Innovation

The term innovation comes from Latin word innovare meaning "creating something new." Hence, the most common definition of innovation emphasizes that "innovation is the process of converting the existing possibilities to new ideas and putting them to practical use. J.A. Schumpeter introduced innovations to the area of economic sciences.

Scientists often use a definition of innovation as the process of converting the existing possibilities in new ideas and putting them to practical use.

According to David Begg innovation is "the application of new knowledge in the production process"

The Process of Innovation

The whole process of innovation consists of the following parts:

• The invention - a new technical solution, not yet patented. Typically, the invention is the result of an idea.
• Innovation - the introduction of the invention for the production process.
• The project - the creation of a new product design, which is the result of innovation.
• Diffusion - the promotion and sale of the product

Sources of Innovation

We can distinguish three sources of innovation:

• Research (R & D),
• Purchase of new knowledge in the form of patents, licenses, technical services, etc.
• Purchase of the so-called. material technology, the innovative devices and machines with improved technical parameters.

Innovations reflect the level of innovation in the economy through their number. Each developed country tries to raise the level of innovation in its economy, because this directly affects the competitiveness of the country.

Features of Innovation

• Innovation is hard, purposeful, focused work that requires knowledge, diligence, perseverance, commitment. Innovators are required to use their strongest points. They induce positive effects in the economy and society, they are cause for changing entrepreneurs and consumers behaviour.
• Innovation is able to facilitate and hinder our life, by constantly complicating the environment. In the strict sense scientist omit innovations associated with the social and organizational change, focusing on technical and technological innovations. Technological innovation occurs when new or upgraded product is introduced or when new or modified process is used in production.
• Technological innovations are the result of innovative activity involving many steps in research, technical, organizational, financial and commercial areas.
• Process-oriented innovations cover the development of new methods, instruments and approaches as well as improving existing methods of production.
• Goal-oriented innovations focus around the formulation of new objectives and approaches to identify new and promising qualifications and the creation of new opportunities of employment in the labour market.
• Context-oriented innovations relate to political and institutional structures. They address the development of the labor market.

See also:

• Innovation process
• Stage-Gate process
• Innovativeness
• Innovative research
• Types of innovation
• Importance of technology

Examples of Innovation

• Developing a new product or service: Companies are always looking for ways to create products and services that solve customer problems or address a gap in the marketplace. For example, Apple's iPhone revolutionized the cell phone industry when it was first released in 2007.
• Improving an existing product or service: Companies can innovate by finding ways to make existing products better. For example, Apple continuously updates and improves the features of the iPhone with each new release.
• Reorganizing a process: Companies can innovate by finding ways to make internal processes more efficient. For example, Amazon has developed a sophisticated supply chain management system that is constantly being tweaked to improve efficiency and reduce costs.
• Introducing new technologies: Companies can innovate by introducing new technologies into their operations. For example, Tesla has developed advanced battery technology for its electric vehicles that has revolutionized the automotive industry.
• Rebranding and repositioning: Companies can innovate by finding ways to make existing products more appealing to customers. For example, Apple rebranded the iPhone from a device for tech-savvy early adopters to an everyday device for everyone.

Advantages of Innovation

Innovation can bring many advantages to organizations and individuals, such as:

• Improved Efficiency: Innovation often involves the improvement of existing systems, processes, and products. By introducing new technology and methods, organizations can streamline their operations and become more efficient.
• Increased Productivity: Innovative solutions can also lead to improved productivity. By introducing new processes and systems, organizations can reduce the amount of time and resources needed to produce a given product or service.
• Reduced Costs: Innovative solutions can also reduce the costs associated with producing and delivering goods and services. By using new technology and methods, organizations can reduce their overhead costs and increase their bottom line.
• Increased Profits: By introducing innovative solutions, organizations can increase their profits, as they are able to charge higher prices for their products and services or to increase their market share.
• Improved Quality: Innovative solutions can also lead to improved quality by introducing new methods to ensure higher quality products and services. This can help organizations to gain a competitive edge and build customer loyalty.

Limitations of Innovation

Despite its advantages, innovation also has certain limitations. These limitations include:

• Limited resources: Innovation requires significant resources such as capital, technology, and human resources. Companies may not have the necessary resources to finance or support the innovation process.
• Risk of failure: The process of innovation involves a certain amount of risk. Companies may invest a lot of money and resources in the process, only to find out that their innovation didn't work.
• Time consumption: The process of innovation can be time-consuming and costly. Companies need to dedicate enough time to research, develop, and test their ideas.
• Regulatory compliance: Companies must make sure that their innovations comply with all applicable laws and regulations. This can be a time-consuming and costly process.
• Market acceptance: Even if the innovation is successful, companies must still be sure that the market will accept the product. If not, the innovation could fail to gain traction.

Other approaches related to Innovation

Innovation has become a multidisciplinary concept, and many other approaches have been used to explore it. These include:

• The Open Innovation Approach, which emphasizes collaboration between organizations and the use of open platforms to facilitate the exchange of ideas and resources.
• The Design Thinking Approach, which emphasizes the development of an iterative process to prototype, test, and refine ideas.
• The Four Ps Approach, which suggests that innovation is a four-step process involving Problem Identification, Problem Solving, Prototyping, and Production.
• The Disruptive Innovation Approach, which suggests that innovation can create new markets and new value networks, thereby disrupting existing markets and value networks.

In summary, innovation is a complex concept that has been approached from numerous different perspectives, each of which provides a unique approach to understanding the process of innovation.

Innovation — recommended articles

Innovation process — Research and development definition — Process of innovation — Innovation and change — Technological innovations — Organizational innovation — Knowledge capital — Entrepreneurship and innovation — Exnovation

References

• Baumol, W. J. (2002). Towards microeconomics of innovation: Growth engine hallmark of market economics. Atlantic Economic Journal, 30(1), 1-12.
• Romer, P. M. (1990). Capital, labor, and productivity. Brookings papers on economic activity. Microeconomics, 1990, 337-367.