Innovation has been defined as “a creative form of innovation” that is “aimed at improving the existing conditions of life”. By contrast innovation can be defined as an unanticipated development in which an earlier available solution is modified to meet the needs of an entirely new situation. For instance, if an apple tree were to fall on a child who was playing on the ground, both of them would be equally affected. It is the unexpected innovations that lead to the progress we are all so interested in.

Innovation is frequently described as the “creation of new value by overcoming a previously existing barrier to achievement” – however, in practice innovation rarely occurs by creating new value but usually by capturing existing value in some other manner. The value capture process may involve an innovation process, or it may simply involve developing more efficient ways of providing a service or product. Let’s examine these two forms separately and then look at the definition of innovation:

Capture of existing value The simplest example of capturing value innovation occurs when you go to your local supermarket and purchase a loaf of bread. You don’t go and buy the whole loaf. Instead, you buy just over a fifth of a loaf. By doing this, you have effectively captured the benefits of the entire loaf, including the added value of having bought it within the supermarket. Thus innovation is about capturing value throughout the value chain.

Defining Innovation In order to understand the definition of innovation, it is necessary first to understand what it is not. Innovation is not merely the creation of something new or the transformation of one existing thing into something new. Innovation is the introduction of something new or the adoption of something that is already available but has not yet been developed or deployed as part of a business strategy. Therefore it is necessary for senior management to take an innovative approach to defining innovation and making sure that innovation is not only happening within their company, but also in the wider business environment.

Defining Innovation When senior management is looking to bring forward new ideas for innovation, they should be careful not to’re-invent the wheel’. An innovation process involves looking at the complete situation and applying an unbiased viewpoint. It also requires taking into account the interests of stakeholders, because everyone in the company will want to be involved in the development of innovations that deliver real value and can compete successfully. Some companies are very good at executing this process and others are not. This is why it is essential to look at how a company defines innovation, not just the process of implementing it, in order to get a clear picture of how innovative a company is at the moment.

Value Creation Innovation is about more than just introducing something new into the marketplace. Creating value is all about using the latest tools to improve the way that products and services are delivered. The innovative ideas that are generated need to be translated into business action. That means that the way the ideas are translated into activities that create real business impact is equally important. Companies that can demonstrate a consistent history of creating real business value creation are far more likely to be successful when trying to define and innovate.

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