Innovation

Innovation is the development of new customers value through solutions that meet new needs,
inarticulate needs, or old customer and market needs in value adding new ways. This is accomplished
through more effective products, processes, services, technologies, or ideas that are readily available
to markets, governments, and society. Innovation differs from invention in that innovation refers to
the use of a better and, as a result, novel idea or method, whereas invention refers more directly to
the creation of the idea or method itself. Innovation differs from improvement in that innovation
refers to the notion of doing something different (Lat. innovare: "to change") rather than doing the
same thing better.

The word innovation derives from the Latin word innovates, which is the noun form of innovare "to
renew or change," stemming from in"into" + novus"new". Diffusion of innovation research was
first started in 1903 by seminal researcher Gabriel Tarde, who first plotted the S-shaped diffusion
curve. Tarde (1903) defined the innovation-decision process as a series of steps that includes:

1. First knowledge
2. Forming an attitude
3. A decision to adopt or reject
4. Implementation and use
5. Confirmation of the decision

Fig-Diffusion curve

Invention and Innovation

An invention is a unique or novel device, method, composition or process. It may be an improvement upon
a machine or product, or a new process for creating an object or a result. An invention that achieves a
completely unique function or result may be a radical breakthrough. Such works are novel and not obvious
to others skilled in the same field.

Some inventions can be patented. A Patent legally protects the intellectual property rights of the inventor and
legally recognizes that a claimed invention is actually an invention. The rules and requirements for patenting
an invention vary from country to country, and the process of obtaining a patent is often expensive.

Another meaning of invention is cultural invention, which is an innovative set of useful social behaviours
adopted by people and passed on to others. Invention is also an important component of artistic and design
creativity. Inventions often extend the boundaries of human knowledge, experience or capability.

*Innovation is already describe above

In the social sciences, an innovation is something that is new, better, and has been adopted. The theory for
adoption of an innovation, called diffusion of innovations, considers the likelihood that an innovation is
adopted and the taxonomy of persons likely to adopt it or spur its adoption. This theory was first put forth by
Everett Rogers. Gabriel Tarde also dealt with the adoption of innovations in his Laws of Imitation

Invention happens when someone comes up with a novel technology, creating something that hasn't been
one before. Innovation is when a new technology or something else novel, changes society, such as when a
new product generates a new market.
Both describe the creation of something new, even an invention must be materialized in some form.
Innovation adds value or serves a need, whereas invention is new, but may just be novel. Invention is brand
new, whereas innovation may be a different application or modification of something already existing.

There is a subtle difference between these two words, but it is an important one for Business Studies
students.

Invention if the formulation of new ideas for products or processes

Innovation is all about the practical application of new inventions into marketable products or
services

For all the talk about protecting innovation, we've often pointed out that the patent system seems to do the
exact opposite -- making it more difficult for those who are actually innovating, while giving money to those
who haven't done anything at all. Last year, Michael Schrage wrote an interesting piece pointing out the very
important differences between invention and innovation, where he noted that innovation is more important --
but the patent system is more about protecting invention. Basically, plenty of people or companies who
"invented" an idea were never able to capitalize on the idea at all. It took others who actually innovated and
built off that idea to make a product that actually had an impact on the world.. In a market driven economy,
the real winner is the company that can make something valuable through innovation -- not the inventor who
happens to come up with something that the market may or may not want.

Creativity is seeing what everyone sees and thinking what no one else has thought before. Invention is
transforming these new thoughts into tangible ideas. Innovation is introducing these ideas to the end-user.
Innovation is channelling creativity (managing its application i.e. invention) so as to produce ideas/products
that people can and wish to use (i.e. marketable).
For an invention, the focus is on novelty and this is a key criterion for patenting. In other words, it must be
new to its field all over the world. Innovation on the other hand does not have to be new except in a specific
situation. Thus, as long as a firm (for instance) is having something for the first time, it is innovative in their
context irrespective of whether it is new to their industry, country or the world.
Characteristically, an invention is anything that is novel and potentially practically applicable; an innovation
is essentially novel, practically applicable and introduced to the market. Thus innovation may be seen as
equal to invention plus exploitation i.e. invention plus commercialization and/or application of new
knowledge in production in a particular environment.

Sources of innovation

In business, innovation can come from a variety of different sources. Sometimes it is the result of
specifically focusing on creating new ideas, whereas other times it can be unexpected and the result of a
spontaneous reaction to a particular need.

