Innovation is the
application of new solutions that meet new requirements, inarticulate needs, or
existing market needs. This is accomplished through more effective products, processes, services, technologies,
or ideas that are
readily available to markets, governments and society. The term
innovation can be defined as something original and new that "breaks in to" the market or into society. One usually associates to new phenomena that are important in some way. A definition of the term, in line with these aspects, would be the following: "An innovation is something original, new, and important - in whatever field - that breaks in to (or obtains a foothold in) a market or society."[1]
innovation can be defined as something original and new that "breaks in to" the market or into society. One usually associates to new phenomena that are important in some way. A definition of the term, in line with these aspects, would be the following: "An innovation is something original, new, and important - in whatever field - that breaks in to (or obtains a foothold in) a market or society."[1]
While something
novel is often described as an innovation, in economics, management science and
other fields of practice and analysis it is generally considered a process
that brings together various novel ideas in a way that they have an impact on
society.
Innovation differs
from invention
in that innovation refers to the use of a better and, as a result, novel idea
or method, whereas invention refers more directly to the creation of the idea
or method itself.
Innovation
differs from improvement in that innovation refers to the notion of
doing something different rather than doing the same thing better.
Contents
- 1 Inter-disciplinary views
- 1.1 Individual
- 1.2 Society
- 1.3 Business and economics
- 1.4 Organizations
- 1.5 Sources of Innovation
- 1.6 Goals/failures
- 1.7 Diffusion of innovation
- 2 Measures
- 3 Rate of innovation
- 4 Government policies
- 5 See also
- 6 References
- 7 External links
Inter-disciplinary views
Individual
Main article: Creativity
Creativity
has been studied using many different approaches.
Society
Due to its
widespread effect, innovation is an important topic in the study of economics, business, entrepreneurship,
design, technology,
sociology,
and engineering.
In society, technological innovation aids in comfort, convenience,
and efficiency
in everyday life cite . It can also lead to negative effects such as
pollution or exploitation. For instance, the benchmarks in railroad equipment and infrastructure
added to greater safety, maintenance, speed, and weight capacity for passenger
services. These innovations included wood to steel cars, iron to steel rails,
stove-heated to steam-heated cars, gas lighting to electric lighting,
diesel-powered to electric-diesel locomotives. By the mid-20th century, trains
were making longer, faster, and more comfortable trips at lower costs for
passengers.[2]
Other areas that add to everyday quality of life include: the innovations to
the light bulb from incandescent to compact fluorescent then LED technologies which
offer greater efficiency, durability and brightness; adoption of modems to cellular
phones, paving the way to smartphones which supply the public with internet access
any time or place; cathode-ray tube to flat-screen LCD
televisions and others.
Innovation is
the development of new value through solutions that meet new needs, or adding
value to old customers by providing new ways of maximizing their current level
of productivity. It is the catalyst to growth.
Business and economics
Main article: innovation economics
In business and
economics, innovation is the catalyst to growth. With rapid advancements in transportation
and communications
over the past few decades, the old world concepts of factor
endowments and comparative advantage which focused on an
area’s unique inputs are outmoded for today’s global
economy. Economist Joseph Schumpeter, who contributed greatly to the
study of innovation, argued that industries must
incessantly revolutionize the economic structure from within, that is innovate
with better or more effective processes and products, such as the shift from
the craft shop to factory. He famously asserted that “creative destruction is the essential fact
about capitalism.”[3]
In addition, entrepreneurs continuously look for better ways to
satisfy their consumer base with improved quality, durability,
service, and price which come to fruition in innovation with advanced
technologies and organizational strategies.[4]
One prime
example is the explosive boom of Silicon
Valley startups out of the Stanford Industrial Park. In 1957,
dissatisfied employees of Shockley Semiconductor, the company of Nobel
laureate 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, latest ideas, and then leading employees started their own firms.
