Innovation may be defined as a process by which varying degrees of measurable value enhancement is planned and achieved, in any commercial activity. This process may be breakthrough or incremental, and it may be achieved by:
- introducing new or improved goods or services and/or
- implementing new or improved operational processes and/ or
- implementing new or improved organizational/ managerial processes
in order to improve market share, competitiveness and quality, while reducing costs.
An idea or project is not an innovation unless it is applied in practice and put onto the market. Innovation occurs at the intersection of invention and insight. It is about the application of invention - the fusion of new developments and new approaches to solve problems.
Innovations are broadly divided into the following types:
- Technological innovations: are associated with the use of technological knowledge, research and development activities. Any innovation due to an industrial application of scientific knowledge is a technological innovation.
- Product innovations: involve introduction of new goods and services which are significantly improved in terms of design excellence, core characteristics, technical specifications etc.
- Process innovations: comprises introduction of a new or significantly improved production process involving new ways of producing goods and services that maximizes speed, service, quality, simplicity and waste reduction.
- Management innovations: essentially means implementation of new management practices, innovative ways of doing things and dramatically transforming and improving the effectiveness of management functions and significant departure from the current norms.
Successful innovations occur when technological, product, or process innovations in the value chain are implemented through effective management innovations. Innovation as a driver for growth, profitability and success of an organization includes people, leadership, creativity, process and organizational culture. Innovation in an organization should not be approached in a piecemeal manner but in a systematic enterprise wide capability including the lowest levels.