The main source of business innovation is directly from employees. Your employees know the specific part
of the business that they are involved with very well. Therefore, innovations come naturally to them. As they
go about day to day operations, employees identify areas that are in need of improvement or could be done
differently. Often, they will have their own ideas about solutions to problems or ways to address certain
needs. Encouraging employees to bring these ideas forward and then supporting their development can
significantly increase the amount of successful innovation in your business.
Employees can also be asked to specifically focus on innovation. Many businesses set aside time and
conduct group brainstorming' sessions to encourage the creativity and the generation of new ideas that the
business can investigate and pursue further.

Another important but commonly overlooked source of innovation are customers. Your customers know
what they want and often have innovative ideas about how their needs could be better met through new
products and services. Taking the time to listen to what your customers are saying can greatly increase the
amount of innovative ideas that flow into your business.

Your business competitors can also be a source of innovation. The important thing to remember is not to
simply copy the products your competitors are successful with, but to analyse them and work out what you
could do better. Consider what makes their product a success and try to innovate on that so that you have
some form of market advantage over the competition.

In some industries, the importance of research and development departments cannot be overlooked.
Organisations invest large amounts of resources into research and development in order to come up with a
new idea that they can make commercially successful. However, you can also conduct research on a small
scale by conducting customer and employee surveys or analysing your past successes and failures.

Understanding how to identify and utilise the potential of these sources of innovation is important to the
success of any business in a competitive market. Avoid focussing on any one source of innovation and try to
be open to new ideas wherever they happen to come from.

Peter Drucker, one of the greatest management thinkers from the last century, defined in his book
Innovation and Entrepreneurship (1986) 7 classes of OPPORTUNITIES. He named these the
"SOURCES OF INNOVATION", namely:

1. The Unexpected: An example of the unexpected is the development of NutraSweet. A chemist

developed a new chemical. Accidentally he got some of it in his mouth. To his surprise it tasted very
sweet. This was the start of a development trajectory that took many years before NutraSweet was
introduced by Searle into the market.
2. Incongruities: Incongruities or conflicts between opposing functions, requirements or values may be
the start of an innovation. For example the request for a small car with still enough space on the
inside seems to be incongruent. This however was solved in a new design as the Smart.
3. Process Needs: An old proverb says that necessity is the mother of invention. In the old days of
the US many unskilled immigrants from Europe arrived. They were peasants that lacked in skills for
the manufacturing of sophisticated artefacts such as guns. In those days one made every component
of these guns by hand. To let them fit to each other and work properly required high skills in
manufacturing. By making machines more precise and introducing standardization of the artefacts
one could produce thousands of components individually. The machine or gun could be assembled
using arbitrarily with ever component from the stores. The individual tasks could easily be learned by
the immigrants, without years of training to become an overall master. In this way they could profit
maximally from the existing economies of scale and learning curve.
4. Industry and Market Structure: Industry markets and market structure may offer opportunitys for
new types of services. Outsourcing of activities such as maintenance of the IT infrastructure is an
example. Other examples are the merging of industrys such as for example the merging of the
computer industry with consumer electronics or IT with business consulting services. The X box of
Microsoft is just one example from many.
5. Demographics: Demographics have long been a major source of innovation creating opportunities
for new types of products and services. Life style drugs such as Viagra are just examples where the
growing group of elderly people who feel themselves still very healthy and who would like to enjoy
life longer can conquer the effects of biological aging.
6. Changes in Perception: An example of changes in perception as source of innovation is the
following. In older days health was seen as related to body mass, meaning fatter people were
perceived as more healthy. In the last century this perception changed as a result of medical studys
that revealed that overweight was a risk factor. Since that time many light products have come to the
 market. Many substitutes of sugar have been developed such as NutraSweet. Also substitutes of fat
have been developed although these have not been successfully introduced into the market yet.
7. New Knowledge: Last but not least new knowledge has produced many opportunities for new
products. The emergence of micro-electronics and new programming methods and tools,
biotechnology, nano-technology etc have been the main motors of innovation and progress over the
last decades. This will probably continue for the coming decades.

