This document discusses different definitions of innovation from economists and organizations. It provides Joseph Schumpeter's definition from the 1930s that innovation includes new products, production methods, markets, supply sources, and forms of competition. The OECD's 1981 definition included scientific, technical and commercial steps for new products and processes. The document argues that innovation is more than words - it is a mindset and culture of willingness to take risks and celebrate failure. Effective innovation requires new ideas, motivated employees and understanding customer wants.

1. WHAT
IS
INNOVATION?
NOVEMBER
2010
Everyone
has
his
or
her
own
view
as
to
what
constitutes
innovation.
Is
innovation
only
about
new
to
the
world
products
or
services?
Is
invention
innovation?
©2010
INNOVATION
FOR
GROWTH
Austrian
economist,
Joseph
Schumpeter1,
defined
innovation
over
70
years
ago
as:
C
W
MOBBS
1. The
introduction
of
a
good
(product),
which
is
new
to
consumers,
or
one
of
higher
quality
than
was
available
in
the
past.
2. Methods
of
production,
which
are
new
to
a
particular
Email:
branch
of
industry.
These
are
not
necessarily
based
on
new
cwmobbs@innovationforgrowth.co.uk
scientific
discoveries
and
may
have,
for
example,
already
been
used
in
other
industrial
sectors.
www.innovationforgrowth.co.uk
3. The
opening
of
new
markets.
4. The
use
of
new
sources
of
supply.
5. New
forms
of
competition,
that
leads
to
the
restructuring
of
an
industry.
The
OECD2
defined
innovation
in
1981
as
consisting
“of
all
those
scientific,
technical,
commercial
and
financial
steps
necessary
for
the
successful
development
and
marketing
of
new
or
improved
manufactured
products,
the
commercial
use
of
new
or
improved
processes
or
equipment
or
the
introduction
of
a
new
approach
to
a
social
service.
R&D
is
only
one
of
these
steps.”
Both
these
definitions,
and
the
descriptions
set
out
in
Box
1,
include
some
common
words,
such
as
‘new’,
‘introduction’,
‘products’,
‘markets’
and
‘processes’,
although
none
in
its
entirety
fully
describes
truly
the
essence
of
innovation.
Why?
I
believe
that
innovation
is
more
than
mere
words.
Innovation
is
a
mind-­‐set,
a
culture,
a
desire
to
do
better,
a
willingness
to
take
risks
and
yes,
the
celebration
of
failure!
Think
of
Apple
and
Google,
both
companies
which
are
considered
to
be
truly
innovative.

2. Box
1
Having
considered
different
There
are
a
number
of
differing
views
as
to
what
constitutes
innovation,
definitions
of
innovation,
it
is
now
including
the
following:
worthwhile
looking
at
the
realities.
• “Innovation
is
the
successful
exploitation
of
new
ideas”
–
For
business
innovation,
the
“4Ps
Innovation
Unit
(2004)
UK
Department
of
Trade
and
Industry.
approach
can
be
used
to
explore
• “Industrial
innovation
includes
the
technical,
design,
opportunities
for
innovation.”5
manufacturing,
management
and
commercial
activities
involved
Essentially,
the
“4Ps”
relate
to
in
the
marketing
of
a
new
(or
improved)
product
or
the
first
innovation
focusing
on
the
product,
commercial
use
of
a
new
(or
improved)
process
or
equipment”
–
Chris
Freeman
(1982)
The
Economics
of
Industrial
Innovation,
2nd
process,
position
or
paradigm.
The
edition,
Pinter,
London.
first
two
are
obvious,
with
• “Innovation
is
the
specific
tool
of
entrepreneurs,
the
means
by
numerous
examples,
including
which
they
exploit
change
as
an
opportunity
for
a
different
revised
or
new
computer
operating
business
or
service.
It
is
capable
of
being
presented
as
a
systems,
new
car
models,
discipline,
capable
of
being
learned,
capable
of
being
practised”
–
Peter
Drucker
(1985)
Innovation
and
Entrepreneurship,
Harper
&
(product),
or
extensions
of
product
Row,
New
York.
ranges,
improved
operations
• “Companies
achieve
competitive
advantage
through
acts
of
(process).
Position
considers
the
innovation.
They
approach
innovation
in
its
broadest
sense,
target
consumer
and
the
purchase
including
both
new
technologies
and
new
ways
of
doing
things”
–
decision
rationale.
