Innovation is the practical implementation of
ideas that result in the introduction of new
goods
In economics, goods are items that satisfy human wants
and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not tra ...
or
services or improvement in offering goods or services.
ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entity realizing or redistributing value". Others have different definitions; a common element in the definitions is a focus on newness, improvement, and spread of ideas or technologies.
Innovation often takes place through the development of more-effective
product
Product may refer to:
Business
* Product (business), an item that serves as a solution to a specific consumer problem.
* Product (project management), a deliverable or set of deliverables that contribute to a business solution
Mathematics
* Prod ...
s, processes,
services,
technologies,
art works
or
business models that innovators make available to
markets,
governments and
society. Innovation is related to, but not the same as,
invention
An invention is a unique or novel device, method, composition, idea or process. An invention may be an improvement upon a machine, product, or process for increasing efficiency or lowering cost. It may also be an entirely new concept. If an i ...
: innovation is more apt to involve the practical implementation of an invention (i.e. new / improved ability) to make a meaningful impact in a market or society, and not all innovations require a new invention.
Technical innovation often manifests itself via the
engineering process when the problem being solved is of a technical or scientific nature. The opposite of innovation is
exnovation.
Definition
Surveys of the literature on innovation have found a variety of definitions. In 2009, Baregheh et al. found around 60 definitions in different scientific papers, while a 2014 survey found over 40.
Based on their survey, Baragheh et al. attempted to define a multidisciplinary definition and arrived at the following definition:
"Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace"
In an industrial survey of how the
software industry defined innovation, the following definition given by Crossan and Apaydin was considered to be the most complete, which builds on the
Organisation for Economic Co-operation and Development (OECD) manual's definition:
[Edison, H., Ali, N.B., & Torkar, R. (2014)]
Towards innovation measurement in the software industry
''Journal of Systems and Software'' 86(5), 1390–407.
American sociologist
Everett Rogers, defined it as follows:
"An idea, practice, or object that is perceived as new by an individual or other unit of adoption"
According to Alan Altshuler and Robert D. Behn, innovation includes original invention and creative use and defines innovation as a generation, admission and realization of new ideas, products, services and processes.
Two main dimensions of innovation are degree of
novelty (i.e. whether an innovation is new to the firm, new to the market, new to the industry, or new to the world) and kind of innovation (i.e. whether it is process or
product-service system innovation).
In organizational scholarship, researchers have also distinguished innovation to be separate from creativity, by providing an updated definition of these two related constructs:
Peter Drucker wrote:
Creativity and innovation
In general, innovation is distinguished from
creativity
Creativity is a phenomenon whereby something new and valuable is formed. The created item may be intangible (such as an idea, a scientific theory, a musical composition, or a joke) or a physical object (such as an invention, a printed literar ...
by its emphasis on the implementation of creative ideas in an economic setting.
Amabile and Pratt in 2016, drawing on the literature, distinguish between creativity ("the production of novel and useful ideas by an individual or small group of individuals working together") and innovation ("the successful implementation of creative ideas within an organization").
Types
Several frameworks have been proposed for defining types of innovation.
Sustaining vs disruptive innovation
One framework proposed by
Clayton Christensen draws a distinction between sustaining and
disruptive innovations. Sustaining innovation is the improvement of a product or service based on the known needs of current customers (e.g. faster microprocessors, flat screen televisions). Disruptive innovation in contrast refers to a process by which a new product or service creates a new market (e.g. transistor radio, free crowdsourced encyclopedia, etc.), eventually displacing established competitors. According to Christensen, disruptive innovations are critical to long-term success in business.
Disruptive innovation is often enabled by disruptive technology. Marco Iansiti and Karim R. Lakhani define foundational technology as having the potential to create new foundations for global technology systems over the longer term. Foundational technology tends to transform business
operating models as entirely new business models
emerge
Emerge may refer to:
* '' Emerge: The Best of Neocolours'', the fourth album of Neocolours
* Emerge Desktop, a Desktop shell replacement for Microsoft Windows
* ''Emerge'' (magazine), a defunct news magazine
* Emerge Stimulation Drink, a drink ...
over many years, with gradual and steady adoption of the innovation leading to waves of
technological
Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, science, ...
and
institutional change that gain momentum more slowly.
[
] The advent of the
packet-switched communication protocol
TCP/IP
The Internet protocol suite, commonly known as TCP/IP, is a framework for organizing the set of communication protocols used in the Internet and similar computer networks according to functional criteria. The foundational protocols in the suit ...
—originally introduced in 1972 to support a single
use case for
United States Department of Defense electronic communication (email), and which gained widespread adoption only in the mid-1990s with the advent of the
World Wide Web
The World Wide Web (WWW), commonly known as the Web, is an information system enabling documents and other web resources to be accessed over the Internet.
Documents and downloadable media are made available to the network through web s ...
—is a foundational technology.