Importance or Benefits of Innovation

In the ever-changing world, innovation is the only key which can sustain long-run growth of the country.
More and more firms are realizing the importance of innovation to gain competitive advantage. Accordingly,
they are engaging themselves in various innovative activities, ranging from manufacturing processes,
product improvement, and brand building initiatives to customer satisfaction. Today, business environment
has become very dynamic with more demanding customers and intense market competition. To meet this,
firms are creating new products, solutions and services that provide a radically better experience for the
consumers.

Innovation is not only about technology, but is also about understanding and exploring untapped user needs
that require to be addressed in an efficient manner. It must occur at every stage of a product or solution
development and release cycle. Thus, managing innovation is fast becoming priority in a global business
environment.

Firms which innovate tend to survive and grow to a greater extent. The most successful individuals,
managers and team leaders in latest business world are the ones who are not only innovative in their own
work, but who encourage and assist others to be innovative in every aspect of their work.

Some of the key innovation areas are: product development and improvement; manufacturing processes;
creating entirely new set of products; etc. In area of supply chain management, innovations help in making
the supply chain more responsive, flexible and efficient. Supply chain innovation can be used to reduce
costs, offer better assortment of customer centric products, decreasing time to market and driving growth.

Innovation is the main idea in shaping corporate life and helping companies to adopt various strategic
options. It helps to reduce total cost of production; increase income avenues; maintain efficient operating
systems; etc. It enables to see potential acquisitions not only on cost basis, but also as a means of
accelerating profitable top-line revenue growth and enhancing capabilities. It also expands R&D base of the
country and brings latest technologies into the country. It also provides an edge in being able to enter new
markets faster and deeper.

Thus, the term 'innovation' is rightly referred to as changes to products, services, processes or business
models. To continue their growth and to attain newer heights, Indian firms need to recognise the importance
of 'innovation' for maintaining their competitive edge and fuelling further growth. Innovation may be linked
to performance and growth through improvements in efficiency, productivity, quality, competitive
positioning, market share, etc.

Innovation is important on a number of levels. It is important for nations and regions, for economic growth
and it are important for firms for survival and growth.

For firms, there are a number of reasons as to why innovation is important, and can be briefly summarised as
follows

Market
To survive adverse changes in operating circumstances;
To make life easier for their customers and help them improve their businesses;
To gain competitive advantage;
To protect market share;
To reposition an organisation and raise its market profile;
 To lead the market and reinforce a reputation as market leader;
To open new horizons so as to get out of a rut or avenues with limited potential;
External Forces
To comply with legislation (actual Or anticipated);
To reduce competition and/or the influence of competitors;
People and Organisation
To stimulate staff with interesting and challenging work;
To attract and retain higher calibre staff;
To provide stability for the workforce;
To encourage those with good ideas to approach the company;
To attract alliance partners;
Financial
To attract extra funding;
To raise margins and profitability;
To drive total shareholder returns.

The Process of Innovation (By Jeffrey Baumgartner)

The innovation process, in the business context, is a structured action that is remarkably easy to implement.
It begins with a problem and ends with profit. As such, it is the ideal business process. So it is remarkable
that so few businesses have actually implemented this structured innovation process. Fortunately, all you
have to do is read this and implement it in your firm!

Steps

1. Begin with a problem

The innovation process starts with a problem or possibly a goal. However, the fact that the business has not
already achieved the goal might be considered a problem. So, we can safely say the process begins with a
problem. All businesses have problems. Sales could be better, products could be better, processes could be
more efficient, and costs could be reduced and so on.

2. Convert the problem into a challenge

Once a problem has been identified, it needs to be converted into a challenge. A challenge is a short, terse
question that invites creative solutions. Example challenges include: "In what ways might we improve
product X?" and "How might we reduce wastage in our manufacturing process?" A challenge may also be in
the form of a call to action: "Sketch design ideas for product X" or "Use building blocks to demonstrate
ways in which we might combine processes in manufacturing." Formulating a good challenge that addresses
your problem is critical to the innovation process. If your challenge does not properly address the underlying
problem, you may get a lot of ideas -- but they won't solve your problem and therefore are unlikely to
become innovations!

3. Challenge colleagues to suggest creative solutions

Once you have a terrific innovation challenge, you need to communicate it to colleagues -- or others such as
business partners, customers or even the public -- so that they can generate ideas. How you communicate
depends on the method of idea generation you will use for each instance of the innovation process.

