Almost every company touts that they are "innovative" or that they produce "innovative" products and/or services. But what exactly is innovation? Googling innovation results in the following definitions:
- "The creation of new products and/or services."
- "The conversion of knowledge and ideas into a benefit"
- "PEOPLE implementing new ideas to create value."
Innovation is the act of introducing something new or the process of making improvements by introducing something new. The term refers to both radical and incremental changes to products, processes or services.
Radical or "disruptive" innovation changes the market landscape and creates new opportunities and segments. Some examples of radical innovation include DVDs, iPods, flash memory, and Software as a Service (SaaS).
Most innovations are incremental in nature. The represent a new product, service, or technology that modifies an existing one. Examples of incremental innovations include the ability of phone to play MP3s, cars that parallel park themselves and vacuum cleaners that emit less dust particles.
A number of companies intermix new product development with innovation and the terms are often used synonymously. However, innovation does not always entail new product development. Many companies are innovative in the way that the manage their relationships with customers, process internal orders or manage their IT processes. These innovations may not lead to earth shattering new products or services but they may reduce costs and deliver better business value.