Four types innovation model
Another framework was suggested by Henderson and Clark. They divide innovation into four types;
* Radical innovation: "establishes a new dominant design and, hence, a new set of core design concepts embodied in components that are linked together in a new architecture." (p. 11)
* Incremental innovation: "refines and extends an established design. Improvement occurs in individual components, but the underlying core design concepts, and the links between them, remain the same." (p. 11)
* Architectural innovation: "innovation that changes only the relationships between them
he core design concepts (p. 12)
* Modular Innovation: "innovation that changes only the core design concepts of a technology" (p. 12)
While Henderson and Clark as well as Christensen talk about technical innovation there are other kinds of innovation as well, such as service innovation and organizational innovation.
Non-economic innovation
The classical definition of innovation being limited to the primary goal of generating profit for a firm, has led others to define other types of innovation such as:
social innovation,
sustainable innovation (or green innovation), and
responsible innovation.
History
The word "innovation" once had a quite different meaning. The first full-length discussion about innovation is the account by the Greek philosopher and historian
Xenophon (430–355 BCE). He viewed the concept as multifaceted and connected it to political action. The word for innovation that he uses, 'kainotomia', had previously occurred in two plays by
Aristophanes ( – BCE).
Plato
Plato ( ; grc-gre, Πλάτων ; 428/427 or 424/423 – 348/347 BC) was a Greek philosopher born in Athens during the Classical period in Ancient Greece. He founded the Platonist school of thought and the Academy, the first institutio ...
(died BCE) discussed innovation in his
''Laws'' dialogue and was not very fond of the concept. He was skeptical to it both in culture (dancing and art) and in education (he did not believe in introducing new games and toys to the kids).
Aristotle (384–322 BCE) did not like organizational innovations: he believed that all possible forms of organization had been discovered.
Before the 4th century in Rome, the words ''novitas'' and ''res nova / nova res'' were used with either negative or positive judgment on the innovator. This concept meant "renewing" and was incorporated into the new Latin verb word ''innovo'' ("I renew" or "I restore") in the centuries that followed. The ''
Vulgate
The Vulgate (; also called (Bible in common tongue), ) is a late-4th-century Latin translation of the Bible.
The Vulgate is largely the work of Jerome who, in 382, had been commissioned by Pope Damasus I to revise the Gospels us ...
'' version of the Bible (late 4th century CE) used the word in spiritual as well as political contexts. It also appeared in poetry, mainly with spiritual connotations, but was also connected to political, material and cultural aspects.
Machiavelli's ''
The Prince'' (1513), discusses innovation in a political setting. Machiavelli portrays it as a strategy a Prince may employ in order to cope with a constantly changing world as well as the corruption within it. Here innovation is described as introducing change in government (new laws and institutions); Machiavelli's later book ''The Discourses'' (1528) characterises innovation as imitation, as a return to the original that has been corrupted by people and by time. Thus for Machiavelli innovation came with positive connotations. This is however an exception in the usage of the concept of innovation from the 16th century and onward. No innovator from the renaissance until the late 19th century ever thought of applying the word innovator upon themselves, it was a word used to attack enemies.
From the 1400s through the 1600s, the concept of innovation was pejorative – the term was an
early-modern synonym for "rebellion", "revolt" and "
heresy".
[
] In the 1800s people promoting
capitalism saw
socialism as an innovation and spent a lot of energy working against it. For instance,
Goldwin Smith (1823-1910) saw the spread of social innovations as an attack on money and banks. These social innovations were socialism, communism, nationalization, cooperative associations.
In the 20th century the concept of innovation did not become popular until after the Second World War of 1939-1945. This is the point in time when people started to talk about ''technological'' product innovation and tie it to the idea of economic growth and competitive advantage.
Joseph Schumpeter
Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
(1883–1950) is often credited as the one who made the term popular - he contributed greatly to the study of
innovation economics,
In
business and in
economics
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyz ...
, innovation can provide a catalyst for growth in an enterprise or even in an industry. With rapid advances in
transportation and
communications
Communication (from la, communicare, meaning "to share" or "to be in relation with") is usually defined as the transmission of information. The term may also refer to the message communicated through such transmissions or the field of inquir ...
over the past few decades, the old concepts of
factor endowments and
comparative advantage
In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Compar ...
which focused on an area's unique inputs are outmoded in today's
global economy. Schumpeter argued that industries must incessantly revolutionize the economic structure from within, that is: innovate with better or more effective processes and products, as well as with market distribution (such as the transition from the craft shop to factory). He famously asserted that "
creative destruction is the essential fact about
capitalism".
Entrepreneurs continuously search for better ways to satisfy their
consumer base with improved quality, durability, service and price - searches which may come to fruition in innovation with advanced technologies and organizational strategies.