4. Collaborative idea generation

Idea generation might be in the form of a brainstorming activity, through the use of real idea management
software (one like our Jenni, which uses ideas campaigns based around innovation challenges) or a team
may be assigned to devise and develop ideas. You could even generate ideas yourself, but as a general rule,
diverse teams generate more creative (both in terms of quantity and quality) than individuals -- at least in the
right circumstances.

Whatever method of idea generation you use, it should ideally be in a collaborative environment in which
people can work together to develop ideas. Ideally, there should be no criticism, censorship or destruction of
ideas during this phase. You want to encourage people to think creatively and be unafraid to suggest ideas.
Early criticism of any kind will only make people reluctant to share ideas, especially their most outlandishly
creative ideas (in other words, the best ideas), for fear of also being criticised.

Note: lots of people think that idea generation is the most important element of the innovation process. It's
not. A great idea, unimplemented, is worthless to business. Nevertheless, you do need ideas to keep the
process going and creating an environment for generating creative ideas means that the resulting innovations
will be more.. Innovative!

5. Combine and evaluate ideas

With lots of ideas in the pot, the next step is to combine similar ideas into idea clusters or big ideas. Each
idea cluster can be processed as a single idea, thus making the next steps of the process more efficient.

This done, you can then evaluate ideas with an evaluation matrix in which promising ideas are compared to
relevant business criteria. The better the idea meets each criterion, the higher its score. In the end, those
ideas with the highest evaluation scores are taken to the next step.

Note: evaluators tend to be overly critical of ideas. Hence it is important to ask them not only what does not
work with an idea, but also to ask them how these problems might be dealt with in order to improve the idea.

6. Develop ideas

How you develop ideas depends on the innovation challenge and the kind of ideas generated. New product
ideas might be developed into prototypes. Process efficiency ideas may be modelled. Marketing ideas may
be evaluated in consumer surveys and so on. The purpose of developing ideas is to test them in the business
environment and, if no insoluble problems are discovered, prepare them for implementation.

In the case of highly creative ideas, it is usually best to create a prototype if at all possible. A prototype
makes it easier to sell a radical idea to managers, committees and other dangling who will be tempted to kill
it off.

7. Implement ideas

Finally, you are now ready to manufacture your new product, restructure your processes or do whatever is
necessary to turn the evaluated and developed ideas into implementations that generate value for the
organisation. It is at this step that creative ideas grow up and become innovations.
If ideas are radically different to business as usual or if they require substantial investment, it is wise to
implement them with a series of milestones along the way. This enables you to review the implementation of
the idea in order to ensure it is either delivering value or retains the potential to deliver value at a future
milestone. Although many organisations today make it difficult to implement radical ideas, once those ideas
are launched as projects, the responsible teams are often remarkably reluctant to stop the implementation for
fear of reprisals, losses or other consequences. You need to minimise those consequences so under-
performing ideas can be killed and resources can rapidly be reinvested in promising new ideas.

A Scalable, Repeatable and Effective Process

There are three terrific qualities of the innovation process. Firstly, it is scalable. An individual freelancer can
use it to innovate in her business, small teams can use it for innovative projects, business units and even
entire companies can use it. Although, with large groups, specialised idea management software is needed to
capture and facilitate the processing of the ideas efficiently.

Secondly, the process is repeatable. A company can have numerous instances of the innovation process in
action at all times. A team leader can launch new challenges once the ideas from old challenges have been
implemented (or even sooner in some instances).

Thirdly, the process is effective. It is based on a combination of Creative Problem Solving (CPS) and
standard business processes. It has been proven again and again. Indeed, it should be clear that the
innovation process enables you to align innovation with strategy, focus creative thinking on current business
needs and combine multiple ideas in order to develop comprehensive solutions to all kinds of business
problems.

And, as we stated in the beginning, it is a simple process; one that can readily be implemented in most
companies. Although, you will also need to have something of a culture of innovation in place in your firm
in order for the process to work. If new ideas are routinely criticised from conception and committees are so
risk adverse they are afraid to cross the street (as is typically the case without a culture of innovation), there
is little hope for the innovation process.

On the other hand, if new ideas are always welcome, the CEO really believes in innovation (rather than just
makes bland statements about it) and the company is willing to invest resources not only in innovation, but
also the implementation of radical ideas, the innovation process will perform wonderfully!

Fig: The Innovation Process Cycle