Definition

Process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination, and initiative in deriving greater or different value from resources, and encompasses all processes by which new ideas are generated and converted into useful products. In business, innovation results often from the application of a scientific or technical idea in decreasing the gap between the needs or expectations of the customers and the performance of a firm's products. In a social context, innovation is equally important in devising new collaborative methods such as alliance creation, joint venturing, flexible working hours, and in creating buyers' purchasing power through methods such as hire purchase. Innovations are divided into two broad categories: (1) Evolutionary innovations are brought about by numerous incremental advances in technology or processes and are of two types (a) Continuous evolutionary innovations result in an alteration in product characteristics instead of in a new product, and do not require any user-learning or changes in his or her routine, examples are multi-blade shaving razor, fluoride toothpaste, and laptop computer; (b) Dynamic continuous evolutionary innovations require some user-learning but do not disrupts his or her routine, examples are fax machines, instant photography, and handheld computers. (2) Revolutionary innovations (called also discontinuous innovations) require a good deal of user-learning, often disrupt his or her routine, and may even require new behavior patterns. Examples are photocopier (xerography) machines, personal computers, and internet. Innovation is synonymous with risk-taking and firms which introduce revolutionary products or technologies take on the greatest risk because they have to create new markets. A less risky innovation strategy is that of the imitator who starts with a new product (usually created by a revolutionary-innovator) having a large and growing demand. The imitator then proceeds to satisfy that demand better with a more effective approach. Examples are IBM with its PC against Apple Computer, Compaq with its cheaper PCs against IBM, and Dell with its still-cheaper clones (sold directly to the customer) against Compaq. Although many innovations are created from inventions, it is possible to innovate without inventing, and to invent without innovating.

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