A prime example of innovation involved the boom of
Silicon Valley start-ups out of the
Stanford Industrial Park. In 1957, dissatisfied employees of
Shockley Semiconductor, the company of
Nobel laureate
The Nobel Prizes ( sv, Nobelpriset, no, Nobelprisen) are awarded annually by the Royal Swedish Academy of Sciences, the Swedish Academy, the Karolinska Institutet, and the Norwegian Nobel Committee to individuals and organizations who make o ...
and co-inventor of the
transistor William Shockley, left to form an independent firm,
Fairchild Semiconductor. After several years, Fairchild developed into a formidable presence in the sector. Eventually, these founders left to start their own companies based on their own unique ideas, and then leading employees started their own firms. Over the next 20 years this process resulted in the momentous
startup-company explosion of
information-technology firms. Silicon Valley began as 65 new enterprises born out of Shockley's eight former employees.
Another example involves
business incubators – a phenomenon introduced in 1959 and subsequently nurtured by governments around the world. Such "incubators", located close to knowledge clusters (mostly research-based) like universities or other government
excellence centres – aim primarily to channel generated knowledge to applied innovation outcomes in order to stimulate regional or national
economic growth
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
.
In the 21st century the
Islamic State
An Islamic state is a state that has a form of government based on Islamic law (sharia). As a term, it has been used to describe various historical polities and theories of governance in the Islamic world. As a translation of the Arabic term ...
(IS) movement, while decrying
religious innovations, has innovated in military tactics, recruitment,
ideology
An ideology is a set of beliefs or philosophies attributed to a person or group of persons, especially those held for reasons that are not purely epistemic, in which "practical elements are as prominent as theoretical ones." Formerly applied pri ...
and geopolitical activity.
Process of innovation
An early model included only three phases of innovation. According to Utterback (1971), these phases were: 1) idea generation, 2) problem solving, and 3) implementation. By the time one completed phase 2, one had an invention, but until one got it to the point of having an economic impact, one didn't have an innovation. Diffusion wasn't considered a phase of innovation. Focus at this point in time was on manufacturing.
All organizations can innovate, including for example hospitals, universities, and local governments. The organization requires a proper structure in order to retain competitive advantage. Organizations can also improve profits and performance by providing work groups opportunities and resources to innovate, in addition to employee's core job tasks. Executives and managers have been advised to break away from traditional ways of thinking and use change to their advantage. The world of work is changing with the increased use of technology and companies are becoming increasingly competitive. Companies will have to downsize or reengineer their operations to remain competitive. This will affect employment as businesses will be forced to reduce the number of people employed while accomplishing the same amount of work if not more.
For instance, former Mayor
Martin O’Malley pushed the
City of Baltimore to use
CitiStat, a
performance-measurement data and management system that allows city officials to maintain statistics on several areas from crime trends to the conditions of
pothole
A pothole is a depression in a road surface, usually asphalt pavement, where traffic has removed broken pieces of the pavement. It is usually the result of water in the underlying soil structure and traffic passing over the affected area. Wate ...
s. This system aided in better evaluation of policies and procedures with accountability and efficiency in terms of time and money. In its first year, CitiStat saved the city $13.2 million. Even
mass transit
Public transport (also known as public transportation, public transit, mass transit, or simply transit) is a system of transport for passengers by group travel systems available for use by the general public unlike private transport, typical ...
systems have innovated with
hybrid
Hybrid may refer to:
Science
* Hybrid (biology), an offspring resulting from cross-breeding
** Hybrid grape, grape varieties produced by cross-breeding two ''Vitis'' species
** Hybridity, the property of a hybrid plant which is a union of two di ...
bus fleets to
real-time tracking at bus stands. In addition, the growing use of
mobile data terminal
A mobile data terminal (MDT) or mobile digital computer (MDC) is a computerized device used in emergency services, public transport, taxicabs, package delivery, roadside assistance, and logistics, among other fields, to communicate with a cent ...
s in vehicles, that serve as communication hubs between vehicles and a control center, automatically send data on location, passenger counts, engine performance, mileage and other information. This tool helps to deliver and manage transportation systems.
Still other innovative strategies include
hospitals digitizing medical information in
electronic medical records. For example, the
U.S. Department of Housing and Urban Development's
HOPE VI initiatives turned severely distressed
public housing
Public housing is a form of housing tenure in which the property is usually owned by a government authority, either central or local. Although the common goal of public housing is to provide affordable housing, the details, terminology, de ...
in urban areas into
revitalized, mixed-income environments; the
Harlem Children’s Zone used a community-based approach to educate local area children; and the
Environmental Protection Agency
A biophysical environment is a biotic and abiotic surrounding of an organism or population, and consequently includes the factors that have an influence in their survival, development, and evolution. A biophysical environment can vary in scale f ...
's
brownfield grants facilitates turning over
brownfield
In urban planning, brownfield land is any previously developed land that is not currently in use. It may be potentially contaminated, but this is not required for the area to be considered brownfield. The term is also used to describe land prev ...
s for
environmental protection
Environmental protection is the practice of protecting the natural environment by individuals, organizations and governments. Its objectives are to conserve natural resources and the existing natural environment and, where possible, to repair dam ...
