Definitions and types

What is innovation?

Innovation can be defined as the application of new ideas to the products, services, processes, or other aspects related to a firm's activities which lead to increased value.

Ideas for innovations are likely to be discovered both in and outside of an organization. The most important internal idea sources are your employees, the R&D department and innovation teams.

External idea sources are the organization's stakeholders (customers, suppliers, partners), industry specialists and even competitors.

Product or Service Innovation

A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in products specifications, components and materials, incorporated software, customer friendliness or other functional characteristics of products or services.

Process Innovation

Process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.

Process innovations can be intended to decrease unit costs of production or delivery, to increase quality, or to produce or deliver new or significantly improved products.

Marketing Innovation

Marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

Marketing innovations are aimed at better addressing customer needs, opening up new markets, or newly positioning a firm's product on the market, with the objective of increasing the firm's sales.

The distinguishing feature of a marketing innovation compared to other changes in a firm's marketing instruments is the implementation of a marketing method not previously used by the firm.

Organizational Innovation

An organizational innovation is the implementation of a new organizational method in the firm's business practices, workplace organization or external relations.

Organizational innovations can be intended to increase a firm's performance by reducing administrative costs or transaction costs, improving workplace satisfaction (and thus labor productivity), gaining access to non-tradable assets (such as non-codified external knowledge) or reducing costs of supplies.