supplies.

[1] The Oslo Manual, developed jointly by Eurostat and the OECD, defines innovation as "the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations." It differentiates between 4 types of innovations, namely "Product Innovation", "Process Innovation", "Marketing Innovation", and "Organisational Innovation" (OECD, 2007).

[2] John Kao, ‘Innovation Nation’ (2007)