,
green spaces,
community and
commercial development
Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market.
An early form of trade, barter, saw the direct excha ...
.
Sources of innovation
Innovation may occur due to effort from a range of different agents, by chance, or as a result of a major system failure. According to
Peter F. Drucker, the general sources of innovations are changes in industry structure, in market structure, in local and global demographics, in human perception, in the amount of available scientific knowledge, etc.

In the simplest
linear model of innovation the traditionally recognized source is ''manufacturer innovation''. This is where an agent (person or business) innovates in order to sell the innovation. Specifically, R&D measurement is the commonly used input for innovation, in particular in the business sector, named Business Expenditure on R&D (BERD) that grew over the years on the expenses of the declining R&D invested by the public sector.
Another source of innovation, only now becoming widely recognized, is ''end-user innovation''. This is where an agent (person or company) develops an innovation for their own (personal or in-house) use because existing products do not meet their needs.
MIT
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the ...
economist
Eric von Hippel
Eric von Hippel (born August 27, 1941) is an American economist and a professor at the MIT Sloan School of Management, specializing in the nature and economics of distributed and open innovation. He is best known for his work in developing the ...
has identified end-user innovation as, by far, the most important and critical in his classic book on the subject, ''"The Sources of Innovation"''.
The robotics engineer
Joseph F. Engelberger asserts that innovations require only three things:
# a recognized need
# competent people with relevant technology
# financial support
The Kline
chain-linked model of innovation places emphasis on potential market needs as drivers of the innovation process, and describes the complex and often iterative feedback loops between marketing, design, manufacturing, and R&D.
Facilitating innovation
Innovation by businesses is achieved in many ways, with much attention now given to formal
research and development (R&D) for "breakthrough innovations". R&D help spur on patents and other scientific innovations that leads to productive growth in such areas as industry, medicine, engineering, and government.
[Mark, M., Katz, B., Rahman, S., and Warren, D. (2008]
''MetroPolicy: Shaping A New Federal Partnership for a Metropolitan Nation''
Brookings Institution: Metropolitan Policy Program Report. pp. 4–103. Yet, innovations can be developed by less formal on-the-job modifications of practice, through exchange and combination of professional experience and by many other routes. Investigation of relationship between the concepts of innovation and technology transfer revealed overlap. The more radical and revolutionary innovations tend to emerge from R&D, while more incremental innovations may emerge from practice – but there are many exceptions to each of these trends.
Information technology and changing business processes and management style can produce a work climate favorable to innovation. For example, the software tool company
Atlassian
Atlassian Corporation () is an Australian software company that develops products for software developers, project managers and other software development teams. The company is domiciled in Delaware, with global headquarters in Sydney, Austra ...
conducts quarterly "ShipIt Days" in which employees may work on anything related to the company's products. Google employees work on self-directed projects for 20% of their time (known as
Innovation Time Off). Both companies cite these bottom-up processes as major sources for new products and features.
An important innovation factor includes customers buying products or using services. As a result, organizations may incorporate users in
focus group
A focus group is a group interview involving a small number of demographically similar people or participants who have other common traits/experiences. Their reactions to specific researcher/evaluator-posed questions are studied. Focus groups are ...
s (user centered approach), work closely with so-called
lead users (lead user approach), or users might adapt their products themselves. The lead user method focuses on idea generation based on leading users to develop breakthrough innovations. U-STIR, a project to innovate
Europe
Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a subcontinent of Eurasia and it is located entir ...
's surface
transportation system, employs such workshops. Regarding this
user innovation, a great deal of innovation is done by those actually implementing and using technologies and products as part of their normal activities. Sometimes user-innovators may become
entrepreneurs, selling their product, they may choose to trade their innovation in exchange for other innovations, or they may be adopted by their suppliers. Nowadays, they may also choose to freely reveal their innovations, using methods like
open source. In such networks of innovation the users or communities of users can further develop technologies and reinvent their social meaning.
One technique for innovating a solution to an identified problem is to actually attempt an experiment with many possible solutions. This technique was famously used by
Thomas Edison's laboratory to find a version of the
incandescent light bulb economically viable for home use, which involved searching through thousands of possible
filament
The word filament, which is descended from Latin ''filum'' meaning " thread", is used in English for a variety of thread-like structures, including:
Astronomy
* Galaxy filament, the largest known cosmic structures in the universe
* Solar filamen ...
designs before settling on carbonized bamboo.
This technique is sometimes used in pharmaceutical
drug discovery
In the fields of medicine, biotechnology and pharmacology, drug discovery is the process by which new candidate medications are discovered.
Historically, drugs were discovered by identifying the active ingredient from traditional remedies or by ...
. Thousands of chemical compounds are subjected to
high-throughput screening to see if they have any activity against a target molecule which has been identified as biologically significant to a disease. Promising compounds can then be studied; modified to improve efficacy and reduce side effects, evaluated for cost of manufacture; and if successful turned into treatments.
