Understanding Innovation: Definitions, Types, and Principles

Innovation: Definition and Core Concepts

Innovation is the successful exploitation of new ideas. It encompasses the technical, design, manufacturing, and commercial activities involved in the marketing of a new process or equipment. It is the practical implementation of an idea into a new device or process. Innovation is a specific tool of entrepreneurs, serving as the means by which they exploit change as an opportunity for a different business or service. Note that innovation and invention are not the same things.

Types of Innovation

• Technological innovation: Improving a product’s functionalities or reducing its production cost relative to the state of the art, through the application of knowledge and competencies to tangible features of the production process or the product.
• Product innovation: Innovation embedded in a product or service supplied by the company.
• Process innovation: Changes in the way the company carries out its activities, such as production, quality control, logistics, or marketing.
• Radical innovation: Leaps or breakthroughs in product functionalities, determined by an evolution of internal knowledge and competencies—a growth of competencies that is organic and coherent with a company’s internal resources.
• Incremental innovation: Small improvements in a product‘s functionalities determined by an evolution in knowledge and competencies, representing organic growth of a company’s resources.
• Continuous innovation (competence enhancing): Improvements in product performance determined by an organic growth of a company’s knowledge and competencies.
• Discontinuous innovation (competence destroying): Improvements in product performance determined by a destruction followed by a reconstruction of a company’s knowledge and competencies.
• Modular innovation: Changes in one or more components of the product or process without significant changes in the overall architecture of the system.
• Architectural innovation: A change in the overall architecture of the system or in the way the single components of the system interact.

Criticism and Key Principles

• Feedback process: Fundamental principles emerge from applied activities.
• Serendipity: While conducting basic or applied research and development, you may unintentionally or unexpectedly run into a relevant innovation.
• Interconnectedness: Innovation is a bundle (continuum) of undetachable activities.