Unit 1: Definition and Concepts of Innovation

Unit 1: Definition and Concepts of Innovation

• Innovation is bringing something new and unknown into a specific context. It challenges routine and faces resistance from individuals and organizations.
• Innovation involves transforming an idea into a new or improved salable product or process in industry and commerce.
• An idea, invention, or discovery becomes innovation when it enters the market.
• Innovation is a set of activities within a given time and place that leads to the successful introduction of a new or improved product, service, or management/organizational technique into the market for the first time.
• Innovation is synonymous with producing, assimilating, and successfully exploiting a novelty in economic and social spheres, providing solutions to problems and societal needs.
• Innovation includes the introduction of a new product, production method, marketing method, or organizational method within a company.
• Innovation is the transformation of an idea into a new saleable product, an operational process in industry and commerce, or a new method of social service. A crucial aspect is commercialization; if there is no market introduction, there is no innovation.
• Innovation is not simply creating new products, inventing something non-commercial, or research. It isn't necessarily linked to technology, nor does it automatically generate economic progress. Ideas alone are not innovation.

Innovation vs. Research

• Research is not essential for innovation. While research can be a path to accessing technology, other methods include acquiring technology, embedded technology in capital goods, licenses, technical assistance, and agreements with other companies (alliances).
• Innovation and research are distinct concepts: Research is a process, whereas innovation is the introduction of something new to the market or society.
• Research can be categorized as basic or fundamental, applied, or experimental or technological.

Ways to Innovate: Types of Innovation

• Innovations can focus on product, process, commercialization, and organization.

Four Types of Innovation

• Product Innovation: Innovating existing products (improving them, creating an entirely new product) to expand market reach or satisfy new needs.
• Process Innovation: Improving internal operational methods to boost efficiency, quality, or cost-effectiveness.
• Business Model Innovation: Creating new revenue streams or service offerings.
• Management Innovation: Changing organizational structures, management techniques, or leadership strategies to support and drive innovation.

Where to Innovate: Examples for Schumpeter

• New good
• New production method
• New market
• New supply source
• New market structure

Technological Innovation Examples

• New material (e.g., graphene)
• New components/sub-systems (e.g., airbags, circuit boards)
• New products based on simple principles (e.g., electric toothbrush)
• New complex systems (e.g., autonomous vehicles, internet)
• New packaging/use (e.g., ibuprofen, coffee)
• New ingredients (e.g., fiber optics, bags, environment considerations)
• New procedures/equipment (e.g., 3D printers for prototypes)

Commercial Innovation Examples

• New product use/application
• New product distribution strategies (e.g., franchising, online shopping, vending)
• New use of existing products (e.g., influencers)
• New commercial systems (e.g., PayPal, 1-Click payments, Vinted)

Ways to Innovate: Organization

• Organizational structure is essential to foster innovation within businesses with facilities designed to promote cross-functional collaboration.
• An example, Steve Jobs, personally designed Pixar facilities to encourage the exchange of ideas and collaboration. A central atrium with restrooms, lockers, and a cafeteria ensured people from different departments interacted.

Impact on Market: Types of Innovation

• Architectural innovations: Significant improvements that build on existing market products.
• Disruptive innovations: New technologies or business models that significantly impact the market.
• Incremental innovations: Continuous, gradual improvements to existing products and services.
• Radical innovations: Transformative breakthroughs that create new markets.

Knowledge as a Basis for Innovation

• Precisely, innovation is any change grounded in knowledge that adds value.
• Innovation stems from the application of knowledge and generates value.
• Two important knowledge types are:
  • Know-about: Easily transferable public knowledge.
  • Know-how: Tacit and difficult to codify, based on skills and experiences.
• Combining tacit and explicit knowledge is essential for successful innovation within companies.

Types of innovation based on organizational aspects

• Operational organization: The type of organizational structures used for efficient resource allocation and operational planning, with defined hierarchical controls.
• Innovative organization: A flat hierarchical, process-driven structure emphasizing idea generation. It is built on autonomy, project participation, and the need to identify individuals with technical and creative insight.