The related technique of
A/B testing is often used to help optimize the design of
web sites and
mobile apps. This is used by major sites such as
amazon.com,
Facebook,
Google
Google LLC () is an American multinational technology company focusing on search engine technology, online advertising, cloud computing, computer software, quantum computing, e-commerce, artificial intelligence, and consumer electronic ...
, and
Netflix.
[Why These Tech Companies Keep Running Thousands Of Failed Experiments](_blank)
Fast Company.com (21 September 2016). Retrieved 16 October 2018. Procter & Gamble uses computer-simulated products and online user panels to conduct larger numbers of experiments to guide the design, packaging, and shelf placement of consumer products.
Capital One uses this technique to drive credit card marketing offers.
Goals and failures
Programs of organizational innovation are typically tightly linked to organizational goals and growth objectives, to the
business plan
A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on t ...
, and to
market competitive positioning. Davila et al. (2006) note, "Companies cannot grow through cost reduction and reengineering alone... Innovation is the key element in providing aggressive top-line growth, and for increasing bottom-line results".
[Davila, T., Epstein, M. J., and Shelton, R. (2006). "Making Innovation Work: How to Manage It, Measure It, and Profit from It." Upper Saddle River: Wharton School Publishing.]
One survey across a large number of manufacturing and services organizations found that systematic programs of organizational innovation are most frequently driven by: improved
quality, creation of new
markets, extension of the
product
Product may refer to:
Business
* Product (business), an item that serves as a solution to a specific consumer problem.
* Product (project management), a deliverable or set of deliverables that contribute to a business solution
Mathematics
* Prod ...
range, reduced
labor costs, improved
production processes, reduced materials cost, reduced
environmental damage
Environmental degradation is the deterioration of the environment through depletion of resources such as quality of air, water and soil; the destruction of ecosystems; habitat destruction; the extinction of wildlife; and pollution. It is define ...
, replacement of
product
Product may refer to:
Business
* Product (business), an item that serves as a solution to a specific consumer problem.
* Product (project management), a deliverable or set of deliverables that contribute to a business solution
Mathematics
* Prod ...
s/
services, reduced
energy consumption, and conformance to
regulations.
Different goals are appropriate for different products, processes, and services. According to Andrea Vaona and Mario Pianta, some example goals of innovation could stem from two different types of technological strategies: ''technological competitiveness'' and ''active price competitiveness''. ''Technological competitiveness'' may have a tendency to be pursued by smaller firms and can be characterized as "efforts for market-oriented innovation, such as a strategy of market expansion and patenting activity."
On the other hand, ''active price competitiveness'' is geared toward process innovations that lead to efficiency and flexibility, which tend to be pursued by large, established firms as they seek to expand their market foothold.
Whether innovation goals are successfully achieved or otherwise depends greatly on the environment prevailing in the organization.
Failure of organizational innovation programs has been widely researched and the causes vary considerably. Some causes are external to the organization and outside its influence of control. Others are internal and ultimately within the control of the organization. Internal causes of failure can be divided into causes associated with the cultural infrastructure and causes associated with the innovation process itself. David O'Sullivan wrote that causes of failure within the innovation process in most organizations can be distilled into five types: poor goal definition, poor alignment of actions to goals, poor participation in teams, poor monitoring of results, and poor communication and
access to information
Access may refer to:
Companies and organizations
* ACCESS (Australia), an Australian youth network
* Access (credit card), a former credit card in the United Kingdom
* Access Co., a Japanese software company
* Access Healthcare, an Indian BPO ...
.
Diffusion

Diffusion of innovation research was first started in 1903 by seminal researcher
Gabriel Tarde, who first plotted the S-shaped
diffusion curve. Tarde defined the innovation-decision process as a series of steps that include:
# knowledge
# forming an attitude
# a decision to adopt or reject
# implementation and use
# confirmation of the decision
Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. This process has been proposed that the lifecycle of innovations can be described using the '
s-curve' or
diffusion curve. The s-curve maps growth of revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point, customers begin to demand and the product growth increases more rapidly. New incremental innovations or changes to the product allow growth to continue. Towards the end of its lifecycle, growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.
The s-curve derives from an assumption that new products are likely to have "product life" – i.e., a start-up phase, a rapid increase in revenue and eventual decline. In fact, the great majority of innovations never get off the bottom of the curve, and never produce normal returns.
Innovative companies will typically be working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an
emerging technology that currently yields lower growth but will eventually overtake current technology and lead to even greater levels of growth. The length of life will depend on many factors.
Measures
Measuring innovation is inherently difficult as it implies commensurability so that comparisons can be made in quantitative terms. Innovation, however, is by definition novelty. Comparisons are thus often meaningless across products or service. Nevertheless, Edison et al.
in their review of literature on
innovation management found 232 innovation metrics. They categorized these measures along five dimensions; i.e. inputs to the innovation process, output from the innovation process, effect of the innovation output, measures to access the activities in an innovation process and availability of factors that facilitate such a process.
