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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 04-Oct-2018
Posted by: Michael PUTZ

Definition Innovation


We are all surrounded by countless innovations. Some of them are actually clever inventions that have prevailed in the market. Others sell only the advertising departments as such. A precise or even uniform definition of innovation does not exist. If you want to control your own innovation, however, you must first determine what you mean by innovation. In this blog entry, you will learn how to define yourself in 4 steps, what innovation is and why invention and market success always play a role.

1. Analyze your innovation past

In order to make the term "innovation" more concrete for itself and your company, first of all a look into the own innovation past helps. What innovations has your company launched in recent years or decades? Which of these also had success in the market? Were these innovations new for your company or for your competitors or even the entire industry? How did these new products, services, services or even business models emerge? From your own innovation past you can already read out an individual definition of innovation. In addition, an innovation trunk tree also provides information on how you have achieved innovation success.


2. Be inspired by science

In order to define more precisely what innovation means for you and your company, science helps you. The Austrian economist Josef Schumpeter is regarded as the father of all innovation theories. He sees innovation as the implementation of a new technical, organizational or market solution. Schumpeter is, therefore, only too few to invent, and the new must also prove itself.

Case Study Strategic Innovation management
The definition of Schumpeter can be applied to any kind of organization. For companies, Schumpeter's formula may be too imprecise. This formula is more precise:


Innovation = Invention + Market success

 Invention and marketing should therefore contain your individual description of innovation.


3. Determine what you understand as a market success

What is, and what is not, a market success is likely to be more clear in your company than through the term innovation. The definition of market success can usually be derived directly from the objectives and also from the cost structure of your company.

You could only consider one of your products as a market success if the costs for development and introduction have already been introduced within two years. Or you fix a turnover amount. As soon as the sale of your new development exceeds this limit, the novelty is considered successful. However, a market success could have occurred even if your invention produces a large media echo.

For example, Amazon could already register its delivery drones as an innovation without leaving the test phase behind. Because the delivery dosing is so popular and signals the consumer that the brand Amazon stands for the fastest possible and individual delivery.


4. Determine how new your innovation is

An innovation always has something to do with something new and its implementation. New is, however, a relative concept. Is a novelty just new to your company? Does it also feel the competition as new? Is it new for a whole industry? Or has your research and development department invented a new basic technology?

In answering these questions, science will help you again. The German economist Jürgen Hauschildt has developed a formula for the determination of the degree of innovation, which you can simply apply yourself.


According to Hauschildt, innovation is a combination of purpose and means. The purpose here can be, for example, for the customer's use which the user has of it. A completely smooth shifting operation for bicycles would be an example of "purpose". The "middle" in this example would be the circuit of the bicycle. Specifically, an electronic circuit.

At least the means or the purpose must be perceptible new in order to speak of innovation at all. With Hauschildt's formula you can find four different degrees of innovation: purpose-medium combinations, which are located in the diagram at the bottom left, fall under "incremental innovation". On the right, the real breakthroughs can be found. The other two divisions are divided into medium-induced and purpose-driven innovations.


Conclusion: Definition innovation

Innovation is a very common word. Many companies regard it as absolutely necessary to always offer their customers something new. On closer analysis, however, the novelty turns out not to be new, but merely as different. If you want to put your innovation management on a strategic footing, you need at least a clear definition of innovation for yourself. You should be able to handle all your business areas. It is only after this internal explanation of the term that you can use innovative value indicators. A quotation from the German politician and business consultant Thomas Mirow also serves as a rough guide: "The transformation of money into knowledge is research, the transformation of knowledge into money is innovation."

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Michael PUTZ

Born in the Salzkammergut. After working for Shell and Porsche, he concentrated on innovation management as a study assistant at the Innovation Department of the Vienna University of Economics and Business Administration. In 2003 he founded LEAD Innovation and manages the company as Managing Partner. Lectures at MIT, in front of companies like Google or NASA.

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