Myth 1: Innovation is all about emerging technologies and creating new products.
Reality 1: Innovation is also about new services and new ways of doing business
Firstly to help understand the concept of innovation, a definition has to be established. Simply defined, innovation is the process that takes new ideas and implements them in a way that creates value. The value that innovation brings in improving products, services and processes can be measured as increased productivity, higher quality or other worth, and may directly benefit producers, consumers or both.
In today’s business world the general connotation of “innovation” is simply something “new and improved” and is often confused with invention, with many people frequently using the two words interchangeably. However, these are distinctly different concepts. “Invention” is an event that occurs at a specific point in time and typically focuses on the development of a single product, and, unlike innovation that produces money (value), invention consumes money. “Innovation” is the extension of invention, the act of bringing an invention to market where it creates value. This is a key difference: Invention results in financial consumption, while innovation results in financial growth. Plenty of patents have been filed and gizmos created that go unused and create no measureable value. For innovation to make a difference, it takes more than a good idea, new product or an emerging technology. The good idea must be implemented and adopted by others by including things like services. Otherwise, it is simply an idea with the potential to be innovative.
There is also less of a relationship between innovation and R&D than most people suspect. R&D is a way to turn capital into knowledge – you learn how things work, how things might work, etc. On the other hand, innovation takes that knowledge and turns it back into capital by discovering and developing ways to apply the knowledge derived from R&D, thus creating economic value.
Taking this into account, there are three ways a technology, product or service can be innovative:
- An old (existing) technology product or service can be applied in a new way, thus creating a new business model or process
- A new technology product or service can be applied to an old business model or process radically changing its results
- A new technology product or service is applied simultaneously to a new business model or process, creating a truly disruptive innovation. This is known as the “black swan” approach
Forming ideas and designing for innovative business – whether the focus is products, services, technologies, business models or business processes – must mean more than only attacking problems at the product and/or service level.
Note: this article was originally posted on www.sourcingfocus.com.