Innovation has many different definitions, perhaps because it is such a difficult concept to define. Is innovation creating something new?
Is innovation improving something that already exists? And just because you create something new or improve something that already exists, is that innovative?
Innovation can be creating something new. Innovation can be taking something that already exists and making it better. But simply creating or improving something is not innovation; the end result must create value. Is it cheaper, faster, stronger, lighter, easier to use, more effective, more fun, better for the environment? It is this value that defines innovation.
So here's how we define it...
Types of innovation
There are two types of innovation; incremental innovation and breakthrough (or radical) innovation.
Incremental innovation is all about small (incremental) tweaks from the operational levels of an organisation where employees know the customers and the realities of day-to-day operations best. Innovation at this level focuses on continuous improvements to products, services and processes. And whilst it doesn't sound as impressive as breakthrough innovation, incremental innovation improves efficiency and keeps the organisation's products and services relevant.
Breakthrough innovation is all about game-changing ideas. It means developing products, services or processes that completely transform existing markets or create new markets altogether - think social media, online shopping and smart phones.
A great example of a breakthrough innovator can be found here.
Benefits of innovation
Companies that foster innovation generally outperform those that don’t. You only have to look at high-performing organisations like Google and Apple - who are frequently voted as some of the most innovative companies in the world - to see what a difference having an innovative culture can make.
If an organisation fosters an innovative culture, they are more likely to be able to respond to changes in the market and maintain their competitive advantage. Why? Because their people are used to finding better ways of working rather than sticking to old processes just because "that's the way things are done around here". They are also constantly searching for creative ways to improve their products and services to better meet the demands of their customers, which ensures they never get left behind.
Pitted against organisations that value bureaucracy over innovation, the innovative companies will always win.
Innovation in Australia
In a study conducted by the Australian Bureau of Statistics, organisations were asked what benefit, if any, had been derived from the introduction of new or significantly improved goods, services, processes or methods.
Overall, 89% of organisations reported some form of benefit from innovation. The key benefits experienced by organisations were:
- Increased revenue (47% of organisations)
- Improved customer service (41% of organisations)
- Increased competitive advantage (27% of organisations)
- Reductions in cost (25% of organisations)