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LEAD Innovation Blog

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

Date: 26-Feb-2019
Posted by: Michael PUTZ

Definition of innovation

 

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


 
1. Analyse your innovation history

In order to make the term "innovation" more concrete for itself and your company, first of all a look into the innovation history 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 an individual definition of innovation. In addition, an innovation trunk tree also provides information on how you have achieved innovation success.

 

2. Let the science inspire

Science can help you define more precisely what innovation means for you and your company. The Austrian economist Josef Schumpeter is regarded as the forefather of all innovation theories. He understood innovation as the implementation of a new technical, organizational or market solution. So according to Schumpeter inventing is not enough, the new has to prove itself.

Case Study Strategic Innovation managementSchumpeter's definition can be applied to any type of organization. Schumpeter's formula may be too imprecise for companies. This formula derived from this is more precise:

 

Innovation = invention + (market) success


Invention and (market) success must therefore contain your individual description of innovation.

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3. Determine what you understand as a market success


What is and what is not market success - this will probably be more clear in your company than the term innovation. The definition of market success can usually be derived directly from your company's goals and cost structure.

For example, you could only regard one of your products as a market success if it has already grossed the costs of development and introduction within two years. Or you fix a sales amount. As soon as the sale of your new development exceeds this limit, the innovation is considered successful. However, market success could already have occurred if your invention generates a great media response.

Amazon, for example, could already call its delivery drone an innovation without even having completed the test phase. The delivery drone idea is very popular and signals to consumers that the Amazon brand stands for the fastest possible and individual delivery.

 

4. Determine how new you innovation really is


An innovation always has something new to do with its implementation. However, “new” is a relative term. Is a novelty just new for your company? Does the competition find it new? Is it new for an entire industry? Or has your research and development department even invented a new basic technology?

Again, science will help you answer these questions again. The German economist Jürgen Hauschildt has developed a formula for determining the degree of innovation that you can easily apply yourself.

Innovation degree

According to Hauschildt, innovation is first and foremost a combination of purpose and means. The purpose can, for example, stand for the customer benefit that the user derives from it. A completely smooth shifting process on bicycles would be an example of "purpose". The "medium" in this example would be the gear change of the bicycle. Specifically, an electronic circuit.


Ultimately, means or purpose must be perceptibly new in order to speak of an innovation at all. Hauschildt's formula allows you to determine four different levels of innovation. Purpose - means combinations which are located in the bottom left of the diagram, fall under "incremental innovation". In the top right you can find the real breakthrough innovations. The other two areas are divided into means-induced and purpose-induced innovations.

 

Conclusion: Definition of innovation

Innovation is a very common word. Many companies see it as absolutely necessary to always have to offer their customers something new. On closer analysis, however, the novelty turns out not to be new, but merely different. If you want to put your innovation management on a strategic footing, then you need at least for yourself a clear definition of innovation. All your company departments should then be able to deal with this. Only after this internal clarification of terms can you use key innovation figures in a meaningful way. A quotation by German politician and management consultant Thomas Mirow also serves as a rough orientation: "The transformation of money into knowledge is research, the transformation of knowledge into money is innovation."

Defining innovation goals

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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