There are two different types of measures for innovation: the organizational level and the political level.
Organizational-level
:The measure of innovation at the organizational level relates to individuals, team-level assessments, and private companies from the smallest to the largest company. Measure of innovation for organizations can be conducted by surveys, workshops, consultants, or internal benchmarking. There is today no established general way to measure organizational innovation. Corporate measurements are generally structured around
balanced scorecards which cover several aspects of innovation such as business measures related to finances, innovation process efficiency, employees' contribution and motivation, as well benefits for customers. Measured values will vary widely between businesses, covering for example new product revenue, spending in R&D, time to market, customer and employee perception & satisfaction, number of patents, additional sales resulting from past innovations.
Political-level
:For the political level, measures of innovation are more focused on a country or region
competitive advantage through innovation. In this context, organizational capabilities can be evaluated through various evaluation frameworks, such as those of the European Foundation for Quality Management. The
OECD Oslo Manual (1992) suggests standard guidelines on measuring technological product and process innovation. Some people consider the
Oslo Manual complementary to the
Frascati Manual from 1963. The new Oslo Manual from 2018 takes a wider perspective to innovation, and includes marketing and organizational innovation. These standards are used for example in the European
Community Innovation Surveys.
Other ways of measuring innovation have traditionally been expenditure, for example, investment in R&D (Research and Development) as percentage of GNP (Gross National Product). Whether this is a good measurement of innovation has been widely discussed and the Oslo Manual has incorporated some of the critique against earlier methods of measuring. The traditional methods of measuring still inform many policy decisions. The EU
Lisbon Strategy has set as a goal that their average expenditure on R&D should be 3% of GDP.
Indicators
Many scholars claim that there is a great bias towards the "science and technology mode" (S&T-mode or STI-mode), while the "learning by doing, using and interacting mode" (DUI-mode) is ignored and measurements and research about it rarely done. For example, an institution may be high tech with the latest equipment, but lacks crucial doing, using and interacting tasks important for innovation.
A common industry view (unsupported by empirical evidence) is that comparative
cost-effectiveness
Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis, which assigns a moneta ...
research is a form of
price control which reduces returns to industry, and thus limits R&D expenditure, stifles future innovation and compromises new products access to markets.
Some academics claim cost-effectiveness research is a valuable value-based measure of innovation which accords "truly significant" therapeutic advances (i.e. providing "health gain") higher prices than free market mechanisms. Such
value-based pricing Value-based price (also value optimized pricing and ''charging what the market will bear'') is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the custome ...
has been viewed as a means of indicating to industry the type of innovation that should be rewarded from the public purse.
An Australian academic developed the case that national comparative
cost-effectiveness analysis
Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis, which assigns a monetar ...
systems should be viewed as measuring "health innovation" as an
evidence-based policy concept for valuing innovation distinct from valuing through competitive markets, a method which requires strong
anti-trust
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
laws to be effective, on the basis that both methods of assessing
pharmaceutical innovations are mentioned in annex 2C.1 of the
Australia-United States Free Trade Agreement.
Indices
Several indices attempt to measure innovation and rank entities based on these measures, such as:
*
Bloomberg Innovation Index
Bloomberg L.P. is a privately held financial, software, data, and media company headquartered in Midtown Manhattan, New York City. It was co-founded by Michael Bloomberg in 1981, with Thomas Secunda, Duncan MacMillan, Charles Zegar, and a ...
*"Bogota Manual" similar to the Oslo Manual, is focused on Latin America and the Caribbean countries.
*"Creative Class" developed by
Richard Florida
Richard L. Florida is an American urban studies theorist focusing on social and economic theory. He is a professor at the Rotman School of Management at the University of Toronto and a Distinguished Fellow at NYU's School of Professional Studie ...
*
EIU Innovation Ranking
*
Global Competitiveness Report
The ''Global Competitiveness Report'' (GCR) is a yearly report published by the World Economic Forum. Since 2004, the ''Global Competitiveness Report'' ranks countries based on the Global Competitiveness Index, developed by Xavier Sala-i-Martin a ...
*
Global Innovation Index (GII), by
INSEAD
INSEAD, a contraction of "Institut Européen d'Administration des Affaires" () is a non-profit business school that maintains campuses in Europe (Fontainebleau, France), Asia (Singapore), the Middle East (Abu Dhabi, UAE), and North America (San ...
*
Information Technology and Innovation Foundation (ITIF) IndexInnovation 360– From the World Bank. Aggregates innovation indicators (and more) from a number of different public sources
*Innovation Capacity Index (ICI) published by a large number of international professors working in a collaborative fashion. The top scorers of ICI 2009–2010 were: 1. Sweden 82.2; 2. Finland 77.8; and 3. United States 77.5
* Innovation Index, developed by the
Indiana Business Research Center, to measure innovation capacity at the county or regional level in the United States
*
Innovation Union Scoreboard
*
innovationsindikator for Germany, developed by the
Federation of German Industries (Bundesverband der Deutschen Industrie) in 2005
*
INSEAD
INSEAD, a contraction of "Institut Européen d'Administration des Affaires" () is a non-profit business school that maintains campuses in Europe (Fontainebleau, France), Asia (Singapore), the Middle East (Abu Dhabi, UAE), and North America (San ...