Examples
Michael
Porter
(1990)
The
Competitive
Advantage
of
Nations,
include
low-­‐cost
airlines
and
on-­‐
“Vivamus
porta
Macmillan,
London.
line
customisation
of
products.
• “An
innovative
business
is
one
which
lives
and
breathes
“outside
est
sed
est.”
the
box”.
It
is
not
just
good
ideas,
it
is
a
combination
of
good
ideas,
Paradigm
is
a
more
difficult
motivated
staff
and
an
instinctive
understanding
of
what
your
concept.
It
is
defined
as
“how
we
customer
wants”
–
Richard
Branson
(1998)
DTI
Innovation
frame
what
we
do.”5
Examples
Lecture.
include
new
platforms,
such
as
IBM,
reinventing
itself
as
a
consultancy
business,
or
i
Tunes.
Innovation
can
be
further
split
into
The
European
Innovation
Progress
Report,
20063
defines
incremental,
radical
and
innovation
as
being
“about
change
and
the
ability
to
manage
discontinuous.
The
former,
change
over
time.
Innovation
can
be
about
the
successful
generally
more
prevalent
is
‘doing
exploitation
of
new
ideas
in
the
form
of
a
new
or
improved
something
better’.
product
or
service
but
it
can
also
be
about
the
way
in
which
a
product
or
service
is
delivered.
Equally,
innovation
can
be
Radical
innovation,
which
is
more
about
creatively
positioning
(or
marketing)
an
existing
elusive,
is
doing
something
product,
or
about
changing
the
business
model
(a
new
different.
paradigm).”
Ahmed
and
Shepherd4
“discern
a
number
of
characteristics”,
The
most
elusive,
and
potentially
and
these
are
set
out
in
Box
2.
These,
it
will
be
noted,
go
even
threatening
is
discontinuous
further
and
look
outside
the
firm
as
well.
Indeed,
innovation
innovation.
This
results
in
can
also
be
considered
as
a
non-­‐business
activity,
think
of
significant
change,
often
from
the
legislation,
the
changes
in
fashion,
the
advancement
of
emergence
of
completely
new,
knowledge,
for
example.
unpredictable
markets
or
as
a
result
of
a
new
technological
In
answer
to
the
two
questions
posed
above,
innovation
is
breakthrough.
It
might
come
from
more
than
the
introduction
of
new
to
the
world
products
or
a
change
in
market
behaviour
services
and
invention
is
only
one
element
of
innovation.
(think
of
real
fur
coats!),
or
be
a
result
of
a
terrorist
event
(World
Trade
Centre,
9/11).
Alternatively,

3. Box
2
it
could
be
business
model
innovation
–
Amazon
springs
to
Ahmed
and
Shepherd’s
characteristics
are:
mind.
But
the
essence
of
• “Innovation
as
creation
(invention):
The
focus
is
on
use
of
discontinuous
innovation
is
that
it
resources
(people,
time
and
money)
to
invent
or
develop
a
new
tends
to
be
unpredictable.
product,
service,
new
way
of
doing
things,
new
way
of
thinking
about
things.
• Innovation
as
diffusion
and
learning:
The
focus
is
on
acquiring,
This
form
of
innovation
will
supporting
or
using
a
product,
service
or
ideas.
change
the
organisation
in
many
• Innovation
as
an
event:
The
focus
of
attention
here
is
on
a
discrete
ways.
New
technology
may
be
event,
such
as
the
development
of
a
single
product,
service,
idea
or
needed
as
well
as,
new
processes,
decision.
new
customers,
new
knowledge,
• Innovation
as
a
(stream
of
innovations)
trajectory:
This
is
recognition
that
a
single
act
of
innovation
(as
that
in
a
discrete
and
possibly
a
new
business
event)
can
facilitate
a
family
of
innovations
to
be
derived
from
the
model.
Incremental
innovation
fit
original
source.
into
existing
core
competencies
• Innovation
as
change
(incremental
or
radical):
Innovation
enacts
and
the
core
business.
change.
Some
innovations
are
minor
adjustments
whilst
other
innovations
are
radical
or
discontinuous
in
nature.
