Innovation is a broad term, which means that there are many definitions of it ranging from the simple to the complex. For us, innovation is simply the process of creating value from novelty.
Novelty means that something new is being employed, but this can be anything from an idea, technology or process to an approach, market, business model or type of customer (to name but a few).
Value means that applying this novel element creates a benefit of some kind for an individual, a group, or an organisation. This benefit is often measured in financial terms, but could also be an intangible benefit such as social value or impact. It is also important to remember that value can be created for different groups: in business, shareholder value is often the focus, but innovation can also create value for the environment, employees, suppliers, partners, or the general public.
Novelty without value is just ideation, which is often the first step to innovation, but definitely not the whole story. Value without novelty is simply business as usual.
Many people conflate innovation with technological advances, and it is true that the fast pace of technical development is partly responsible for driving the current heightened interest in innovation, but a technology on its own is not innovation until someone has found a way of creating value from it. Similarly, there are many examples of innovations that do not rely on new technology to provide the novel element.
Respected management thinker Peter Drucker famously stated that organisations only have two basic functions: innovation and marketing (everything else is a cost). Innovation in order to develop ways of serving customers or stakeholders better; marketing in order to understand the customer or stakeholder so well that it is easy to find ways to serve them better.
For organisations, innovation offers the opportunity to:
- extend, improve and develop their existing products and services to generate additional value
- open up new markets, customer segments or stakeholders for their products and services
- create new products and services, or better ways of delivering them
- move into new industries with their current skills and expertise
- change the way their existing industry operates