Innovation Efficacy Index
*
International Innovation Index, produced jointly by
The Boston Consulting Group, the
National Association of Manufacturers
The National Association of Manufacturers (NAM) is an advocacy group headquartered in Washington, D.C., with additional offices across the United States. It is the nation's largest manufacturing industrial trade association, representing 14,000 s ...
(NAM) and its nonpartisan research affiliate The Manufacturing Institute, is a worldwide index measuring the level of innovation in a country; NAM describes it as the "largest and most comprehensive global index of its kind"
*Management Innovation Index – Model for Managing Intangibility of Organizational Creativity: Management Innovation Index
* NYCEDC Innovation Index, by the New York City Economic Development Corporation, tracks New York City's "transformation into a center for high-tech innovation. It measures innovation in the City's growing science and technology industries and is designed to capture the effect of innovation on the City's economy"
* OECD
Oslo Manual is focused on North America, Europe, and other rich economies
* State Technology and Science Index, developed by the
Milken Institute, is a U.S.-wide benchmark to measure the science and technology capabilities that furnish high paying jobs based around key components
*
World Competitiveness Scoreboard
Rankings
Common areas of focus include:
high-tech companies,
manufacturing,
patents,
post secondary education,
research and development, and research personnel. The left ranking of the top 10 countries below is based on the 2020
Bloomberg Innovation Index
Bloomberg L.P. is a privately held financial, software, data, and media company headquartered in Midtown Manhattan, New York City. It was co-founded by Michael Bloomberg in 1981, with Thomas Secunda, Duncan MacMillan, Charles Zegar, and a ...
. However, studies may vary widely; for example the
Global Innovation Index 2016 ranks
Switzerland as number one wherein countries like
South Korea,
Japan
Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the nor ...
, and
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones an ...
do not even make the top ten.
Rate of innovation
In 2005
Jonathan Huebner, a
physicist
A physicist is a scientist who specializes in the field of physics, which encompasses the interactions of matter and energy at all length and time scales in the physical universe.
Physicists generally are interested in the root or ultimate caus ...
working at the
Pentagon
In geometry, a pentagon (from the Greek πέντε ''pente'' meaning ''five'' and γωνία ''gonia'' meaning ''angle'') is any five-sided polygon or 5-gon. The sum of the internal angles in a simple pentagon is 540°.
A pentagon may be simp ...
's
Naval Air Warfare Center, argued on the basis of both U.S.
patents and world technological breakthroughs, per capita, that the rate of human technological innovation peaked in 1873 and has been slowing ever since.
In his article, he asked "Will the level of technology reach a maximum and then decline as in the Dark Ages?"
[ In later comments to '' New Scientist'' magazine, Huebner clarified that while he believed that we will reach a rate of innovation in 2024 equivalent to that of the Dark Ages, he was not predicting the reoccurrence of the Dark Ages themselves.
John Smart criticized the claim and asserted that ]technological singularity
The technological singularity—or simply the singularity—is a hypothetical future point in time at which technological growth becomes uncontrollable and irreversible, resulting in unforeseeable changes to human civilization. According to the m ...
researcher Ray Kurzweil
Raymond Kurzweil ( ; born February 12, 1948) is an American computer scientist, author, inventor, and futurist. He is involved in fields such as optical character recognition (OCR), text-to-speech synthesis, speech recognition technology, and ...
and others showed a "clear trend of acceleration, not deceleration" when it came to innovations. The foundation replied to Huebner the journal his article was published in, citing Second Life
''Second Life'' is an online multimedia platform that allows people to create an avatar for themselves and then interact with other users and user created content within a multi player online virtual world. Developed and owned by the San Fra ...
and eHarmony
Eharmony (styled eHarmony) is an online dating website launched in 2000. eHarmony is based in Los Angeles, California, and owned by Nucom ecommerce, a joint venture of German mass media company ProSiebenSat.1 Media and American private equi ...
as proof of accelerating innovation; to which Huebner replied.
However, Huebner's findings were confirmed in 2010 with U.S. Patent Office data. and in a 2012 paper.
Innovation and development
The theme of innovation as a tool to disrupting patterns of poverty has gained momentum since the mid-2000s among major international development
International development or global development is a broad concept denoting the idea that societies and countries have differing levels of economic or human development on an international scale. It is the basis for international classifications ...
actors such as DFID
, type = Department
, logo = DfID.svg
, logo_width = 180px
, logo_caption =
, picture = File:Admiralty Screen (411824276).jpg
, picture_width = 180px
, picture_caption = Department for International Development (London office) (far right ...