There
is
an
unresolved
debate
as
• Innovation
as
a
(firm-­‐level)
process:
In
this
view
innovation
is
not
a
single
act,
but
a
series
of
activities
that
are
carried
out
by
a
firm
to
whether
companies
need
both
to
lead
to
the
production
of
an
outcome
(namely,
the
innovation).
sorts
to
compete
in
the
long-­‐term,
• Innovation
as
a
context
(region,
nature,
etc.)
level
process.
This
but
certainly,
incremental
“Vivamus
porta
view
sees
innovation
as
an
act
beyond
the
confines
of
an
innovation
is
required
as
a
est
sed
est.”
individual
or
firm.
The
view
captures
institutional
frameworks,
socio-­‐political
networks,
and
proximal
factor
endowments
as
minimum.
important
factors
in
the
act
of
innovation.
The
focus
is
switched
from
the
firm
to
the
peculiar
endowments
and
characteristics
of
a
Research
undertaken
in
2009
(see
specific
context
(region,
nation,
etc.)”
Chart
1)
shows
the
percentage
of
respondents
who
have
undertaken
the
identified
forms
of
innovation,
with
new
or
significantly
improved
Chart
1
Has
your
company
introduced
any
of
the
following
services
being
undertaken
by
50%
innovations
since
2006?
of
the
5,238
enterprises
New
or
signikicantly
improved
interviewed
across
Europe.
marketing
strategies
Responses
from
UK
organisations
are
also
shown
for
comparison.
New
or
signikicantly
improved
products
Having
regard
to
the
above
comments,
when
considering
New
or
signikicantly
improved
innovation,
we
look
at
five
main
processes
UK
areas:
New
or
signikicantly
improved
organisational
structures
EU27
• Innovation
strategy;
• Ideas;
New
or
signikicantly
improved
• Prioritisation;
services
• Implementation;
and
0
20
40
60
• People
and
organisation.
%
of
Yes
It
is
only
by
linking
and
analysing
Source:
Innobarometer
2009:
Analytical
Report6
these
five
elements
(three
of
which,
ideas,
prioritisation
and
implementation
form
the
phases
of

4.
Aliquam
dolor.
the
traditional
development
funnel)
that
a
fuller
understanding
of
innovation
can
be
reached.
To
conclude,
innovation
is
more
than
just
simple
invention,
or
indeed,
‘new
product
development’.
It
needs
to
be
commercialised
and
exploited.
It
involves
the
whole
business,
and
particularly
its
ethos
or
culture.
It
can
be
relatively
simple,
and
low
key,
or
it
can
be
more
radical
and
possibly,
byline
threatening
to
existing
players.
It
encompasses
Imore
than
just
goods,
it
Lorem
psum
includes
services,
markets,
processes,
paradigms,
and
positions
as
well.
We
Incremental,
radical,
or
all
innovate,
we
do
not
always
realise
discontinuous?
that
we
are
doing
so.
1. Schumpeter
(1934)
The
Theory
of
Economic
Development
Harvard
University
Press,
Boston
2. OECD
(1981)
The
Measurement
of
Scientific
and
Technical
Activities
OECD,
Paris
3. EIPR
(2006)
European
Innovation
Progress
Report
Office
for
Official
Publications
of
the
European
Communities,
Luxembourg
4. Ahmed
and
Shepherd
(2010)
Innovation
Management
Context,
strategies,
systems
and
processes
FT
Prentice
Hall,
Harlow
5. Tidd
and
Bessant
(2009)
Managing
Innovation
Integrating
Technological,
Market
and
Organisational
Change
4th
edition.
Wiley,
Chichester
6. Flash
Eurobarometer
267
–
The
Gallup
Organisation
(2009)
Innobarometer
2009
Analytical
Report
European
Commission
Founded
in
2010,
Innovation
for
Growth
is
a
business
consultancy
firm
that
specialises
in
the
provision
of
advice
to
small
and
medium
sized
enterprises.
We
work
with
companies
from
all
sectors
undertaking
innovation
audits,
and
providing
innovation
advice
so
our
clients
can
achieve
their
growth
aspirations.
We
also
undertake
desktop,
business
research,
enabling
our
clients
to
concentrate
on
running
their
business.
Innovation
for
Growth
Limited
For
more
information,
contact
Weir
Farm
Lower
Road
Chris
Mobbs
at
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Innovation
for
Growth
Nr
Bicester
Oxfordshire
OX25
1TG
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