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The term innovation means a new way of doing something. It may refer to incremental, radical, and revolutionary changes in thinking, products, processes, or organizations. A distinction is typically made between invention, an idea made manifest, and innovation, ideas applied successfully. (Mckeown 2008) In many fields, something new must be substantially different to be innovative, not an insignificant change, e.g., in the arts, economics, business and government policy. In economics the change must increase value, customer value, or producer value. The goal of innovation is positive change, to make someone or something better. Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy.

Innovation is an important topic in the study of economics, business, technology, sociology, and engineering. Colloquially, the word "innovation" is often synonymous with the output of the process. However, economists tend to focus on the process itself, from the origination of an idea to its transformation into something useful, to its implementation; and on the system within which the process of innovation unfolds. Since innovation is also considered a major driver of the economy, especially when it leads to increasing productivity, the factors that lead to innovation are also considered to be critical to policy makers.

Those who are directly responsible for application of the innovation are often called pioneers in their field, whether they are individuals or organisations.


In the organizational context, innovation may be linked to performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share, etc. All organizations can innovate, including for example hospitals, universities, and local governments.

While innovation typically adds value, innovation may also have a negative or destructive effect as new developments clear away or change old organizational forms and practices. Organizations that do not innovate effectively may be destroyed by those that do. Hence innovation typically involves risk. A key challenge in innovation is maintaining a balance between process and product innovations where process innovations tend to involve a business model which may develop shareholder satisfaction through improved efficiencies while product innovations develop customer support however at the risk of costly R&D that can erode shareholder return.

Conceptualizing innovation

Innovation has been studied in a variety of contexts, including in relation to technology, commerce, social systems, economic development, and policy construction. There are, therefore, naturally a wide range of approaches to conceptualizing innovation in the scholarly literature. See, e.g., Fagerberg et al. (2004).

Fortunately, however, a consistent theme may be identified: innovation is typically understood as the successful introduction of something new and useful, for example introducing new methods, techniques, or practices or new or altered products and services.

Distinguishing from Invention and other concepts

"An important distinction is normally made between invention and innovation. Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice" (Fagerberg, 2004: 4)

It is useful, when conceptualising innovation, to consider whether other words suffice. Invention - the creation of new forms, compositions of matter, or processes - is often confused with innovation. An improvement on an existing form, composition or processes might be an invention, an innovation, both or neither if it is not substantial enough. It can be difficult to differentiate change from innovation. According to business literature, an idea, a change or an improvement is only an innovation when it is put to use and effectively causes a social or commercial reorganization.

Innovation occurs when someone uses an invention or an idea to change how the world works, how people organize themselves, or how they conduct their lives. In this view innovation occurs whether or not the act of innovating succeeds in generating value for its champions. Innovation is distinct from improvement in that it permeates society and can cause reorganization. It is distinct from problem solving and may cause problems. Thus, in this view, innovation occurs whether it has positive or negative results.

Innovation in organizations

A convenient definition of innovation from an organizational perspective is given by Luecke and Katz (2003), who wrote: "Innovation . . . is generally understood as the successful introduction of a new thing or method . . . Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new products, processes, or services.

Innovation typically involves creativity, but is not identical to it: innovation involves acting on the creative ideas to make some specific and tangible difference in the domain in which the innovation occurs. For example, Amabile et al. (1996) propose: "All innovation begins with creative ideas . . . We define innovation as the successful implementation of creative ideas within an organization. In this view, creativity by individuals and teams is a starting point for innovation; the first is necessary but not sufficient condition for the second".

For innovation to occur, something more than the generation of a creative idea or insight is required: the insight must be put into action to make a genuine difference, resulting for example in new or altered business processes within the organization, or changes in the products and services provided.

A further characterization of innovation is as an organizational or management process. For example, Davila et al. (2006), write: "Innovation, like many business functions, is a management process that requires specific tools, rules, and discipline."

From this point of view the emphasis is moved from the introduction of specific novel and useful ideas to the general organizational processes and procedures for generating, considering, and acting on such insights leading to significant organizational improvements in terms of improved or new business products, services, or internal processes.

Through these varieties of viewpoints, creativity is typically seen as the basis for innovation, and innovation as the successful implementation of creative ideas within an organization (c.f. Amabile et al. 1996 p.1155). From this point of view, creativity may be displayed by individuals, but innovation occurs in the organizational context only.

It should be noted, however, that the term 'innovation' is used by many authors rather interchangeably with the term 'creativity' when discussing individual and organizational creative activity. As Davila et al. (2006) comment,"Often, in common parlance, the words creativity and innovation are used interchangeably. They shouldn't be, because while creativity implies coming up with ideas, it's the "bringing ideas to life" . . . that makes innovation the distinct undertaking it is."

The distinctions between creativity and innovation discussed above are by no means fixed or universal in the innovation literature. They are however observed by a considerable number of scholars in innovation studies.

Innovation as a behavior

Some in depth work on innovation in organisations, teams and individuals has been carried out by J. L. Byrd[1], PhD who is co-author of "The Innovation Equation." Dr Jacqueline Byrd is the brain behind the Creatrix Inventory which can be used to look at innovation and what is behind it. The Innovation Equation she developed is: Innovation = Creativity * Risk Taking

Using this inventory it is possible to plot on axis where individuals fit on their Risk Taking and Creativity.

Economic conceptions of innovation

Joseph Schumpeter defined economic innovation in The Theory of Economic Development, 1934, Harvard University Press, Boston.[2]

The introduction of a new good -- that is one with which consumers are not yet familiar -- or of a new quality of a good.

The introduction of a new method of production, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially.


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