, Gates Foundation
The Bill & Melinda Gates Foundation (BMGF), a merging of the William H. Gates Foundation and the Gates Learning Foundation, is an American private foundation founded by Bill Gates and Melinda French Gates. Based in Seattle, Washington, it was ...
's use of the Grand Challenge funding model, and USAID's Global Development Lab. Networks have been established to support innovation in development, such as D-Lab at MIT
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the ...
. Investment funds have been established to identify and catalyze innovations in developing countries
A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
, such as DFID's Global Innovation Fund, Human Development Innovation Fund, and (in partnership with USAID) the Global Development Innovation Ventures.
The United States has to continue to play on the same level of playing field as its competitors in federal research. This can be achieved being strategically innovative through investment in basic research and science".
Government policies
Given its effects on efficiency
Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...
, quality of life, and productive growth, innovation is a key driver in improving society and economy. Consequently, policymakers have worked to develop environments that will foster innovation, from funding research and development to establishing regulations that do not inhibit innovation, funding the development of innovation clusters, and using public purchasing and standardisation to 'pull' innovation through.
For instance, experts are advocating that the U.S. federal government launch a National Infrastructure Foundation, a nimble, collaborative strategic intervention organization that will house innovations programs from fragmented silos under one entity, inform federal officials on innovation performance metrics
A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it e ...
, strengthen industry-university partnerships, and support innovation economic development initiatives, especially to strengthen regional clusters. Because clusters are the geographic incubators of innovative products and processes, a cluster development grant program would also be targeted for implementation. By focusing on innovating in such areas as precision manufacturing, information technology, and clean energy, other areas of national concern would be tackled including government debt, carbon footprint, and oil dependence. The U.S. Economic Development Administration understand this reality in their continued Regional Innovation Clusters initiative. The United States also has to integrate her supply-chain and improve her applies research capability and downstream process innovation.
Many countries recognize the importance of innovation including Japan's Ministry of Education, Culture, Sports, Science and Technology (MEXT); Germany's Federal Ministry of Education and Research; and the Ministry of Science and Technology in the People's Republic of China. Russia's innovation programme is the Medvedev modernisation programme which aims to create a diversified economy based on high technology and innovation. The Government of Western Australia
The Government of Western Australia, formally referred to as His Majesty's Government of Western Australia, is the Australian state democratic administrative authority of Western Australia. It is also commonly referred to as the WA Government ...
has established a number of innovation incentives for government departments. Landgate was the first Western Australian government agency to establish its Innovation Program.
Some regions
In geography, regions, otherwise referred to as zones, lands or territories, are areas that are broadly divided by physical characteristics (physical geography), human impact characteristics (human geography), and the interaction of humanity and t ...
have taken a proactive role in supporting innovation. Many regional governments are setting up innovation agencies to strengthen regional capabilities. In 2009, the municipality of Medellin, Colombia
Colombia (, ; ), officially the Republic of Colombia, is a country in South America with insular regions in North America—near Nicaragua's Caribbean coast—as well as in the Pacific Ocean. The Colombian mainland is bordered by the ...
created Ruta N to transform the city into a knowledge city.
See also
* Communities of innovation
* Creative problem solving
* Diffusion (anthropology)
* Ecoinnovation
* Hype cycle
* Induced innovation
* Information revolution
The term information revolution describes current economic, social and technological trends beyond the Industrial Revolution.
Many competing terms have been proposed that focus on different aspects of this societal development.
The British polymat ...
* Innovation leadership
* Innovation system
* International Association of Innovation Professionals
* ISO 56000
* Knowledge economy
* Obsolescence
Obsolescence is the state of being which occurs when an object, service, or practice is no longer maintained or required even though it may still be in good working order. It usually happens when something that is more efficient or less risky r ...
* Open Innovation
Open innovation is a term used to promote an information age mindset toward innovation that runs counter to the secrecy and silo mentality of traditional corporate research labs. The benefits and driving forces behind increased openness have bee ...
* Open Innovations (Forum and Technology Show)
* Outcome-Driven Innovation
* Participatory design
* Product innovation
* Pro-innovation bias
* Sustainable Development Goals (Agenda 9)
* Technology Life Cycle
* Technological innovation system
* Theories of technology
* Timeline of historic inventions
The timeline of historic inventions is a chronological list of particularly important or significant technological inventions and their inventors, where known.
Paleolithic
The dates listed in this section refer to the earliest evidence of an i ...
* Toolkits for User Innovation
* UNDP Innovation Facility
* User Innovation
* Virtual product development
References
Further reading
* Bloom, Nicholas, Charles I. Jones, John Van Reenen, and Michael Webb. 2020.
Are Ideas Getting Harder to Find?
, ''American Economic Review
The ''American Economic Review'' is a monthly peer-reviewed academic journal published by the American Economic Association. First published in 1911, it is considered one of the most prestigious and highly distinguished journals in the field of eco ...
'', 110 (4): 1104–44.
*
*
{{Authority control
Design
Innovation economics
Product management
Science and technology studies