Over the next 20 years, this snowball process launched the momentous startup
company explosion of information technology firms. Essentially, Silicon
Valley began as 65 new enterprises born out of Shockley’s eight former
employees.[5]
Organizations
In the
organizational context, innovation may be linked to positive changes in efficiency,
productivity,
quality, competitiveness,
market
share, and others. However, recent research findings highlight the complementary
role of organizational culture in enabling organizations to translate
innovative activity into tangible performance improvements.[6]
All
organizations can innovate, including for example hospitals,[7]
universities, and local governments. 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 crime trends to
condition of potholes. This system aids 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.[8] Even mass
transit systems have innovated with hybrid
bus fleets to real-time tracking at bus stands. In
addition, the growing use of mobile data terminals in vehicles that serves
as communication hubs between vehicles and control center automatically send
data on location, passenger counts, engine performance, mileage and other
information. This tool helps to deliver and manage transportation systems.[9]
Still other
innovative strategies include hospitals digitizing medical information in electronic medical records; HUD’s HOPE VI
initiatives to eradicate city’s severely distressed public
housing to revitalized, mixed income environments; the Harlem Children’s Zone that uses a
community-based approach to educate local area children; and EPA’s brownfield grants that
aids in turning over brownfields for environmental protection, green spaces, community and commercial
development.
Sources of Innovation
There are
several sources of innovation. It can occur as a result of a focus effort by 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 different changes in
industry structure, in market structure, in local and global demographics, in
human perception, mood and meaning, in the amount of already available
scientific knowledge, etc..
Original model
of three phases of the process of Technological Change
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.
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 economist Eric
von Hippel has identified end-user innovation as, by far, the most
important and critical in his classic book on the subject, Sources of Innovation.[10]
The robotics
engineer Joseph F. Engelberger asserts that
innovations require only three things:
- A recognized need,
- Competent people with relevant technology, and
- Financial support.[11]
However,
innovation processes usually involve: identifying needs, developing
competences, and finding financial support.
The Kline Chain-linked model of innovation[12]
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.
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.[13]
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. 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.
An important
innovation factor includes customers buying products or using services. As a
result, firms may incorporate users in focus groups (user centred 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’s
surface transportation system, employs such workshops.[14]
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. In most of the times user innovators have some
personal record motivating them. 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.[15][16]
Goals/failures
Programs of
organizational innovation are typically tightly linked to organizational goals
and objectives, to the business plan, and to market competitive
positioning. One driver for innovation programs in corporations is to
achieve growth objectives. As Davila et al. (2006) notes, "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." [17]
One survey
across a large number of manufacturing and services organizations found, ranked
in decreasing order of popularity, that systematic programs of organizational
innovation are most frequently driven by: Improved quality, Creation of new markets, Extension
of the product, range, Reduced labor costs,
Improved production processes, Reduced materials,
Reduced environmental damage, Replacement of products/services, Reduced energy consumption,
Conformance to regulations.[17]
These goals
vary between improvements to products, processes and services and dispel a
popular myth that innovation deals mainly with new product development. Most of
the goals could apply to any organisation be it a manufacturing facility,
marketing firm, hospital or local government. Whether innovation goals are
successfully achieved or otherwise depends greatly on the environment
prevailing in the firm.[18]
Conversely,
failure can develop in programs of innovations. The causes of failure have been
widely researched and can vary considerably. Some causes will be external to
the organization and outside its influence of control. Others will be 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. Common 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, Poor communication and
access to information.[19]
Diffusion of innovation
Main article: Diffusion of innovations
Diffusion of
innovation research was first started in 1903 by seminal researcher Gabriel
Tarde, who first plotted the S-shaped diffusion
curve. Tarde (1903) defined the innovation-decision process as a series of
steps that includes:[20]
- First 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 life cycle 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 life cycle 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.[21]
Measures
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. 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.[22]
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 (1995) 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
2005 takes a wider perspective to innovation, and includes marketing and
organizational innovation. These standards are used for example in the European
Community Innovation Surveys.[23]
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.[24]
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 widely ignored. For an example, that
means you can have the better high tech or software, but there are also crucial
learning tasks important for innovation. But these measurements and research
are rarely done.
A common
industry view (unsupported by empirical evidence) is that comparative cost-effectiveness research (CER) is a form of
price control which, by reducing returns to industry, limits R&D
expenditure, stifles future innovation and compromises new products access to
markets.[25]
Some academics claim the CER is a valuable value-based measure of innovation
which accords truly significant advances in therapy (those that provide 'health
gain') higher prices than free market mechanisms.[26] Such
value-based pricing has been viewed as a means of indicating to industry the
type of innovation that should be rewarded from the public purse.[27] The Australian
academic Thomas Alured Faunce has developed the case
that national comparative cost-effectiveness assessment systems should be
viewed as measuring 'health innovation' as an evidence-based concept distinct
from valuing innovation through the operation of competitive markets (a method
which requires strong anti-trust laws to be effective) on the basis that both
methods of assessing innovation in pharmaceuticals
are mentioned in annex 2C.1 of the AUSFTA.[28][29][30]
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